Apprenticeships: SMEs

Emma Hardy Excerpts

Thursday 13th February 2020 Westminster Hall

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies. I thank my hon. Friend the Member for Slough (Mr Dhesi) for securing this debate. I must say it is also a pleasure to see the Minister still there in her place opposite me, to continue our discussions from Tuesday.

I will start by commenting on my hon. Friend’s speech. He started with an interesting point about the differences between Germany and England in the status of apprentices and how they are viewed. I saw that when the Education Committee went to Germany, and I was struck by how fantastic the system is there. Of course, there are structural differences that mean we cannot replicate it here in this country, but I think we can all agree that we need to keep selling the idea of apprenticeships, talking them up and explaining what a good thing they are for our country.

My hon. Friend made a very good point about the falling apprenticeship numbers in small businesses. Out of all the figures that he mentioned, the one that struck me was the figure of 34% in small businesses. Small businesses have been hit even harder than medium-sized businesses by the apprenticeship levy. He spoke passionately about apprenticeships in Slough; in fact, I was at the event with him where he talked to some of his fantastic apprentices from Slough, and I was really impressed by their passion and dedication to their training.

My hon. Friend was right to highlight the falling numbers of level 2 and level 3 apprenticeships. Very few people know at 16, or even at 18, what they want to do when they move on in life, so we need to start where people are at. If people are not ready to start at level 3 —if they have not been able to achieve as successfully as we would all like them to in school—they need that level 2 start to enable them to make progress and to fulfil their ambition and achieve social mobility. I am sure that we all agree with that.

My hon. Friend is also right to point out that a question was raised in the debate on Tuesday about the levy for businesses—I am in favour of that levy—and whether the Government expected all businesses to use it. There seem to be conflicting evidence and statements about that, and I would be interested to hear the Minister’s thoughts. Are businesses expected to use all of the levy themselves, or was the intention behind the design that a certain amount of the levy would be kept and used by SMEs? There seems to be a lack of clarity over whether it is a tax that larger businesses contribute to, which can be distributed to small businesses, or whether it is just a system to allow individual businesses to get the money back for themselves.

I am particularly pleased that my hon. Friend raised the question of maths and English and the extra support that is needed. This might not be the right debate in which to talk about that, but I hope that the Department will take it seriously, because we have created a system where the insistence on having people resit their qualification in their first year, even when they are on a two-year course, is causing many people to fail. We have to explore ways to enable everybody to succeed. I would like the Department to go away and think about why it insists that people on a two-year level 2 course should resit at the end of their first year. Why not give them that extra year to practise and develop their skills before they have to sit their exam? Can we not be a little bit more open-minded and creative in coming up with solutions to enable everyone to achieve the maths and English qualifications that we all agree they need?

I really enjoyed the speech of my hon. Friend the Member for Birmingham, Perry Barr (Mr Mahmood)—he has gone, but I will let him know. It was nice to hear him talk about how his father’s interest in engineering got him involved, and how he was not sure what he wanted to do. It was a heart-warming speech. I look forward to visiting his constituency and seeing the examples he gave. He is quite right: we need to invest in engineering and manufacturing skills, and support the making of British goods here in Britain. It has been a source of frustration to me for a long time that we continue to import more and more when we could grow our own, and develop and make things in this country, giving people high-skilled jobs and helping to grow our economy. I hope the Minister will comment on how the apprenticeship levy can do that.

I do not usually comment on the remarks of Scottish National party spokespeople, but I really liked the interesting point that the hon. Member for Kilmarnock and Loudoun (Alan Brown) made about the retention of apprentices, which I had not considered before. If we fund apprenticeships, as a Government or through the levy, should we not expect businesses that have had access to those public funds to retain the apprentices? That is an interesting idea to explore, and I look forward to the Minister’s comments on that.

I think we all agree about the importance of apprenticeships, not only for the productivity of our country but for individuals and social mobility. We all agree that SMEs are really valuable to our economy. In fact, during the debate on Tuesday, one Member pointed out that in Northern Ireland, where their constituency is, there are few large, levy-paying businesses, so it is nearly all SMEs. I have not yet had the chance to crunch the data on this, so it will be interesting to see whether the Department has analysed the areas of the country where there are fewer levy-playing businesses, and looked at whether we have therefore created coldspots and areas in which people lack opportunities to access apprenticeships.

[Alex Sobel (Leeds North West) (Lab/Co-op)]

One industry prevalent in small business is hair and beauty. Routes into hair and beauty and other apprenticeships include the level 3 qualification, which the Government just cut thousands of, and T-levels. T-Levels will be the major route into higher-level apprenticeships, but they are not yet ready, and in the hair and beauty industry they will not be ready for years. The pathway to these apprenticeships needs to be solid, small businesses need to know what is happening and the funding needs to come through. Otherwise, we will see an even further drop in apprenticeships, on top of the challenges of the apprenticeship levy.

--- Later in debate ---

[Emma Hardy]

My hon. Friend is absolutely correct. I have questioned the whole concept of T-levels before. If they are a solution to a problem, what problem were they trying to solve? I have not quite been able to figure that out yet. They almost seem to be trying to ram themselves into a system where they might not necessarily be needed or, indeed, wanted. He makes an important point: if we take away existing qualifications before establishing the T-level, we will leave a gap. What will happen to the people who want to access those qualifications during the gap? Perhaps we might debate T-levels after recess and dig into the question in a lot more detail.

