Apprenticeship Levy

Debate between Jonathan Gullis and Rupa Huq

Wednesday 22nd November 2023 Westminster Hall

[Jonathan Gullis]

I could not agree more: the levy should be much easier to access for small and medium-sized enterprises, and even for big levy payers, such as Lloyds Bank, which I met recently in my constituency at Saint Nathaniel’s Academy in Burslem. It said that it found it incredibly tricky to navigate the system to try to get money to the frontline. In that case, it was for digital apprenticeships and skills for those teachers and support staff, as the school went to a Google Classroom-based learning system. I will set out later how I think the levy can be reformed to make it more accessible and to ensure that more SMEs get more opportunities to take up apprenticeships. It is all well and good talking about skills, but if we do not have enough apprentices in the first place with the opportunity to access them, we will always have to overly rely on cheap foreign labour from abroad to fill vacancies. I suspect the hon. Gentleman and I have slightly different opinions on that, but the Chancellor said in the autumn statement today that he wants to see us skilling up and levelling up the opportunities for young people here.

The fall in the number of apprenticeship starts suggests that apprenticeships in their current form are not benefiting young people and helping them get into the workforce. We require businesses to invest in their existing workforce. Increasing the flexibility of the apprenticeship levy would help businesses with the cost of investment in British talent, further militating against the dependency on mass migration. Although increased collaboration between the Institute for Apprenticeships and Technical Education and the Migration Advisory Committee will not eradicate reliance on immigration for vital skills, it will shift the focus to prioritising British upskilling and offer a long-term solution to the nation’s skills shortages.

As evidenced in “The New Conservatives’ plan to upskill Britain”, which I proudly wrote with my hon. Friend the Member for Great Grimsby (Lia Nici), red wall areas have been hit especially hard by the reduced number of younger apprentices in SMEs. In northern and coastal constituencies, the number of apprenticeships has fallen, while it has grown in places such as Wimbledon and Chelsea. As the New Conservatives’ skills paper suggests, areas such as Stoke-on-Trent North, Kidsgrove and Talke need more home-grown apprentices so that we do not rely on cheap migrant labour to fill the skills gap. That is why it is so vital that we take on recommendations from industry and reform the levy, so that communities can benefit from apprentices.

One way the New Conservatives’ skills plan seeks to do this is by pushing for the Migration Advisory Committee to work much more closely with the Institute for Apprenticeships and Technical Education, by identifying gaps in the market where unspent levy funding can be used to support the training of home-grown talent that will help to close the skills gap. With net migration standing at over 600,000 in the year to June, it is essential that we explore ways to wean the economy off cheap migrant labour, which puts immense pressure on our public services, including our schools, our NHS and our housing supply, with migrants now making up half the demand for new builds. I am confident that reforming the apprenticeship levy to allow underspends to target specific gaps in the job market will help to solve one of the UK’s most challenging long-term problems.

In the New Conservatives’ skills plan, we also raise issues surrounding the levy transfer mechanism and suggest raising the current transfer from 25% to 35%. Since the introduction of the levy five years ago, £4.3 billion has been raised by the levy but kept back by the Treasury. In 2021-22 alone, the revenue raised was £750 million—more than the entire apprenticeship budget—and according to FE Week analysis, His Majesty’s Revenue and Customs pocketed an extra £415 million in the year to September 2023. I know that this is an issue for small and medium-sized businesses in Stoke-on-Trent, and I was shocked to see the Sentinel report in January this year that Stoke-on-Trent City Council was forced to send its £1 million apprenticeship underspend back to HM Treasury.

As co-chair of the APPG on apprenticeships, I have spoken to many businesses that say the system for transferring funds is immensely bureaucratic and requires excessive paperwork, which dissuades businesses from pursuing it. Our skills paper therefore sets out plans to increase the apprenticeship levy transfer to 35%. As the New Conservatives’ report sets out, the current cap at 25% limits employers making the most out of their funding, and it is difficult for businesses to transfer funding to SMEs outside their supply chain. That is why we advocate increasing the ease with which funds can be transferred by including other SMEs local to the region of the levy payer, which would keep investment local and widen access to apprenticeship funding.

The New Conservatives and I want to see a greater amount of the billions of pounds of unspent levy funding—like the £1 million underspend in Stoke-on-Trent—spent on skills locally, which will help the levelling-up agenda and assist young people in finding good career prospects near to home. However, to do that, the Government need to be brave and expand access to apprenticeship funding, as we outline in our report.

