Queen’s Speech

Lord Aberdare Excerpts

Tuesday 10th June 2014 Lords Chamber

[Lord Aberdare (CB)]

My Lords, I shall focus on the commitment in the Queen’s Speech to,

“increase the total number of apprenticeship places to 2 million by the end of the Parliament”.

I welcome that. Good-quality, well designed apprenticeships that meet the needs of employers and apprentices across a wide range of business sectors are surely one of the most effective means of tackling the blight of youth unemployment while increasing the UK’s productivity and competitiveness in the global economy as a whole. In March, the Government published for consultation proposed new arrangements for delivering and funding apprenticeships, which are largely based on the recommendations of the Richard review of apprenticeships. I attended a conference yesterday morning at which both Doug Richard and the Skills Minister, Matthew Hancock, spoke, and was on the whole encouraged by what I heard.

However, there are some concerns, particularly about persuading more small and medium-sized businesses—the importance of which we have heard so much about today—to take on apprentices. Most of the initial trailblazer initiatives being used to pilot the new approach are in sectors dominated by larger businesses such as aerospace, automotive, energy and utilities, and financial services, while sectors such as construction and creative and media, which have a much higher proportion of smaller firms, are unrepresented.

I will enumerate some of the concerns which need to be addressed to ensure that the 2 million target is reached and that it does not exclude large numbers of younger apprentices or specific sectors such as construction. First, under the proposed new rules, employers will have to make a cash contribution of a third of the training cost of their apprentices, with the Government paying the other two-thirds. Apparently no allowance will be made for the extra, non-cash costs involved in taking on apprentices, such as additional supervision, on-site training, mentoring time and the costs of slower work rates and needed rework. Extra incentive payments will be available for businesses with fewer than 50 employees, but the overall cost of providing apprenticeships under the proposals seems likely to put off some, and perhaps many, SMEs.

Secondly, there will also be extra payments for taking on younger, 16 to 18 year-old apprentices, for whom until now the full costs of training have been paid. Assuming that those extra payments will fall short of the full cost, that could act as a further disincentive for firms to take on apprentices at those younger ages, as against using either older, more job-ready or more experienced apprentices, or just using the supply of cheap labour often available in sectors such as construction. Given that most of the increase in apprenticeships so far has been among over-25s, with under-19 apprenticeships hardly growing at all, that seems particularly ill advised. It certainly will not do much for those young people who fear they will never work, who were mentioned by the right reverend Prelate the Bishop of Durham in his fine maiden speech.

Thirdly, there are significant concerns among SMEs and others that the payment options being considered by the Government, which are based either on using existing PAYE mechanisms or on a new apprenticeship credit model, may prove far from simple for small firms to implement, and unpredictable in terms of the exact amounts and timing of payments. In addition, they are likely to result in serious cash-flow challenges, which are, of course, the absolute bane of all small businesses—as I can vouch from my own experience.

Fourthly, many SME apprenticeships are managed through apprenticeship training agencies—ATAs—whereby the ATA acts as the employer for a group of businesses and undertakes most of the administration and bureaucracy involved, to lift that burden from the small employers for whom the apprentices actually work. It is not clear how the proposed new funding arrangements will affect ATAs, but at least one of them, Building Lives, is concerned that its delivery and funding model may be put at risk by the proposed new arrangements. Building Lives is a community interest company which currently runs six academies across London which offer training and employment for up to 300 apprentices a year, who work mainly in small to medium-sized construction-sector firms. It featured as a case study in the cross-party report No More Lost Generations, which was mentioned earlier by the noble Lord, Lord Macdonald of Tradeston. It has set itself a target of expanding to 10 centres and offering up to 1,000 construction apprenticeships each year. However, despite the fact that its whole raison d’être is to make it possible for small contractors to take on apprentices, it seems that it may in future have to fund a third of the training costs for all those apprentices upfront, without even being eligible for the small employer incentive payment—a double whammy which may jeopardise its entire award-winning operation.

I applaud the intention to increase the number and quality of apprenticeships, but I urge the Government to ensure that there is sufficient flexibility in the funding and other arrangements to meet the specific needs of smaller employers, and of sectors such as construction, and of younger apprentices. The system must be genuinely simple, able to accommodate firms of all sizes in all sectors, and be thoroughly piloted before being rolled out.

Almost as important as providing more apprenticeship places is the other side of the coin: ensuring that there are enough candidates, especially 16 to 18 year-olds, coming forward to take up those places. Schools need to do a much better job of making their students aware of the apprenticeship opportunities available and encouraging those for whom they might be appropriate to pursue them. This seems unlikely to happen unless and until Ofsted inspections include formal assessment of the careers services offered by schools, often deficient at present, and of the range and quality of progression routes followed by their students, including into apprenticeships and other forms of employment, not just into further or higher education.

Finally, I hope that your Lordships will forgive me if I stray from the topics of today’s debate to add a brief welcome to the proposed social action, responsibility and heroism Bill, providing a degree of legal protection for good Samaritans and have-a-go heroes. I declare my interest as a trustee of St John Cymru Wales, which is dedicated to helping people save lives through first aid training and support, and pursues the vision of a first-aider on every street in Wales. It would be even better for the Government to provide more of these potential heroes with the tools to do the job, as it were, by making first aid training a mandatory part of the school curriculum, so that the UK could begin to match the life-saving outcomes of those other countries where that is the case.