My hon. Friend the Member for Slough mentioned the fall in SME apprenticeships, which has come about as a direct result of the levy. There has been a fall of 23% overall, with a fall of 171,000 in SME apprenticeships. That is down an estimated 49% since the levy was introduced, and it is a huge fall. Particularly concerning to me, as I mentioned on Tuesday, is the quite shocking 20% fall in 16-to-18 apprenticeships. From the reports I have seen, SMEs receive only half as much apprenticeship funding compared with April 2017, when the levy was introduced. Traditionally, SMEs have been the largest recruiters of young apprentices, and they have generally been the recruiters of apprentices at a starter level. It will impact on our ability to grow our own talent if we cut off opportunities for young people and cut off the lower levels that we need.

On Tuesday, the Minister said:

“The apprenticeship levy is helping businesses large and small to access the high-quality training that they need.”—[Official Report, 11 February 2020; Vol. 671, c. 258WH.]

I have to say that the Minister may be a little bit mistaken, because I am not sure that the apprenticeship levy is helping small businesses to access the high-quality training that they need. As I just said, I do not think that they can actually access all the funding that they need.

In Tuesday’s debate, the hon. Member for Stoke-on-Trent Central (Jo Gideon) pointed out that 300 potential SME apprenticeships have been lost at Staffordshire University because of the current funding system. Not only are the apprenticeships not helping people at the beginning of their career, at level 2 and 3, but they are not helping those at university and at the other end of their career, at level 6 and above.

As mentioned, the Centre for Vocational Education Research report says that the fall in apprenticeships is because of the introduction of the levy. The report says:

“For smaller enterprises which are less likely to be directly impacted by the Levy, the strong decline in starts may be linked to a combination of adapting to the new funding system, the constraints on the pool of funding actually available for apprenticeship training, and the ongoing switch”.

It is because we do not have the funding needed to actually move them forward.

The Minister also spoke on Tuesday of the award-winning digital service, saying that it would

“support employers to manage their funds and choose the training they need from a register of approved providers”,

and pointed out that that would benefit smaller employers by

“moving away from the previous procured contract system to give SMEs more choice than ever”.—[Official Report, 11 February 2020; Vol. 671, c. 258-59WH.]

With the greatest respect to the Minister, as my hon. Friend the Member for Slough pointed out, putting SMEs on the digital platform will put them in a similar position to someone who is trying to buy concert tickets, and who has to jump on as early possible and press the buy button before someone else gets there. Even increasing the numbers by 15,000 will not be enough to cover the 49% decrease that we have already seen. Giving people more access to a system that does not have enough money just means that they have greater access to having no money; it does not solve the problem. If the Government are to put them on the digital system, they need to fund the digital system to enable it to work.

The levy money is, indeed, running out. There is not enough money, which is why, as has been confirmed by the Minister with responsibility for skills, the National Audit Office, the permanent secretary at the Department for Education and, more recently, the new CEO of the Institute for Apprenticeships and Technical Education—IFATE; there are too many acronyms in this job—apprenticeships in SMEs will not go back to pre-levy numbers. That is why I keep pushing this. There is a joined-up message from businesses, the Labour party, the Confederation of British Industry, the Federation of Small Businesses—from everybody—that the Government have to put in £1.5 billion in funding for SMEs. The digital solution that has been mentioned will not suffice.

The Minister may have seen a letter in the Financial Times that highlights the point I was making. Surprisingly in education, because it does not always happen, lots of people agree and are saying the same thing:

“The chief executive of the employer-led Institute for Apprenticeships and Technical Education also believes that the apprenticeship levy needs to be topped up with additional Government funding to address the shortage of funds available for apprenticeships offered by smaller businesses. Her comments follow similar concerns expressed by Ofsted’s chief inspector that the levy is not working in a way which would satisfy the Government’s ‘levelling up’ agenda across the UK regions.”

The letter was signed by Mike Cherry of the Federation of Small Businesses; Mark Dawe of the Association of Employment and Learning Providers; David Hughes of the Association of Colleges; Doctor Sue Pember CBE from Holex; and more. These people all say the same thing: the Government need to put money into the SME budget to enable SMEs to offer apprenticeships.

The Minister said on Tuesday that she is

“keeping the apprentice system and levy under constant review to understand how it works for employers of all sizes, and most importantly how it can deliver for our economy and for social mobility.”—[Official Report, 11 February 2020; Vol. 671, c. 258WH.]

Will she dig into that a little bit more and explain what review has been undertaken, its timescale, who is included in it, when we should start to see its outcomes and whether we should expect it to have occurred before the 11 March Budget? Will we see anything in the Budget to address the ongoing crisis in SMEs?

I point out a good example of local SME support in Manchester, which used a grant of £3,000 for non-levy paying SMEs in the region that have not employed an apprentice in the past two years. Creative solutions are starting to come out, and I hope that the DFE will explore this and find ways to offer such support.

I shall keep my request quite simple. In a nutshell, what we—in business, in the Labour party and in this unity of voice—would like to see is the Government committing to a ring-fenced and guaranteed non-levy budget of at least £1.5 billion and separate, segregated funding approaches between levy and non-levy paying employers. I am not saying that that will solve all the problems overnight, but it will alleviate the most immediate concerns and it will open up access for young people and people wanting to start at lower levels who want to work in SMEs.

This will be the last minute of my speech, because I have been talking for quite a long time. And now for something completely different, as they say. I want to mention the Back a Bid campaign: we are looking for the UK to host the 2027 WorldSkills championships. It is like an Olympics for skills whereby we have Team GB going abroad to compete and show the talents and skills that there are in this country. I hope that the UK will look at being one of the hosts for that. I hope that the Minister will press the new Chancellor of the Exchequer hard to enable the funding for a Government feasibility study to come through, to show how we can stand on the world stage as Global Britain and show off the skills and talents in our country by hosting the championships here in the UK and showing what brilliant, talented people we have. I hope that by 2027 many of those brilliant, talented people with great skills will be coming from SMEs.