We need to allow for training to be more sensitive to labour market demands, so that we can upskill our homegrown talent. We should seize on local areas’ expertise, such as Stoke-on-Trent’s thriving video game industry, to make apprenticeships work for the economy. Alongside using unspent levy funding to support SMEs with grants, we should look to make it flexible enough to support shorter courses. Microsoft has identified that a modular approach to apprenticeships would allow apprentices to fit into the gaps in the labour market much more effectively. It says that this is essential to ensure that people are equipped with the digital skills they need to perform an increasing number of tasks.

In some cases, labour market demands do not require long courses, so making the levy more flexible will support shorter courses that meet existing needs of the business, rather than fulfilling bureaucratic apprenticeship requirements. This will enable employees to develop much-needed skills and help employers to address specific skills shortages that they face. Microsoft identifies such flexibility as being necessary for businesses to adapt to the rapidly changing requirements of digital roles, noting that the current 18-month waiting period for the digital apprenticeship standard to be approved is too long. Such long approval times stifle growth and leave employers without the skills that they need. Increasing the flexibility of the apprenticeship levy will also help Britons to upskill, improving productivity and reducing the skills gap.

In my role as the co-chair of the APPG on apprenticeships, I have also spoken with many leading businesses in Stoke-on-Trent North, Kidsgrove and Talke as well as across the country, and they have outlined ideas about how to make the levy work. Policy Exchange’s excellent paper, “Reforming the Apprenticeship Levy”, makes the disappointing point that SME involvement in the apprenticeship system has plummeted since the introduction of the levy, and it states that that has wider implications because, historically, SMEs train higher proportions of apprentices, particularly from disadvantaged backgrounds.

As such, Policy Exchange has proposed a number of recommendations to streamline the process and support SME involvement in the training of apprentices, including financial support for off-the-job training. It suggests that SMEs should be supported with £2,500 to fund off-the-job training for apprentices under the age of 25, with an additional £500 on completion.

Given that FE Week reported that HMRC pocketed around £415 million generated by apprenticeship levy receipts last year, I want the Government to explore whether there is scope to use some of that underspend to back SMEs with the £3,000 payment advocated for by Policy Exchange, which believes that such support would cost around £200 million. The policy was backed by the Prime Minister when he was Chancellor during the covid-19 pandemic, so I urge him to consider that to get more people doing apprenticeships once more.

For some businesses, especially SMEs, the hidden costs are often what prevents them from being able to hire an apprentice in the first place. The funding is there to support our SMEs and to support our apprentices with more than just training, and this simple change could be transformative.

Alongside reforms to the levy, I want to use this time to raise the issue of functional skills requirements, which are also a barrier to apprenticeships. For someone to be an apprentice in England, they must prove that they have good qualifications in English and maths. If they cannot do so, the Government pay to enrol them on a course and enter them into exams to prove that. That is wasting tens of millions of pounds of taxpayers’ money, because, in some circumstances, despite an older apprentice holding a degree or other level 4 qualifications, the fact that they cannot find their GCSE or even O-level certificates means that they must retake the exams.

The current focus on functional skills qualifications also poses a challenge to some hoping to complete apprenticeships, disproportionately impacting those from disadvantaged backgrounds and SME employers that are more likely to offer apprenticeships to younger and less well-educated students. I wrote to the Department for Education to raise my concerns about this issue and was disappointed with the response I received this week from the Minister, who said that they are

“currently unable to offer any flexibility here”.

If we were to relax those requirements, there would be a significant public savings benefit, meaning that money could be spent on helping businesses to support their apprentices more effectively. Over the past five years, the Government have spent £379 million on functional skills, with the per-apprentice cost increasing by 64% since 2021-22. If we reduce those costs by being more flexible about functional skills requirements, businesses will benefit.

As the co-chair of the APPG on apprenticeships, I have spoken with businesses who told me that reviewing functional skills requirements, which is also a recommendation in the New Conservatives’ skills paper, will improve retention rates for apprenticeships. That will give businesses confidence that the investment they make in new employees will be worthwhile.

