Apprenticeship Levy

David Linden Excerpts

Wednesday 22nd November 2023 Westminster Hall

[David Linden (Glasgow East) (SNP)]

It is a pleasure to serve under your chairmanship, Dr Huq, and to follow the right hon. Member for Suffolk Coastal (Dr Coffey). I shadowed her when she was Secretary of State for Work and Pensions, but I have to say that I much more enjoy the unchained version of her, offering criticisms of what has happened in Government. As a serious point—and the same might be true of the right hon. Member for Maidenhead (Mrs May)—there is value in having former Ministers remain in the Commons to offer constructive criticisms of policy, to dwell on their time and to reflect on what they might do differently. It helps to inform the decisions that Ministers take.

I thank the hon. Member for Woke-on-Trent North—not “Stoke-on-Trent”, for the purposes of Hansard, but Woke-on-Trent. I am sure he will love that. He is genuinely a good friend of mine, despite the fact that we have nothing in common. I commend him for securing the debate.

As a former modern apprentice, I must confess to having a very strong interest in the subject. I have long been of the view that in recent years we have perhaps not got the balance right in terms of what we churn out into the labour market. The reality is that if I have a leaking pipe at home, I need a plumber, not an accountant or a lawyer. In this place in particular, I think that there are far too many lawyers and not enough apprentices, but that is a separate story. We have to make that balance a bit better. I certainly did my bit by completing my apprenticeship back in 2008.

We in the SNP hold the belief that an investment in apprenticeships is, in turn, an investment in our young people. That is particularly true for young people in Scotland. I stand here as someone who left the gates of Bannerman High School in Baillieston and went on to carry out an apprenticeship at Glasgow City Council. That has stood me in good stead and has very much helped me to navigate life in my role as a Member of Parliament. According to Skills Development Scotland, as of 30 December last year there were 3,626 modern apprentices in training in Glasgow. The modern apprenticeship achievement rate in Glasgow was last reported as sitting at around 68.6%. However, we are currently in an area where the apprenticeship levy is both reserved and devolved. That presents several challenges to Scottish businesses. I want to reflect on just a couple.

Just over two weeks ago, I was lucky enough to visit a local KFC branch in my constituency of Glasgow East, where, coincidentally, we discussed the impact of the apprenticeship levy on businesses. KFC’s corporate team told me how, like many businesses, they struggle to spend their levy pot because of the many barriers in meeting the UK Government’s definition of an apprenticeship. Those barriers are due to the rigidity of the specified qualifications for completing an apprenticeship: they are too narrow, they are too long or they require too much off-the-job training. I was told that this year alone, KFC has lost a six-figure sum of its levy fund to the Treasury. I would hope that that is not the case for everyone who is subject to the levy, but it certainly paints a picture of what many businesses face. I should add that in the east end of Glasgow, we have four young people employed in KFC’s Glasgow Forge and Glasgow London Road restaurants as a result of its pre-employability programme Hatch, which I commend to the Minister.

Scotland’s share of the annual levy pot is calculated and assigned by the Westminster Government, but Scotland has adopted a slightly different approach—a more relaxed approach, I would argue, whereby Scottish employers can spend the levy on other types of training that they judge to be right for them. As the hon. Member for Stoke-on-Trent North (Jonathan Gullis) has rightly highlighted, the rigidity of the UK Government’s apprenticeship levy can somewhat hinder employees as a result of the specifications of how levy funds can be spent.

I reiterate to Members across the House that the apprenticeship levy was imposed on Scottish businesses without consultation with the Scottish Government, despite skills and apprenticeships being a devolved matter. Nevertheless, the Government in Edinburgh have tried to use the funds from the levy in ways that I would argue have been more effective in increasing the skills of the workforce in Scotland. That is mostly thanks to the flexible approach that they have adopted after consulting and engaging with Scottish employers, at every step of the process, on how best to use the funds that have been made available from the levy.

In this case, the Scottish Government have been very clear that the share of the levy that Scotland receives through the Barnett consequentials largely replaces money that was already made available to the Scottish Government. That is why the UK Government policies in this area have not achieved what they ought to have achieved in terms of providing new streams of funding to the Scottish Government. As a result, their policies have delivered a reduction in spending on devolved public services by imposing the levy on public sector employers.

