Enterprise Bill [HL]

Baroness Warwick of Undercliffe Excerpts

Monday 12th October 2015 Lords Chamber

[Baroness Warwick of Undercliffe (Lab)]

My Lords, in recognising the intention of the Bill to promote economic growth, I want to focus on just one part: Clause 18 and apprenticeships. I declare an interest as chair of the National Housing Federation, the body that represents housing associations.

There is a huge need to increase the number of apprenticeships and to ensure that they are of high quality. Looking in particular at the number of young people who are not in education, training or employment, I believe that there is an urgent need to focus on creating opportunities that will get them into employment. Work placements, traineeships and work experience opportunities can help some of the most disadvantaged in our society into a position where they can move into work and, for some, into apprenticeships. That is one of the key reasons why housing associations have become committed to building and developing both employment and skills support and apprenticeship programmes for their tenants and residents.

Many of those who are eligible for social or affordable housing are out of work or in low-skilled, low-paid jobs. The unique and regular contacts that housing associations have with their clients, together with their networks of local connections, provide an opportunity to offer innovative, tailored programmes to help those people into work and so provide the basis for stable tenancies. Both sides benefit, and the country benefits as well, as tenants become productive members of the labour force and no longer need to depend on welfare benefits.

I welcome the Government’s commitment to create 3 million apprenticeships by 2020, although I, too, acknowledge that that is a very challenging target. Housing associations want to play their part in creating those apprenticeships, but I am anxious that the Enterprise Bill will create obstacles and not opportunities for them to do that. Why do I say that? Clause 18 includes measures that would provide a power for the Secretary of State to set targets for public sector bodies in England in relation to the number of apprentices who work for them. They apply to most public sector organisations and require these bodies to have regard to any targets set on them and to report annually on progress against meeting those targets. The public bodies within the scope of the Bill will be set out in regulations, and a consultation is planned on exactly which bodies will be required to meet a target.

The Bill’s definition of a public body is:

“(a) a public authority, or

(b) a body or other person that is not a public authority but has functions of a public nature and is funded wholly or partly from public funds”.

It is paragraph (b) that concerns me. It would potentially apply a target to any body in receipt of public funds, which would certainly include housing associations, as well as many charitable bodies and many other recipients of public funding. I am anxious that the implications of this have not been carefully thought through. The consultation will, of course, allow concerns to be raised, but I want to flag this up now with the Minister in the hope of receiving reassurance on the issue.

I am concerned about two things. First, this is a broadly drawn definition of “public body” and could mean that larger housing associations, as well as many third sector and private sector bodies, will be brought into the scope of this legislation. Secondly, there is a risk that innovative approaches to apprenticeships, skills development and wider employment support may be stifled by the need to meet formal targets on apprenticeship numbers.

It is important to stress that housing associations are not public bodies. Housing associations are not-for-profit organisations, generating the majority of their funding from private sources. The ONS currently classifies them as private bodies. The independent status of housing associations underpins their ability to borrow billions on the private market to invest in housebuilding and to support programmes for the communities in which they work. To date, they have raised £76 billion. The ONS is currently conducting a review of the classification of housing associations and considering whether they should be reclassified as public bodies, as we heard only in the last debate. The federation that I chair is keen to avoid the reclassification of associations as public bodies. The accounting rule changes that would flow from a reclassification could carry harmful implications for associations’ ability to borrow and their use of cash flow and surpluses—all of which are important for funding the new supply of houses. There is growing concern in the sector about cumulative legislation and policy interventions that attempt to direct the corporate strategy of associations, because this is the central tenet of the test that the ONS will consider in its classification review. Any proposals that position housing associations as public sector bodies are likely to add to this cumulative risk to the sector’s independence.

My second concern is the stifling of innovation. Social housing tenants experience considerable disadvantages in the labour market and many require additional support to enable them to fulfil their potential. Around one-third of housing associations see supporting their residents into employment, education and training as a key priority. They provide employment support and training and skills development. Alongside all that, they provide many work placements, traineeships and work experience opportunities. In doing this, they are helping to support some of the most disadvantaged people in our society so that they are able to move into work and, for some, to undertake an apprenticeship. I would be very concerned if these innovative approaches were stifled because of a focus on in-house apprenticeship numbers. For example, many housing associations use their supply chains to deliver additional apprenticeship opportunities. I would be concerned if targets for in-house apprenticeships reduced capacity to support these externally provided apprenticeships. Many of these are in small and medium-sized enterprises in the construction and maintenance sectors. Increasing the number of skilled operatives in these sectors will be vital if the Government’s housebuilding and wider infrastructure ambitions are to be met.

Housing associations are committed to developing and supporting apprenticeship schemes. Over the last three years, they have directly employed around 12,000 apprenticeship starters. Annually, their contribution accounts for just under 1% of all apprenticeships across England. They are ambitious about helping even more people into work and they are good at doing it. I hope that the Minister can reassure me that the Enterprise Bill will not include housing associations in the definition of “public body” and that it will not jeopardise housing associations’ aim of increasing the number of apprenticeship schemes they can support.