Data supplied to me by Multiverse shows that 60% of apprentices undertaking functional skills exams already have degree certificates, but they do not have their school qualifications to hand, or they were schooled internationally. I do not believe that it is necessary for someone to take on extra training in English and maths if they have a degree-level qualification. A degree should be an indicator of competency in English and maths, and new recruits should be focused on developing skills that are fit for industry and not on functional skills training.

Multiverse argues that this requirement is a significant and unnecessary barrier to work. Its data shows that 74% of apprentices withdrew from their course when they were required to undertake English and maths exams. Given that fewer people have been undertaking apprenticeships since the introduction of the levy, we need innovative and simple ways to improve retention rates, and removing functional skills requirements could help to achieve that.

However, outdated attitudes towards higher education are thankfully ending. Recent polling shows that the British public are more positive about technical and vocational education than they are about university education, with 48% of parents saying that they would prefer their child to get a vocational qualification after leaving school, compared with 37% of parents who would prefer their child to go to university.

More broadly, there is support for prioritising further education and higher education equally, with 31% thinking that vocational education should be prioritised by the Government over university education and only 9% thinking that university education should be prioritised over further education. It is regrettable, therefore, that equal treatment of higher education and further education is not shown through the welfare system. Families should not be penalised if their child opts for an apprenticeship rather than other post-16 education. However, current welfare policy requires child benefit to be removed from families with children aged under 19 in apprenticeships, unlike if their child were studying for A-levels or T-levels.

More needs to be done to ensure that young people from disadvantaged backgrounds benefit from apprenticeships rather than being short-changed by their university experience. For those with low academic attainment or opting for low-return courses, a quality apprenticeship could offer a better option for a variety of reasons. Such a route should not be closed off due to parental financial worries.

In conclusion, the over-expansion of university education by Tony Blair and new Labour has left too many young people in debt, without the skills needed to secure well-paying careers. At the same time, investment in high-skilled trades has dropped, leading to an over-reliance on cheap immigration from abroad to meet our ever-expanding list of job shortages. As the party that values hard work and aspiration, we need to reverse that trend and invest in local talent that matches local labour market demands.

The policy suggestions presented in the New Conservatives’ skills paper aim to shift the balance from Government overspending on low-return higher education and repurpose all money saved for investment in quality technical and vocational education that keeps talent local and high-skilled. That will be achieved only by both disincentivising students from poor-quality university education and incentivising them towards high-quality technical and vocational education.

Such measures also need the support of local businesses. Small and medium-sized businesses need to feel that their investment in local talent is worthwhile and supported by the Government. With renewed prioritisation for apprenticeships and other technical and vocational training and education, our country can upskill its workforce, meet labour demands without reliance on immigration, and ensure good jobs for the present are there for future generations as well.

The central message of the New Conservatives’ skills plan is to increase the parity between further and higher education funding. That means that it is essential for the Government to support all apprenticeships offered by an SME regardless of how much of the levy is used. That will help businesses and individuals get greater access to apprenticeships, which is in line with my vision to make apprenticeships a more viable option and to make clear that degrees are no longer the sole gold standard in education.

[Dr Rupa Huq (in the Chair)]

I remind hon. Members to bob now if they want to be called, so we can work out who will speak.

Gurkha Pensions

Debate between Jonathan Gullis and Rupa Huq

Monday 22nd November 2021 Westminster Hall

[Dr Rupa Huq (in the Chair)]

Before we begin, I remind Members that they are expected to wear face coverings when not speaking, in accordance with NHS guidance and that of the House of Commons Commission. I also remind Members that they are asked by the House to have a lateral flow test twice a week if coming on to the parliamentary estate—there is a test centre where you can do that, or you can do it at home. Please also give each other and members of staff space when seated, and when entering and leaving the room.

[Jonathan Gullis (Stoke-on-Trent North) (Con)]

I beg to move,

That this House has considered e-petition 594155, relating to Gurkha pensions.

It is a pleasure to serve under your chairship, Dr Huq. I will start by thanking Roy Brinkley, who himself is a veteran of the Grenadier Guards, for creating this petition. In total, it has attracted more than 107,000 signatures from all over the country, including 99 from Stoke-on-Trent North, Kidsgrove and Talke, enabling us today to discuss the important issues underlying the petition. I also thank Roy and his friend Jack for taking the time to talk to my office earlier today about the petition and what it means to them. I apologise for not being able to meet them in person; sadly, unexpected parliamentary business meant that I had to ask my staff to take the meeting on my behalf. Roy is here in the Public Gallery, and many Gurkhas have turned up in Westminster today to show their support for the campaign. Sadly, we are likely to be disrupted by votes, but I hope that Roy and everyone outside will feel that we have done their campaign justice this evening.

