Apprenticeship Levy

Dan Poulter Excerpts

Tuesday 11th February 2020 Westminster Hall

[Richard Graham]

I thank the hon. Member for her point. I think that the Welsh Assembly’s Economy, Infrastructure and Skills Committee published a report last week highlighting the fact that the levy was introduced without the Assembly being consulted. I have no doubt that the Minister will respond on that issue.

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

My hon. Friend is making a well-informed and excellent speech. He spoke about the potential benefit to SMEs from the changes to the apprenticeship levy. However, I am sure that he recognises that there is sometimes quite a challenging relationship between the different parts of the supply chain in agriculture. The introduction of agricultural apprenticeships has not always been very successful. What would be a good way to address that problem, and what advice would my hon. Friend give the Minister and the Government?

[Richard Graham]

I intended to raise that issue in relation to the timber industry, but perhaps I will do it now. The timber industry has certain similarities with the agricultural sectors to which my hon. Friend alluded, because it too has found enormous difficulty in creating standards and courses that are applicable to a sector that employs some 75,000 people. The Timber Research and Development Association, TRADA, which is the national body, still does not have accredited apprenticeships. It has been unable to get a course accredited—it believes accreditation takes 12 to 18 months—and is deeply frustrated.

There have been similar comments from other sectors. My hon. Friend mentioned agriculture. The Minister will know that there are significant pockets of huge dissatisfaction. TRADA states that the

“Institute of Apprenticeships are trialling the concept of a face to face interview panel…But we are not being offered this interview as things stand.”

It also states that the institute has been interested in creating a course for a “timber product technician”, but that term is apparently not actually used in the timber industry.

There are detailed frustrations about how to get the right standards and courses accredited. I hope the Minister will be able to offer us reassurance that for any sector, or indeed any significant levy payer, somebody from the Institute for Apprenticeships will be available to have a face-to-face meeting to try to resolve these issues, giving us all the confidence that it will not take 12 to 18 months to set up a course, during which time employers are contributing to the apprenticeship levy, but it is not being used for their own employees.

That, of course gives rise to one of the big issues with the way in which the apprenticeship levy was structured—namely, that it is seen by many people as a tax. The principal of South Gloucestershire and Stroud College said that many major companies now contributing to the levy see it as such. They are unable to spend their levy, and

“rather than transferring this money to the restricted non-levy pot, which benefits smaller employers…the money is being held back by Treasury”

and not reinvested into training and skills for the younger generation.

As I said earlier, I do think that, to some extent, the emphasis is on levy employers to understand what the offer is and how they can use the pot more creatively. There will be individual cases where companies are not investing enough in training and skills, and should be proactively doing more to engage with the Institute for Apprenticeships to design courses, and so on. None the less, the perception that the levy is a tax is large enough that it would be helpful for the Minister to clarify whether it was always intended that there would be an element of tax contribution to the levy, and whether the £2.5 billion that I believe is being invested this year in apprenticeships by taxpayers, via the Government, is a gross or a net figure? That is to say, to what extent is the apprenticeship levy used to reduce the total cost, or is it a net figure, regardless of what comes into the apprenticeship levy?

That is important because for as long as employers view the levy as a tax and not as something that can benefit them and their supply chain it is less likely that we will have their complete buy-in. I cannot help wondering whether part of the solution might be to increase again the figure of 25% that can be passed on or traded, like carbon emissions, to SMEs. I cannot help but feel that that would increase the number of apprenticeships, which is clearly where the problem has been in delivery, and reassure businesses that the Government really do want the levy to work, maximising opportunities for both big and small employers.

I do not feel that today’s debate should be about trying to beat up the Government, either for their failure to deliver 3 million apprenticeships or for some of the complexities of the apprenticeship levy. The scheme remains relatively young, and the direction of travel should be to reform rather than scrap it. I think that that is also the view of the Chartered Management Institute and other employers’ groups. None the less, we have to recognise some of the challenges.

