Autumn Statement

Lord Macdonald of Tradeston Excerpts

Thursday 3rd December 2015 Lords Chamber

[Lord Macdonald of Tradeston (Lab)]

My Lords, I, too, thank the noble Lord, Lord Carrington, for his introduction to the debate. As a time-served marine fitter, I identify with his comments on apprenticeships, on which I now hope to build.

In his Autumn Statement, the Chancellor announced an apprenticeship levy of 0.5% to be paid by companies with payrolls of more than £3 million per annum, effective from April 2017. It is estimated that this levy will raise £12 billion during this Parliament and help to fund the training of 3 million apprentices.

The Government say that only 2% of UK companies will pay the levy, getting vouchers to offset the cost of training the apprentices in return. The initial reaction of leading employer organisations was to complain that the levy was just another payroll tax on top of the increased cost of pension provision last year and the national living wage which is to be paid next year. By contrast, the response from the Trades Union Congress was positive. I, too, welcome the creation of an institute of apprenticeships to set rigorous standards and monitor the use of levy moneys. This institute is to be independent of Government, with a publicly appointed board of business leaders. I look forward to this businesslike board challenging the Government’s view that 25% of levy moneys would be spent on administration. This new institute will be crucially important to the success of the new apprenticeship system. In appointing board members, the Government should therefore ensure that the practical workplace experience of millions of trade union members is properly represented.

At a CBI conference this week for leaders of medium-sized businesses, the main concern of 36% of those attending was the difficulty in attracting skilled staff, particularly in the engineering and tech sectors. No doubt this helps to explain why most of the delegates reportedly welcomed the apprenticeship levy. The Minister will be aware that the present policy on apprenticeships is widely criticised for putting quantity before quality of training, as the noble Baroness, Lady Burt, mentioned.

A recent Ofsted investigation, Apprenticeships: Developing Skills for Future Prosperity, reported that increased apprenticeships numbers were not well matched to the skills most needed. One-third of skills providers visited by Ofsted were judged not to provide high-quality training. There was also a lack of collaboration between providers and employers. Too few 16 to 18 year-olds were starting an apprenticeship, with too many places going to those over 25. Ofsted’s chief inspector, Sir Michael Wilshaw, concluded,

“Despite the increase in numbers, very few apprenticeships are delivering the professional, up-to-date skills in the sectors that need them most”.

While welcoming the apprenticeship levy, we now need more detail on how the new arrangements will work. Can the Minister tell the House if key sectors with skills shortages, such as engineering, construction and the digital economy, will be given highest priority? How will the new institute for apprenticeships relate to the Skills Funding Agency, an executive agency with an annual budget of £3.7 billion? Will SMEs have access to levy moneys, as well as to the existing apprenticeship pot of the Skills Funding Agency?