When preparing for today’s debate, I realised that I have not yet spoken on the Gurkhas in this place. I approach this topic as someone who holds all members of our armed forces in the highest possible regard. As a bit of family history, my great-great-uncle, Allan Gullis—who still lives today—fought on D-day; my grandfather and hero, Terrence Gullis, served in the Royal Marines during the Suez crisis; and my maternal grandfather, William Beacham, served in the Royal Air Force. There is also a strong veterans community in my area of Stoke-on-Trent North, Kidsgrove and Talke. We are proud to be the home of the Staffordshire Regiment. In Kidsgrove, the Royal British Legion has created a beautiful and touching war memorial garden, which is maintained and used all year round, and in Smallthorne, we have the fantastic veterans breakfast club at the Green Star pub, run by Martyn Hunt and Paul Horton. This family background, and the strong ties to the armed services that we have in Stoke-on-Trent North, Kidsgrove and Talke, were key motivations behind the Desecration of War Memorials Bill, which I tabled in June last year with my hon. and gallant Friend the Member for Bracknell (James Sunderland) to secure better protection for memorials to our glorious dead.

On top of that, today’s debate comes at a poignant time, following on so soon from Remembrance Sunday. Every year, we hold poignant services across north Staffordshire and our United Kingdom in memory of our glorious dead, and this year, it was a real privilege to be able to attend the memorial service at Tunstall memorial gardens and to lay wreaths and pay respects at memorials across my constituency. This year, it has also been very moving to be able to plant a cross in Parliament’s inaugural remembrance garden on behalf of the people of Stoke-on-Trent North, Kidsgrove and Talke in memory of heroes such as Gunner Zak Cusack from Smallthorne and so many other brave men and women who served Queen and country. As such, I speak today as someone who knows just how amazing all our veterans are, and I hope I will do this subject the justice it deserves.

First of all, let me say that I know how highly regarded the Gurkhas are and have been for over 200 years. Their service to the British Crown, both here and overseas, has been marked by excellence and sacrifice. As Roy said to my team earlier, they are some of the most loyal soldiers this country has ever had, and have served on the frontlines of every war that the UK has fought in for the past 200 years. Prince Harry famously served alongside them during his 2007-08 tour of Afghanistan, and commented that

“when you know you are with the Gurkhas…there’s no safer place to be”.

That record of excellence and heroism goes somewhat under the radar, so I thank Joanna Lumley and campaigners like her for bringing the Gurkhas into the limelight. Like many people, I became aware of the problem Gurkhas have been facing, because of Joanna’s tireless efforts and all she has done to get this issue on our political agenda. More recently, we have had our attention refocused by the hunger strike outside Downing Street—indeed, I understand that Roy knows one of the hunger strikers personally. Having spoken to colleagues in the Ministry of Defence and other colleagues in this place before today’s debate, I know that the Gurkhas’ service is incredibly highly valued and respected. Their distinguished service is a source of immense pride in both the UK and Nepal.

From engaging with Roy, I understand that the crux of the issue is the pension scheme, and the concerns of many Gurkhas relate to the historic Gurkha pension scheme that ran from 1948 to 2007. Roy is seeking equal pension rights pre-1997, including back pay. The scheme differed from the arrangements for the rest of the British armed forces, being based on the Indian army model, because the Brigade of Gurkhas was based in Nepal until 1 July 1997. Despite that, I understand that for most Gurkha veterans the 1948 Gurkha pension scheme provides a pension at least as good as, and in many cases better than, that given to their British counterparts with identical periods of service. Under the Gurkha pension scheme all Gurkhas who retired before 1 July 1997 also qualified for an immediate pension after only 15 years of service. This meant that, typically, they would qualify for a pension in their 30s. By contrast, before 1975 British soldiers had to serve at least 22 years before they could receive a pension. That meant Gurkhas were receiving pension payments for over 25 years before most British soldiers of the same rank and length of service qualified for any payments.