That point takes us back to the need for a bit more flexibility. In comparison with England, the Scottish Government have adopted a more flexible approach to how levy funds are used. The options available for using funds include modern apprenticeships, college training, support for skills development and employment-focused training for young people. The Scottish Government’s approach has provided Scottish employers with a greater sense of agency and freedom as to what they can spend the funding on. That begins at the point of consultation, engaging Scottish businesses in that very discussion, whereas the apprenticeship levy in England has failed to increase the number of apprenticeships: there were 145,700 fewer apprenticeship starts in 2021-22 than in 2016-17.

North of the border, our more flexible approach has resulted in the number of apprentices in training in Scotland reaching its highest level ever and surpassing the Scottish Government’s ambitions for modern apprenticeships this year. However, I say to my colleagues in Edinburgh that they can and should go still further; I go back to my point questioning whether we have got the balance right in churning everybody out through university, when in my constituency we cannot get a bricklayer, for example. That makes more of a case for some of the trades.

All of this reiterates the need for the devolution of employment law. Ultimately, in my view—this will come as no surprise to this Chamber or to the hon. Member for Strangford (Jim Shannon)—it makes the case for the full powers of independence, to allow us to introduce a comprehensive strategy that develops the skills and productivity of the Scottish workforce. The successful use of funds in Scotland, compared perhaps with other parts of the UK, only highlights the benefit of Holyrood having control over skills and apprenticeships.

With control over the ability to set levies, the Scottish Government could and would work to reduce the burden that the apprenticeship levy places on businesses, to which many other Members have referred, and ensure that it works to increase the funds available to businesses to train their workforce in the way that we all know they are asking for. However, while we remain a part of the Union, we will continue to consult the industry to ensure that the funds raised from the levy are used in the best interests of Scottish businesses and Scottish employers, in the exact way that KFC outlined to me just two weeks ago.

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[The Minister for Skills, Apprenticeships and Higher Education (Robert Halfon)]

It is an honour to serve under you in the Chair today, Dr Huq. I congratulate my hon. Friend from Woke-on-Trent North; I beg your pardon, my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis)—slip of the tongue. He is a passionate advocate of apprenticeships and skills, and he made a very thoughtful speech, as did all my colleagues and everyone here today. I will try to respond to some of the points that hon. Members have raised, but where I do not I will write to them.

I have made it my political life’s mission to champion apprenticeships and skills. My hon. Friend said he employed apprentices, which is a wonderful thing. I was the first MP to employ apprentices in Parliament. I have had many, and one of them has gone on to be the leader of my local council—I think the youngest ever leader in history. That shows the power of apprenticeships.

Let me focus on a few of the things that my hon. Friend said. It is worth noting the increase in starts between 2021 and 2022. In 2022, there were 349,000 starts, which is 8.6% higher than in 2021. I am not saying that we do not have challenges when it comes to the number of starts—Members have spoken about starts—but we have to focus on quality, not just quantity. That has been a problem in the past, especially if I may say so with the party of the shadow spokesman, hon. Member for Feltham and Heston (Seema Malhotra), although I greatly respect her. Her party had an obsession with 50% of people going to university. That was about quantity rather than quality, and we are trying to give people a choice between university and apprenticeships.

It is also worth knowing that 70% of apprenticeships are at levels 2 and 3, and more than 50% are done by young people. Both my right hon. Friend the Member for Suffolk Coastal (Dr Coffey)—who was a brilliant Secretary of State, who did a lot to protect the environment and who I massively respect—and my hon. Friend the Member for Stoke-on-Trent North talked about modular apprenticeships. I am firm in the belief that we want quality apprenticeships. We want to move away from the pre-2010 past, when many apprenticeships were not seen as high quality. That is why we moved from frameworks to standards. I believe that apprenticeships should be for a minimum of a year, but of course many are over a year—two to three years. They have to be about quality. They are designed by employers. We now have over 680 apprenticeship standards, which are designed by employers with the Institute for Apprenticeships and Technical Education. However, there are career starter apprenticeships and short skills courses—bootcamps. My right hon. Friend the Member for Suffolk Coastal spoke about HGVs, and there are HGV bootcamps. Our multimillion-pound package on bootcamps has been a great success. They are 16 weeks, so people can do them and go on to an apprenticeship or get a job. Many people on bootcamps get good outcomes. They have been a huge success and are an example of the Government investing in skills.

