Apprenticeships (Child Benefit and Tax Credit Entitlement) (Research)

Jesse Norman Excerpts

Tuesday 18th November 2014 Commons Chamber

[Jesse Norman (Hereford and South Herefordshire) (Con)]

I beg to move,

That leave be given to bring in a Bill to provide for a programme of research into the costs and benefits of extending eligibility for Child Benefit and Tax Credit entitlement to young people completing apprenticeships; and for connected purposes.

The Government have made excellent progress over the past four years in increasing the take-up of apprenticeships. Across England, more than 1.9 million apprenticeships have started since 2010, with the number of apprenticeships overall having more than doubled in this Parliament. In my own constituency of Hereford and South Herefordshire, between 2010 and 2014, 2,210 apprenticeships were started compared with 2,340 in the previous four years, which is an increase of 80%. But that terrific growth has largely been due to increasing numbers of over-25 year-olds starting apprenticeships. The number of 16 to 19-year-olds starting apprenticeships has remained relatively flat. In 2011-12, there were some 130,000 apprenticeship starts among 16 to 19-year-olds. That fell to 114,000 in 2012-13. The provisional figures for 2013-14 indicate that apprenticeship starts for 16 to 19-year-olds rose slightly to 118,000. So the huge increase overall in apprenticeships does not seem to be getting much traction among school leavers, and it is worth asking: why not?

At my local jobs fair in Hereford last March, a friend who works in the local jobs club pointed out to me a serious inconsistency in how the benefit system treats young people. If a 16 to 19-year-old stays in education, their family can continue to claim child benefit and tax credits for them. But if that same young person takes up an apprenticeship instead, they are counted as being in work and their family can no longer claim benefits on their behalf.

Clearly, apprenticeships are work, but as the apprentice minimum wage is just £2.73 an hour, the youngest and most poorly paid apprentices will often be earning less than their family could receive in benefits for them. The minimum wage for under-18s not in apprenticeships is £3.79 an hour, rising to £5.13 an hour for 18 to 20-year-olds, so the young apprentice ends up neither receiving benefits nor earning the normal minimum wage.

Of course, there are many reasons why an apprenticeship is highly worth while even with the relatively low apprentice minimum wage. Many employers invest heavily in high-quality apprenticeships, and an apprenticeship serves as a stepping-stone between training and full employment, but we must also consider what benefits are lost to the family of someone who becomes an apprentice at this early age. The area is extremely complex, as the House will know, but I have checked the following numbers with the Library.

First, the family will lose child benefit. If the apprentice is the only child in the family, that will be £20.50 a week. If the family is in receipt of child tax credit, they will also lose up to a further £3,295 a year, or £63.37 a week. Indeed, colleagues have reported that they might also lose housing benefit. If a person aged 16 to 19 works 30 hours a week at the apprentice minimum wage, they will earn £81.90, on which they will not pay tax or national insurance, so the net effect of a 16-year-old’s going into an apprenticeship on minimum wage could be a drop in family income of just under £2 a week, or a little over £100 a year.

How, then, do these young apprentices fare relative to someone who is in full-time education? The family of a 16 to 19-year-old in full-time education will continue to be eligible for child benefit and other benefits for that child, even when that child is in paid work. They might also be entitled to a 16-to-19 bursary, or the education maintenance allowance if they live in Wales, Scotland or Northern Ireland. We must not forget that full-time education is defined as more than 12 hours a week of supervised study, and that many apprentices will do seven hours a week in their work.

I am highly sympathetic to the Government’s position on this issue, which is that

“When a young person takes up an apprenticeship, they are classed as in employment with training. From that point, benefits for the young person paid to their parents cease.”—[Official Report, 28 January 2014; Vol. 574, c. 757.]

But as the National Institute of Adult Continuing Education has pointed out in supporting the Bill today, the notion that a young apprentice should be considered a non-dependent in relation to benefits would be challenged by many parents, to put it mildly.

Apprentices are caught in the middle between training and employment. As the idea of an apprentice minimum wage implicitly recognises, what matters is not the classification but the human consequences for those affected by the loss of benefits, and the deterrence from taking up an apprenticeship that results. This is an injustice that affects the least well-off in our society and we need to fix it, and that is why I urge the House to support the Bill.

Question put and agreed to.

Ordered,

That Jesse Norman, Angie Bray, Jim Shannon and Mr Graham Stuart present the Bill.

Jesse Norman accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 9 January, and to be printed (Bill 121).