On the positives, the increase in higher apprenticeships has undoubtedly paid off, particularly in sectors such as those in the constituency of my hon. Friend the Member for Filton and Bradley Stoke (Jack Lopresti), where aerospace is a huge driver of employment, growth and exports for the nation at large. We have doubled the number of higher apprenticeships over the past three years, from 36,000 to 75,000. There are literally thousands of employees through some of the larger companies, such as Channel 4, Royal Mail and Lloyds Banking Group, as well as the NHS and our armed forces in the public sector. They are very comfortable, by and large, with what has been introduced, and just raise very specific implementation issues, which I will touch on.

The challenges are the fall in the number of apprentices and the complexity of some of the bureaucracy around the levy. According to the University of Gloucestershire, there have been further Institute for Apprenticeships and Technical Education delays to approvals of standards through each stage. The university gave the example of the senior leader master’s degree apprenticeships, noting that

“the standard did not achieve full approval (i.e. was not ready to be delivered)”

until several months after the launch. The university also stated:

“There is a significant administrative burden as the funding claims process is not straight forward, and subject to frequent policy and regulation changes.”

During the debate on the health Bill in the House the other day, I raised the issue of the complexity created by nursing apprentices, who must be supernumerary because the Nursing and Midwifery Council has ruled so. That makes nursing degree apprentices unaffordable for many local NHS trusts, so that issue has to be resolved.

I have been told by an intermediary business that works with large employers all over the country that

“the bulk have millions of unspent levy funds”

and that this particular company has

“attempted to introduce leadership training for which the levy would be used”,

but that there are

“so many hoops to jump through in order to get something up and running”

that it has given up. I was also emailed by the owner of a small business that employs one apprentice, who said that employing an apprentice is

“far greater a challenge than anticipated. Support in numbers, time or financial resource is limited.”

Of course—this has been said previously—one reason for employing my own apprentice was to find out precisely how complicated the process is. I do not think it needs to be that complicated, but clearly, the message from some SMEs is that it is that complicated. I hope that a change of direction to make the process simpler has taken place, and that the Federation of Small Businesses is completely behind it.

I am conscious that time is moving on, so I will just touch on a handful of key points I hope the Minister will be able to respond to. First, a number of colleagues have mentioned complexity, so any news about how the levy can be made less complex would be welcome. Some Members have also touched on the issue of inflexibility; there is a constant question mark about whether the apprenticeship levy has to be spent on only those courses that are accredited by IFATE. I understand the reasons why that might be the case, but it puts the onus of responsibility on IFATE to approve these courses—agriculture, timber, or whatever—much faster, so that people can get on them. I welcome the reduction in the amount that non-levy payers contribute to the cost of apprenticeships; it has been halved from 10% to 5%. I wonder whether that contribution is financially important, or whether it is symbolically important.

By implication, Members also mentioned the current restriction whereby at least 20% of apprentices’ time has to be spent training off-site. That is a real issue for many employers, particularly smaller ones, so I ask whether that can be either waived or improved. As has been touched on, there is a question mark about the amount of knowledge in the supply chain regarding the transferability of the apprenticeship levy, so anything the Minister could say about being able to increase that would be welcome.

Ultimately, this programme was introduced as part of the Government’s commitment to improving an apprenticeship programme in order to deliver the skilled workforce that employers need. We know that employers need more skills and more apprentices, so we need those numbers to rise, as well as the percentage of higher apprentices. A more transparent breakdown of the levy, and whether it is a net or gross contribution to apprenticeships by the Government, would be welcome. I hope that by the end of all this, IFATE and the Government will be listening more to business, so that there will be more voices out there strongly supporting the apprenticeship levy and encouraging other employers to make as much use of their levy as possible. I also hope that a new apprenticeships Minister can be appointed who will listen, oversee, champion and communicate what should be a really good, positive story for Government, business and the country as a whole.