Apprenticeships

Lord Layard Excerpts

Thursday 14th October 2010 Lords Chamber

[Lord Layard]

My Lords, I strongly congratulate my noble friend on initiating this debate. Apprenticeships are vital to the future of the country. As we know, low skill is our problem. It is why we have so many people on low pay, and why we have low productivity and so much youth unemployment. The only way we can eliminate this is through apprenticeships. Learning while working is what young people and employers want. It must be established clearly as the main alternative to A-levels and university for our young people. Youngsters of 13 or 14 must grow up thinking that this is the natural alternative to A-levels or university as a way into a decent job.

That is why, last year, we enacted the historic apprenticeship Act in this House. The main clause gave, in three years' time, an entitlement to an apprenticeship to every young person with the minimum qualifications of five GCSEs at any grade. If that is implemented, it will be one of the most important things done in the last Parliament. However, will it be done? For me, that is the key question of the debate. I very much hope that the Minister will tell us whether the Government will implement the entitlement to an apprenticeship in 2013, which is in the Act. Obviously, it is not easy to do, especially in a recession at a time of financial squeeze. I shall say a bit about what needs to happen for it to be done, and then I shall make a few more points about why it is so crucial that it is done.

There are five key steps. First, as my noble friend Lord Sugar said, we must ensure that the employers are much more central to the process, and that they know that they can have the money. This point was made in the report of the Economic Affairs Committee, chaired by the noble Lord, Lord Wakeham. The answer from the authorities is always that the employers can have the money—but do they know this? I think that most of them have no idea that they could have the money if they wanted to run an apprenticeship scheme. Nobody has gone out and offered them the money up front. How many Ministers have made speeches saying, “Take this money”? Has the National Apprenticeship Service gone round saying, “Take this money”? I do not think so; I have seen no evidence of it; but that is what has got to happen. Of course, employers will not take the money if the system is as bureaucratic as it is at present. Linked to that, there has to be a cut in bureaucracy to make it easier for an employer to run an apprenticeship.

The second issue is the level 2 apprenticeship. Of course we want everybody to get to level 3, but most 16 to 18 year-olds will have to go through level 2 to reach level 3. When the Economic Affairs Committee went to Germany and talked to employers, it was interesting to learn what level of entry qualification they expect for an apprenticeship. They do not expect apprentices to be wonderful. The noble Lord, Lord Sugar, rightly said that they know nothing when they come. They have got to be taken in, in a spirit of good will, by an employer who will make the most of them. That means that employers must be willing to take in young people at 16 and 17 who do not have anything remotely like level 2 already under their belt. This is essential: we will not revitalise the youth labour market in this country, which has closed down over the past 25 years, unless we have employers who accept that their role includes taking in greenhorns.

Thirdly, in the government allocation of funding, the absolute priority must go to 16 to 18 year-olds. The Government love to say how many people over 18 get apprenticeships. It is always a bigger number than the number of those under 18. It should be the other way around, otherwise there is no chance of achieving the entitlement.

Fourthly, as the noble Baroness, Lady Sharp, said, schools must be required to inform their youngsters about apprenticeships. I simply do not understand what has happened about that clause in the Act and why it is not being implemented. Perhaps we will be told.

Fifthly, somebody must co-ordinate this. Who is responsible for making the entitlement happen? It can only be one body: the National Apprenticeship Service. Has it been told that it must make this happen? Has it been asked to produce an action plan for making it happen? Again, perhaps we will be told.

We are talking about a really important social and economic change, and perhaps I may end with a few interesting facts to show why it is so important. First, apprenticeship is a first-class investment. I should like to quote some estimates of the social rate of return—that is, the rate of return to the whole of society—from apprenticeship based on some excellent work by a former colleague of mine, Steven McIntosh, who is now at the University of Sheffield. He shows—it is a robust estimate, much tested—that the rate of return from apprenticeship has been over 35 per cent per annum. That is incredibly high. Comparable estimates which many of us have done for rates of return from A-level and university are in the ballpark of 10 per cent and are probably even less for full-time vocational education.

Unfortunately, until recently the Government and people of all parties have tended to think that the solution to our problems is more full-time vocational education. It is not; it is apprenticeship, yet at the moment full-time education is treated more generously than apprenticeship. Full-time education for 16 to 18 year-olds receives £4,000 a year, compared with £3,300 for apprenticeship, although, as I said, the latter yields a rate of return of one-third. Of course, the reason is that full-time vocational education—this applies equally to the diploma and the NVQ—does not provide a ticket for the trade.

A misconceived thrust was given but fortunately we are now getting back on track with apprenticeship as a centrepiece. However, it is easy to see what will happen in the recession. Young people will stay on in full-time education for lack of anything else to do and we will pay out the £4,000 for them because there are no places for apprenticeships, which they would much rather have. We have to make sure that that does not happen, because either they will not stay in full-time education and become unemployed or they will go into a less useful form of education. Unemployment would be a social tragedy and more full-time education could well be a waste of money compared with apprenticeship.

Equally, I point out—this has already been mentioned—that apprenticeship is the secret of success in many of our competitor nations. My colleague Hilary Steedman showed that to be the case recently in a wonderful report on apprenticeship in different countries.

We are discussing something which is not peripheral but central to the future of our country in both the short and long run. In the short run, we face a real national danger of mass youth unemployment, losing a whole generation. Many of these youngsters will reject full-time education and, if we cannot secure them an apprenticeship, we will have a real problem on our hands. In the long term, we will never get a more productive or more equal society without a proper, flourishing system of apprenticeship, which has to start as soon as a young person has nothing better to do. Therefore, it is a dreadful error to build up apprenticeships for those over the age of 18 and not to give priority to 16 to 18 year-olds. Our young people have to see, when they are 13 or 14, that apprenticeship is as available to them as full-time education. I hope that the Minister can assure us that that is what the Government intend to do by implementing entitlement at the due date.