Institute for Apprenticeships and Technical Education (Transfer of Functions etc) Bill [ Lords ] (Third sitting)

Neil O'Brien Excerpts

Committee stage
Thursday 20th March 2025 Public Bill Committees

[The Parliamentary Under-Secretary of State for Education (Janet Daby)]

Government amendment 1 lets the Secretary of State make regulations that determine the date, or dates, when clauses 1 to 8 and schedules 1 to 3 come into force. The other provisions of the Bill in clauses 9 to 14 come into force on the day on which the Bill is passed.

This amendment seeks to overturn the amendment passed in the other place that places a 12-month delay between the creation of Skills England and commencement of key parts of the Bill, including the clauses that transfer functions from the Institute for Apprenticeships and Technical Education to be exercised by Skills England. It was hugely disappointing that, despite broad support for the urgent need for reform, peers in the other place voted for that delay. Reform is exactly what the Bill and Skills England will deliver. After 14 long years of complacency and neglect, this Government are driving high standards, and we have a plan for change. A delay will benefit no one.

Skills England is already operating in shadow form and, once the Bill is passed, it stands ready to become a fully operational arm’s length body. The leadership is already in place, with the chair, the vice-chair, the chief executive officer, the deputy CEO and a full team of senior civil servants already working as one. The work is well under way; Skills England reported on skill gaps in September last year. It is connecting decision making across regional and national Government, as well as working closely with training providers, trade unions and employers. It is collaborating with businesses to develop sector plans for the forthcoming industrial strategy.

Skills England is working with closely with the Migration Advisory Committee to access skills needs to identify shortages in occupations. That will help to identify and grow our domestic skills pipeline over time, which will reduce our reliance on overseas workers. We need to build our own skilled workforce, and Skills England is moving ahead. The Bill gives it some of its key tools, but there is no case for delay, and I commend Government amendment 1 to the Committee.

Government amendment 2 would remove clause 14(2) of the Bill. It is normal procedure for Bills originating in the House of Lords to require the insertion of a standard privilege amendment such as subsection (2). This formally recognises the privilege of this House to control charges on people and public funds. Therefore, in accordance with normal procedure, we now remove the privilege amendment so that any such charge is imposed by this House, rather than the House of Lords. I commend Government amendment 2 to the Committee.

Clause 11 sets out the territorial extent of the provisions contained within the Bill. This is a standard clause for all legislation. Clauses 1 to 7, clause 9 and schedule 2 extend to England and Wales. Clause 8 extends to England, Wales and Northern Ireland. Clauses 10 to 14 and schedules 1 and 3 extend to England and Wales, Scotland and Northern Ireland.

I have already touched upon clause 12 as part of Government amendment 1, which states when the provisions of the Bill will come into effect. Clause 12 should stand part of the Bill, as amended by Government amendment 1. Furthermore, as is standard practice, clause 14 gives the Bill a short title by which it may be known once it becomes an Act. The short title given is the

“Institute for Apprenticeships and Technical Education (Transfer of Functions etc) Act 2025.”

I commend clauses 11, 12 and 14 to the Committee.

[Neil O’Brien (Harborough, Oadby and Wigston) (Con)]

Clause 11 talks about the geographical extent of the Bill, which it says is England and Wales. This is a very small point, but it is worth noting that the Bill and decisions under it will actually affect other parts of the UK as well, not least because they affect degree apprenticeships and higher education. For example, the University of Strathclyde is a leading provider of graduate apprenticeships and degree apprenticeships across Scotland and England; I will return to that overlap later on.

On a more substantive note, Government amendment 1 seeks to overturn the one-year pause inserted in the House of Lords. Why did peers insert that? Why was there so much debate, and such wariness about this Bill? First, because there were good reasons that standard setting was put at arm’s length and closer to employers. We heard from all parts of the House of Lords that this Bill is a centralisation and, alongside other changes the Government are making, it will risk directly damaging the status of these qualifications.

Secondly, the Government are doing several things that will make it less likely that businesses will take on apprenticeships, starting with the Budget. Rather than fixing those problems, the Government are reorganising. Skills England will be the 13th skills body in 50 years. It is abolishing IfATE, which was created only seven years ago—yet more reorganisation, rather than a focus on the real issues.

Thirdly, peers had—and we have—real concerns that the reorganisation of the machinery of Government will lead to harmful delays in addressing some of the most important strategic issues we face. Those concerns are borne out by the Government’s impact assessment, which states that there may be a drop in apprenticeship starts while IfATE’s functions are transferred to the Secretary of State. It says:

“The transfer of function from IfATE to the DfE could potentially cause a temporary slowdown in the growth rate of new apprenticeships and technical education courses due to potential delays in the approvals process resulting from the Bill…This may disproportionately impact disadvantaged learners, who rely more heavily on these pathways for career advancement.”