Following the change in the home base for the Brigade of Gurkhas in 1997, and a review of their terms and conditions of service in 2007, came a change to their pensions. Following this review, it was decided that the difference between the terms and conditions of service of the Gurkhas and those of their British counterparts would be eliminated. For Gurkhas currently serving, and those with service on or after 1 July 1997, there would be an offer to transfer to the armed forces pension scheme. The reason for this cut-off was that that was when the UK became the home base for the Brigade of Gurkhas and changes in immigration rules, backdated to 1 July 1997, meant there was an increased likelihood of retired Gurkhas settling in the UK on discharge. This change, to better reflect the changed circumstances of the Brigade of Gurkhas, who were no longer based in Nepal, was most welcome. However, it clearly has not solved all the outstanding issues.

It is welcome that there has been ongoing engagement between the UK Government, Nepali embassy officials and Gurkha veteran groups. The former Minister for the Armed Forces, my hon. Friend the Member for Plymouth, Moor View (Johnny Mercer), met repeatedly with Nepali Ministers and veterans groups to discuss the outstanding issues. This led to the production of the technical report, with the Gurkha veterans’ grievances, together with the UK Government’s responses, set out in one document. This engagement has led to improvements in the Gurkha pension scheme, and in March 2019 a new package of measures was announced, including an increase to pensions under the Gurkha pension scheme of between 10% and 34% above annual inflation. There was also a new £25 million investment in medical and healthcare facilities in Nepal for Gurkha veterans.

The Government have since agreed to reconsider the decision on the increase to pensions made in 2019, with a public consultation earlier this year that sought views on how changes should be implemented to the Gurkha pension scheme. That consultation closed earlier this year, and after considering responses Ministers will make a fresh decision on the size of the uplift. The Ministry of Defence has also agreed to start a bilateral committee in December to discuss all Gurkha veteran welfare issues. This move is very welcome, but I understand from what Roy has said that, as yet, there is no certainty over the timings of this important committee. If it is possible, I would very much appreciate the Minister sharing more details of these plans in his response.

Another key issue that Roy raised with me was the ability of Gurkhas and their families to settle in the United Kingdom, to be granted citizenship and to have the right to vote. Non-UK service personnel, including Gurkhas, can also apply for settlement in the UK on discharge if they have served a minimum of four years and meet the requirements of the immigration rules. Settlement gives people the right to live, work and study here for as long as they like and to apply for benefits if they are eligible; they can use it to apply for British citizenship. However, I recognise that although there is a straightforward route to settlement the current system places a financial liability on those personnel and their families, costing £2,389 per person. I am therefore delighted that the MOD and the Home Office are currently analysing the responses received to a draft policy proposal to waive fees for non-UK service personnel if they apply to settle in the UK at the end of their military service, provided certain criteria are met.

--- Later in debate ---

[Jonathan Gullis]

I am grateful to my hon. Friend. I totally hear his case. I am unfortunate not to have an individual in my constituency who can share their story. My hon. Friend is a doughty champion for his constituents. I am sure that the Minister has taken note of that and will take it away. Having spoken with the Minister, I have confidence that there will be a very fair settlement coming down the road. It may not be full retrospection, as some would want, but I think it will be a suitable and adequate arrival point, which will mean that everyone can start to look forward rather than backward.

Clearly, however, the issue has not been resolved, and some Gurkha veterans still have concerns, so I am pleased that the Government have been willing to engage and keep dialogue going. I very much look forward to seeing the response on the public consultation on waiving fees for non-UK service personnel, which I feel could be very significant, as well as to the outcome of the bilateral committee on Gurkha veteran welfare. I look forward to hearing what hon. Members and the Minister have to say on this important issue.

[Dr Rupa Huq (in the Chair)]

Given the time we have left, and the time set aside for the three Front Benchers, I think everyone will get in if we remain within five minutes each. I call Ruth Cadbury.

--- Later in debate ---

[Jonathan Gullis]

I thank all those who took part in this debate. Dr Huq, I do not know whether it is customary, but am I allowed to take an intervention while summing up? I noticed that my right hon. and learned Friend the Member for South Swindon (Robert Buckland) was keen to intervene.

[Dr Rupa Huq (in the Chair)]

I am nice, so I will allow it.

[Robert Buckland]

I am grateful to my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis) for allowing me to intervene. I have the honour of representing the Gurkha community in Swindon, and I have wrestled with these issues for many years. Does he, like me, take some encouragement from the Minister’s hard work, particularly on the uplift and the negotiations he has been conducting with the intercession of the Nepalese embassy since September?