I want to make a point about the levy budget. We have spent 98% of the apprenticeship budget given to us by the Treasury and we give hundreds of millions under the Barnett consequential formula. The hon. Member for Strangford (Jim Shannon)—I am going to call him my hon. Friend because he is a very kind friend—rightly mentioned Barnett consequentials, as did the SNP spokesperson, the hon. Member for Glasgow East (David Linden). We give hundreds of millions from the levy, but I recognise the points made about the devolved authorities. They decide their apprenticeship policies, but I am happy to work with officials to ensure that we work with Scotland, Northern Ireland and Wales to support them in every possible way to make those policies a success.

My hon. Friend the Member for Waveney (Peter Aldous) —the great FE champion in the House of Commons—asked about the minimum wage. This is really good news, and he is absolutely right. Last year, we increased it by 9%. I am pleased about today’s announcement that we will increase the apprenticeship minimum wage not by 9%, 10%, 11% or 15%, but by 21%, which will benefit an estimated 40,000 apprentices.

My hon. Friend the Member for Waveney talked about levels 4 and 5, as did my right hon. Friend the Member for Suffolk Coastal. It is worth remembering that we have introduced 106 higher technical qualifications at levels 4 and 5 with 140 providers. We are spending £300 million on 21 institutes of technology all over the country. We have a national strategy on apprenticeships and skills. We have the Unit for Future Skills for data. We have the local skills improvement plan, which identifies skills needs in local areas. Only a week or so ago, we announced £165 million to benefit 38 areas in the country. There were over 66,000 starts at levels 4 and 5, which is about 20% of total starts, and 151 standards approved for delivery at levels 4 and 5.

I am excited that we have introduced not only nursing apprenticeships but doctor apprenticeships. The workforce plan puts apprenticeships and skills at the heart of the NHS workforce strategy, with 22% of all training for clinical staff to be delivered through apprenticeship routes by 2031, up from 7% today. We expect that 20% of registered nurses will qualify through the apprenticeship routes by 2028-29 compared with 9% now.

I have been to see policing degree apprenticeships in Manchester and they are second to none, but I will look into what my right hon. Friend the Member for Suffolk Coastal said. I visited Staffordshire University, where many constituents of my hon. Friend the Member for Stoke-on-Trent North go. It does a brilliant degree apprenticeship policing programme. I know that the quality is second to none, but I will look into the question raised by my right hon. Friend and write to her.

The shadow spokesperson, the hon. Member for Feltham and Heston, was incredibly kind to mention the extra £50 million that we announced today for a two-year pilot to boost high-value apprenticeships in priority growth sectors. The Chancellor mentioned engineering today, but we will set out further details. It is worth noting that we will spend more than £2.7 billion on apprenticeships by 2025. That is a huge whack of money, especially in the current difficult economic climate.

The other point I will make is very important. My right hon. and hon. Friends and Opposition Members talked about businesses not using their levy. When that happens, the levy is used to fund 95% of the training costs for small businesses, which is what my hon. Friend the Member for Stoke-on-Trent North wants. We fund 95% of the training costs, and if a business has less than 50 employees and employs somebody aged 16 to 18, we fund all the training costs. That is where the money goes. When big business does not use its levy, we use it to fund training costs.

Given some of the things that have been raised today, it is also worth noting that we give £1,000 to every provider. We give £1,000 to every business that employs an apprentice to help them along the way, and we are trying to slash regulation. I have a phrase that I use in the Department: I call it Operation Machete. I do not like regulation, and there is too much of it. We are doing a huge amount of work in this area. We have significantly reduced regulation for small businesses when they start to employ apprentices. We have also removed the cap on the number of apprentices they can employ. There used to be a cap, which we have changed. I am absolutely determined to do everything we can, but it is important to remember that when big business does not use the levy, the money is used to fund smaller businesses’ training costs.

[David Linden]

I do not necessarily expect the Minister to answer this, but perhaps he could undertake to write to me. Those of us on the Work and Pension Committee are interested in things such as auto-enrolment. I ask the Minister to go away and have a look at why auto-enrolment does not kick in at age 16, when a lot of people are doing apprenticeships. That might be one of the areas where we could look at retention and how we help young people. It is not the Minister’s brief, but I would appreciate it if he could write to me about that.

[Robert Halfon]

I would be very happy to write to the hon. Gentleman, and I respect the thoughtful way he set out his remarks today.

The hon. Member for Feltham and Heston quoted organisations that do not like the levy. I have a whole list of businesses that do like the levy and use it brilliantly. Virgin Atlantic has used the levy extensively.