Fourthly, peers inserted the delay because of concerns about what will happen as DFE tries to absorb all the staff of IfATE. Lord Blunkett, who was one of the most interesting speakers in the Lords, said:

“My fear…is that given the number of people currently transferable from IfATE, full- and part-time, which nudges 200…there is a real danger that IfATE will swamp Skills England at birth.

When two years ago I led on the learning and skills document that was a precursor to Skills England…we never envisaged that an agency inside government would have to take on the assurance and accreditation of the relevant sector standards.”

He continued:

“A Skills England that has no legislative backing and no parliamentary references but is down merely to the changing face of ministerial and departmental appointments is in danger of losing its birthright before it has got off the ground.” —[Official Report, House of Lords, 21 November 2024; Vol. 841, c. GC98.]

That argument is somewhat different from the others. His argument, as somebody sympathetic to the creation of a body like Skills England, albeit outside the Department, is that it needs time to establish its own culture and balance, and to grow and develop some roots, before the IfATE elephant steps into the Skills England rowing boat.

Since we last met as a Committee, we have received further written evidence from the Skills Federation, which brings together 18 employer-led sector skills bodies, representing more than 150,000 employers. They add their voices to the concerns. The organisation warns:

“Transfer of IfATE functions risks disruption and a focus on operational rather than strategic priorities…The movement of functions and the people that carry them out will always be challenging. It is important that the transfer is planned effectively, and the time taken to think through the implications for IfATE staff, but also the impact on the system. Compromises will no doubt have to be made to balance the need for pace with the requirement to retain operational continuity.

However, there is a key risk that transfer of functions from IfATE will become the key focus for the set-up of Skills England and less attention (and potentially resources) placed on achieving the overarching aims.”

That is a direct reinforcement of the argument that Lord Blunkett made in the Lords. It is very sensible advice to take our time.

In contrast to employers’ groups, Ministers say there is no time to wait. In truth, there is no great obstacle to the Department doing all the things it might want to do, and establishing Skills England a little bit more before that big transfer of staff, but Ministers want to take this one-year pause out of the Bill with their Government amendment 1. They would be wiser to listen to the grey-haired people in their own party, such as Lord Blunkett, but it seems they are not minded to do that.

This group also includes Government amendment 2 to remove the Lords’ privilege amendment. For the benefit of those following the proceedings, as the Minister said, the Lords automatically insert these amendments when there is legislation starting in the Lords that involves levies and taxpayers’ money, to avoid formal infringement of the Commons’ privileges over those things.

There is nothing unusual about that, but the privilege amendment is put in as a deliberate reminder that the Bill has a significant impact on spending of both levy and taxpayers’ money. The sums involved here are non-trivial—it is billions of pounds of spending, governed by IfATE today and by the Department for Education in future. The ongoing chronic uncertainty about the Government’s plans to allow employers to take money out of apprenticeships is not just damaging for business—it is damaging on a significant scale.

In the last Bill Committee sitting, the Minister promised to write to me to set out the Government’s position on the 50% flexibility. I hope she will tell me today when that letter is likely to appear, because businesses are starting to raise the alarm ever louder.

Since the Committee last met, even more businesses have come out with criticisms. Jane Gratton, the deputy director of public policy at the British Chambers of Commerce has said that the lack of clarity about the future of the growth and skills levy was creating “fresh uncertainty among businesses.” She said that some employers had told the BCC that they had put training plans on hold until they heard what alternatives would be funded in future. She called on the Government to lay out a clear timeline for reform and said that threats to cut the levy before it had even been established are “worrying and destabilising”.

Likewise, Simon Ashworth, the deputy chief executive and director of policy at the Association of Employment and Learning Providers, said:

“there’s little room for manoeuvre—scrapping level 7 apprenticeships won’t yield savings for years…Until the programme budget more closely matches the levy take, it’s imperative funding priorities are aimed at maintaining the sustainability of apprenticeship standards, rather than introducing further non-apprenticeship flexibilities.”

That is a very important warning.

This is all happening against a backdrop where other types of technical education covered by IfATE are shrinking too. I am old enough to remember when Labour MPs spent years saying that adult skills spending was not generous enough—yet yesterday we learned that the DFE is to cut adult skills budgets by 6%. Amazingly, that came out at the same time as the welfare reform Green Paper, which overshadowed it and mentioned training 18 times. In the Chamber the other day, the Secretary of State for Work and Pensions made an argument—a good argument—that it is better to get people into training rather than parking them on benefits; yet elsewhere, at the very same moment, DFE Ministers were cutting the training budget.

