Apprenticeship Levy

Baroness Berridge Excerpts

Tuesday 28th January 2020 Lords Chamber

[Lord Young of Norwood Green]

To ask Her Majesty’s Government what plans they have to increase the participation of small and medium-sized enterprises in the Apprenticeship Levy.

[Baroness Berridge (Con)]

My Lords, this month we began the transition of the smaller employers which do not pay the levy on to our apprenticeship service, currently used by levy-paying employers. This will give SMEs greater choice in the training providers they can use and more control over apprenticeship decisions for their businesses. The apprenticeship levy funds apprenticeships for all employers and we will continue to work hard with small and medium-sized employers to give them the support they need to hire apprentices.

[Lord Young of Norwood Green (Lab)]

I welcome what the Minister said. I declare an interest as an ex-apprentice and an apprenticeship ambassador. I support the apprenticeship levy, but it is a bit like the curate’s egg—it is good in parts. It needs reform to ensure that the maximum number of SMEs participate. We need to look at areas such as transfer funding, on which the larger employers feel there is some sort of legal liability that needs to be clarified. I believe a review is currently taking place. I make a plea for the maximum involvement of all stakeholders, especially employers.

[Baroness Berridge]

My Lords, on behalf of the Government, I thank the noble Lord for his work as an apprenticeship ambassador. The apprenticeship levy only came into force in April 2017, so there will be some developments in its implementation. We are committed to improve the working of the levy to ensure that it continues to deliver the skilled workforce that businesses of all sizes need. As the noble Lord highlights, it is driven by employers. We will give further detail on the review in due course and will ensure the involvement of all employers. We acknowledge that ensuring the scheme is driven by employers setting standards for their own businesses is key to its success.

[Lord Grade of Yarmouth (Con)]

My Lords, the creative industries in this country are one of the great growing and successful sectors of our economy—as I think even the Treasury would agree, in a weak moment. In the creative industries, we face a terrible skills shortage. There is a technical issue with the apprenticeship levy which prohibits access to it for those industries because, for good reason, most screen productions are special purpose vehicles. The creative industries need these apprenticeships; there is huge demand for them and their great social mobility. Can I prevail on my noble friend to take this up with the Treasury and unblock it?

[Baroness Berridge]

My Lords, the Government are aware of that specific problem in relation to the creative industries, which also arises partly because many of the people in that sector are sole traders. Because an apprenticeship now has to be for a minimum of one year, finding someone who can take on an apprentice for that period can be quite burdensome. We are aware of the skills gap and the Institute for Apprenticeships and Technical Education is developing 16 new standards specifically for the creative industries. There is also a project between DfE and DCMS to work with ScreenSkills, which has agreed to become the employer so that apprentices can be placed in a number of TV productions and other locations. It sounds like a fantastic opportunity.

[Lord Aberdare (CB)]

My Lords, many SMEs which might be interested in offering apprenticeships are deterred by the amount of management time and bureaucracy involved. There is a need for specific mechanisms to address those issues. What plans do the Government have to promote, for example, initiatives such as apprenticeship training agencies as a vehicle to enable small firms to take part, or initiatives specifically designed for sectors such as construction, hospitality and the creative industries, as the noble Lord, Lord Grade, mentioned?

[Baroness Berridge]

The noble Lord raises an important point. Bringing small and medium-sized enterprises into the apprenticeship service, which is part of GOV.UK, should enable the lessening of bureaucracy and allow small employers to get hold of the training they need. The specific change will be that they will not be governed by the contracts given; they can choose exactly which provider they want to use. Then there is a simple apprenticeship agreement between the training provider, the firm and the apprentice, setting out everyone’s obligations.

[Lord Watson of Invergowrie (Lab)]

My Lords, I raised this issue with the Minister’s predecessor—without success, but we have a new year, new Minister and new Government, so let us see. Under the co-investment rule associated with the levy, the 10% that small businesses are obliged to pay towards the cost of apprenticeships dissuades many from accessing levy funds. Can the noble Baroness say whether the Government will now consider piloting the suspension of that co-investment so that small businesses can play their full part in maximising the number of apprenticeships made available?

[Baroness Berridge]

The noble Lord is trying me and I hope I will not be found wanting. The 10% co-investment fee has been reduced to 5%, which I hope will solve some of the issues. Also, if very small employers of less than 50 employees take on specific vulnerable or disadvantaged groups, such as 16 to 18 year-olds or 19 to 24 year- olds who are care leavers, the entire cost of the training is paid. They do not have to contribute anything.

[Lord Foster of Bath (LD)]

My Lords, further to the question of the noble Lord, Lord Grade, I am sure the Minister is aware that the vital creative industries currently have 70,000 vacancies, so they desperately need an apprenticeship scheme which works for them. The current scheme clearly does not; some 75% of money raised by the creative industries for the levy is not being spent on those industries. I accept that one of the problems is being addressed by the ScreenSkills trial, to which the Minister referred, but another big problem is the simple fact that only 25% of levy money can be passed on to smaller employers and ATAs. Will the Minister explain why that percentage cannot be increased so that more of the creative industries’ levy money can be spent on those industries?

[Baroness Berridge]

My Lords, there has recently been that change with the cap raised to 25%, and we are seeing the effect that it has. The Institute for Apprenticeships and Technical Education is responding to employers and creating 16 new standards, but I will take away these matters and write to the noble Lord.