Apprenticeship Levy

Baroness Barran Excerpts

Tuesday 25th April 2023 Lords Chamber

[Lord McNicol of West Kilbride]

To ask His Majesty’s Government what assessment they have made of the sectoral disbursement of the take-up of the Apprenticeship Levy.

[The Parliamentary Under-Secretary of State, Department for Education (Baroness Barran) (Con)]

My Lords, employers are at the heart of our apprenticeship system. They have developed more than 660 standards across a range of occupations, and they choose which apprenticeships they offer and when. The health and care, business administration and law sector subject areas were each around a quarter of starts last year, benefiting employers operating across all sectors of the economy. We have also seen recent growth in the digital and construction sector subject areas. The apprenticeship levy will enable us to increase funding to £2.7 billion by 2024 to support employers in all sectors to invest in apprenticeships.

[Lord McNicol of West Kilbride (Lab)]

I thank the Minister for her Answer. As one of the few in your Lordships’ House who attained not a degree but a technical qualification—I am immensely proud of my HND—I understand the need for technical education. The apprenticeship levy is seen by many employers, especially those unable to recoup their contributions, as a training tax. This is due to the current scheme’s inflexible, rigid and bureaucratic nature. Does the Minister recognise the need to redress these problems? If so, are there any plans to extend the sectoral remit, the timescale of study and draw-down and the level of application, and thus help improve the apprenticeship schemes?

[Baroness Barran (Con)]

I think the noble Lord would agree that this country needs to invest more in the skills of the workforce, both those entering the workforce and those currently in it. The last thing we need to do is cut back on the amount of funding going into apprenticeships. I remind the House that of the £2.5 billion last year, there was an £11 million underspend, so it was fully disbursed. We do offer employers flexibility; we are spending £550 million on skills boot camps for the kind of short courses to which the noble Lord alludes, as well as working in particular with the creative industries to offer flexible apprenticeships.

[Lord Aberdare (CB)]

My Lords, what assessment have the Government made of the results of initiatives to increase and broaden the take-up of apprenticeships, such as flexible apprenticeships, making it easier for small businesses to host apprentices, and levy transfer schemes, enabling larger employers to transfer unused levy to businesses in their supply chains? Given the seemingly limited impact of these schemes to date, what plans does the Minister have to increase the flexibility of the levy so that more businesses in more sectors, and especially SMEs, are able to make use of it?

[Baroness Barran (Con)]

I do not completely accept the suggestion that the noble Lord makes; 41% of all apprenticeship starts were in SMEs in 2020-21, up from 38% in 2019-20. We have a lot of initiatives. For example, we have lifted the cap on the number of apprentices a small business can take on. In the area of the creative industries, which I alluded to, we are expecting 1,500 apprenticeship starts through the flexible apprenticeship scheme.

[Lord Storey (LD)]

My Lords, I thank the Minister’s department for always giving fulsome Written Answers. From Written Questions we can see that the number of young people not in education or training is largely static, although this year it is estimated to be 1,857,000. The worrying trend, however, is that the number of 19 year-olds is going down year on year and is at 22.4%. The Minister talked about skills, and the other worrying trend is that the number of those people doing intermediate apprenticeships is at its lowest level ever at 22.4%, while higher apprenticeships and advanced apprenticeships are at their highest level. This goes against the whole basis of why the apprenticeship scheme was set up by the coalition Government.

[Baroness Barran (Con)]

The apprenticeship scheme has two important objectives. One, as the noble Lord touched on, is to give young people a choice of opportunities as they enter their career—training, work experience and so forth. The other is to give our employers the skills they need in their workforce. The scheme is currently balancing those two things.

[Lord Trefgarne (Con)]

My Lords, as a former chairman of the Engineering Training Authority I am clearly very conscious of the work in that particular sector. What is the position today? Is a sufficient number of young people coming forward for apprenticeships in the engineering sector?

[Baroness Barran (Con)]

Engineering and manufacturing technologies account for about 14% of all the apprenticeship starts. Last year that was about 49,000 apprentices.

[Baroness McIntosh of Hudnall (Lab)]

My Lords, the Minister mentioned the creative industries in a number of her earlier answers. I believe she said most recently that 1,500 starts are expected within those industries. Can she tell the House—and if not, can she please write on the matter—how many of those 1,500 are being undertaken in small and medium-sized enterprises within the creative industries?

[Baroness Barran (Con)]

Given that the creative industries are full of small and medium-sized enterprises, I assume that it is the vast majority. If it is different from that, I will write to the noble Baroness.

[Lord Clarke of Nottingham (Con)]

My Lords, in recent years a practice has sprung up in British industry of not training staff but recruiting them directly, already trained, from overseas, often from countries that could benefit from having their own trained staff stay at home. This leads to the shortages of skilled staff that we have in the economy and surges in immigration through work visas, which we find difficult to accommodate with housing and adequate social services. Can the Minister confirm that the Government will not waver in their application of the apprenticeship levy, which is making an important difference in stimulating firms to start training their own staff in the way that they used to? Will the Government also take steps to stop the abuse of the levy when it sometimes gets employed for management training for long-serving senior managers, who would be trained by the company anyway in the ordinary course of events?

[Baroness Barran (Con)]

I am happy to reassure my noble friend that we have no plans to do away with the levy. Indeed, as I said, based on the OBR forecast we expect it to increase to £2.7 billion in 2024-25. The levy is part of a wider strategy to offer more flexible opportunities, such as modular learning and the lifelong loan entitlement, to potential employees and address the skills gaps of employers more effectively.

[Baroness Twycross (Lab)]

My Lords, the chief executive of the CIPD has said that the apprenticeship levy

“has failed … Without reform it will act as a handbrake on employer investment in skills”.

Given reports that more than £2 billion of the levy money has been clawed back by the Treasury rather than being spent on apprenticeships, is it still genuinely the Government’s view that the levy as it stands is fit for purpose?

[Baroness Barran (Con)]

It is the Government’s view. Again, if we look at the trend in the use of the levy, we have seen an increase in adoption and use of the levy by employers, both levy-paying employers and much smaller enterprises. We are committed to offering all sorts of flexible and shorter courses, and to funding those to meet key skills gaps. We think this is a critical part of our strategy.

[Baroness Blackwood of North Oxford (Con)]

My Lords, I was pleased to see that, among other measures, the Apprenticeship Diversity Champions Network has been set up to provide practical advice on how to attract more women into STEM roles in industries that have historically been dominated by men. The first quarter of 2022-23 saw 13% more women start STEM apprenticeships. Can the Minister say what other measures will be taken to build on this progress?

[Baroness Barran (Con)]

Obviously there are a number of different initiatives, both within schools, particularly in relation to girls and young women to increase their awareness of and aspiration to become involved in the STEM sector, and, in turn, working with employers and holding them to account in terms of how and where they recruit.