Skills England was supposed to bring a joined-up approach to policymaking. There is not much sign of that here. Instead, it will reinforce the concerns of those who want technical education to be more independent and employer-led.

I ask the Minister a specific question on the funding that IfATE regulates. Yesterday, we got an announcement on schools funding. The Association of School and College Leaders and the Confederation of School Trusts are warning that the funding only covers part of the costs of the national insurance increase and is leaving schools with a funding gap ranging from 10% to 35%—but at least schools are getting the funding announcement before the start of the financial year, albeit only days before.

Technical education is not so lucky. Colleges and 16-19 institutions will have to wait. They will be told their allocations this May and will be paid in September, even though they will have to start making the increased tax payments from the start of the new financial year in just a few days’ time. As James Kewin, deputy chief executive of the Sixth Form Colleges’ Association points out:

“16 to 19 funding is uncertain at the best of times, but this year colleges are also waiting for their post-16 budget grant allocations (scheduled for May) and a decision on the 10 per cent T-level uplift…This is all very late in the day”.

He is right. Once again, technical education is being treated as the poor relation.

We already know that independent training providers and specialist colleges will not get any compensation, and it is unclear how much of next month’s national insurance rise will be covered by the grant. Can the Minister stand up and reassure the sector today that all the additional costs, including those for indirectly employed staff, will be covered by the grant? Or will they, like schools, find that they have been short-changed?

I will not labour the point, but many people, including employer groups and very experienced people on the Labour side, have warned about the rush to bring these powers and functions into the Department and the effect that that will have on the Government’s own plans for Skills England. Ministers would be sensible to listen.

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[Damian Hinds]

That is not really the way we do it in Parliament. You respond for the Government.

[Neil O’Brien]

We ask you a bunch of questions. I do not know whether you have noticed, but you are the Minister.

[Janet Daby]

I did not expect the Members opposite to respond anyway.

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[Janet Daby]

Across the UK, almost one in 10 of more than 2.5 million roles in critical demand—

[Neil O’Brien]

Will the Minister give way?

[Janet Daby]

I am going to make some progress first, then I will give way.

[Neil O’Brien]

She was asking us to intervene.

[Janet Daby]

More than 90% of those roles require periods of work-related training or education.

[Neil O’Brien]

Will the Minister take an intervention?

[Janet Daby]

The point I am making is that the last Government did not solve the skills shortages. The last Government held back growth and opportunity. This Government are moving forward. We want to boost skills through Skills England. The last Government prolonged uncertainty.

[Neil O’Brien]

The Minister encouraged us to intervene. One of the things Labour complained about a lot in opposition was what happened to the adult skills budget. Can the Minister confirm that the Government have just announced a 6% cut in the adult skills budget? Can she explain how that fits with the Government’s constant rhetoric—as in the welfare cuts debate just the other day—about getting people out of unemployment and into training? How will a 6% cut help to move people from welfare into training?

[Janet Daby]

Ms Furniss, I fear we are straying far away from the purpose of the Bill and what needs to be achieved.

[Neil O’Brien]

Will you answer the question? You invited the question.

[The Chair]

Order.

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[Janet Daby]

I will continue to respond. Skills will power this mission-driven Government.

[Neil O’Brien]

Will you answer the question?

[The Chair]

Order. Please speak through the Chair.

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[Janet Daby]

I am sorry, Ms Furniss. This is very flustering.

As I said, we have had 14 years of complacency and neglect from the previous Government. Following the reforms they introduced, including the apprenticeship levy, apprenticeship starts have fallen by more than 30%. It is concerning that fewer young people are benefiting from apprenticeships. Apprenticeship starts for those under 25 are down by almost 40%. That is why, since the Prime Minister announced it in July 2024, Skills England has been operating in shadow form in preparation for full establishment.

The teams responsible for Skills England’s broader strategic functions are already operational and are establishing links with their counterparts in IfATE. By combining the analytical and regional functions, it is already delivering in shadow form. Detailed transitional planning has taken place to ensure that the functions moving to Skills England from IfATE will transition smoothly with no break in service. The planned continuity in staffing and team structures will ensure that occupational standards, apprenticeships and wider technical qualifications will continue to be approved, and T-level contracts will continue to be delivered, supported and monitored.

This approach will also ensure that Skills England maintains the vital links with employers and other partners that IfATE teams have previously established. The Minister for Skills in the other place recently met many peers and went through many of the processes and functions under the Bill. He has outlined that in a letter that is available for the Committee.

The Government are focused on establishing a coherent skills system with more flexible training options to support employers to fill skills gaps while driving growth and spreading opportunity. Businesses are backing the Government’s mission to grow the economy by breaking down barriers to opportunity for young people through our planned reforms.

[Neil O’Brien]

Speaking of gaps, I wonder whether the Minister will answer my question. Will she stand up and reassure the sector that all the additional costs, including those for indirectly employed staff, will be covered by the forthcoming national insurance contributions grant?

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[Janet Daby]

As I have already said, the devolved areas will work on LSIPs with ERBs and maintain a close and strong relationship with Skills England.

LSIPs provide ongoing mechanisms through which local employers, strategic authorities, providers and other stakeholders come together to identify and address skills needs and issues. This supports Skills England’s aim to have the skilled workforce the economy needs at a national, regional and local level.

In response to the question about the impact of national insurance costs on skills and education, the Government have agreed that public sector employers will receive support in recognition of the increase in their national insurance contributions from April 2025. We are also providing £155 million for post-16 schools, academies and further education colleges. That is an increase of over £1 billion in the financial year 2025-26 for the education sector.

[Neil O’Brien]

Will the Minister promise to publish the methodology of how the figure of £155 million was arrived at? Can she reassure the sector that that sum is enough to cover all the costs of the national insurance increase, including the costs for indirectly employed staff?

[Janet Daby]

I hear what the shadow Minister is saying and will endeavour to get more information to him on those points. He asked about the flexibility of apprenticeships and levies. I wrote to the Chairs of the Committee yesterday addressing his question, but I understand that that was only yesterday.

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[Neil O’Brien]

It has not arrived.

[The Chair]

Please, show some respect.

[Janet Daby]

Government amendment 1 is crucial to ensure that Skills England is not unnecessarily held back. Transformation is under way—businesses and employers cannot afford to wait. Government amendment 2 is a normal procedure for Bills originating in the House of Lords. I urge the Committee to support the Government amendments and clauses 11, 12 and 14.

[Neil O’Brien]

I meant no disrespect, Ms Furniss, but the Minister promised in the previous sitting that she would write to me. She may say that the letter has been sent, but it has not arrived. It is telling that the things we are debating will be written into law and I have still not—

[The Chair]

Order. My point was that you were talking from a sedentary position. You had sat down and should have asked to intervene again.

[Neil O’Brien]

I take your point, Ms Furniss. We are keen to move on to a vote on Government amendment 1, which we think is a big mistake. We have already explained why—I will not recapitulate that.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12

Commencement

Amendment proposed: 1, in clause 12, page 5, line 6, leave out from “force” to end of line 7 and insert

“on such day as the Secretary of State may by regulations appoint”. —(Janet Daby.)

This amendment provides for the substantive provisions of the Bill to be brought into force by regulations made by the Secretary of State.

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[Janet Daby]

Clause 13 contains provisions to ensure continuity and consistency of functions that are transferred from IfATE to the Secretary of State. This will allow functions already performed by IfATE to be treated as having been done by the Secretary of State. It includes a provision enabling the Secretary of State to continue things that are in the process of being done in relation to IfATE, immediately before the function was transferred. These will also ensure smooth commencement of the new legislation and transition from existing legislation. These functions may only become clear closer to when the functions are transferred.

Therefore, clause 13 includes a power to address this by way of regulations. Without this clause, there will be no statutory way of ensuring the smooth transition of the functions carried out by IfATE under the current legislation, to the Secretary of State under the new legislation.

[Neil O’Brien]

This clause is just a reminder that we are trying to make major changes to the engine of our skills system, while the engine is still running. I have already quoted from the Government impact assessment, pointing out that the impact of transition will be to slow down apprenticeship approval numbers—I will not recapitulate that. I will come back later to the challenges these changes to the engine while the engine is still running will cause.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14

Short title

Amendment made: 2, in clause 14, page 6, line 4, leave out subsection (2).—(Janet Daby.)

This amendment removes the Lords’ privilege amendment.

Clause 14 ordered to stand part of the Bill.

New Clause 1

Draft proposals for establishing new executive agency

“(1) Within six months of the passing of this Act, the Secretary of State must produce a report containing draft proposals for the establishment of a new executive agency, to be known as “Skills England”, responsible for the powers transferred under this Act.

(2) A copy of this Report must be laid before both Houses of Parliament.

(3) Within forty days of a Report under subsection (1) being laid, the Secretary of State must ensure resolutions are tabled, and moved, in both Houses of Parliament to approve the Government’s draft proposals.

(4) If the draft proposals are rejected by either House of Parliament, the Secretary of State must, within a period of six months, lay a report containing revised proposals before Parliament, and, within a period of forty days after laying the revised proposals, table a motion before each House of Parliament to approve the revised proposals.

(5) The Secretary of State may not establish an executive agency to carry out the functions transferred under this Act until it has secured, through a motion under subsection (3) or (4), the consent of both Houses of Parliament.

(6) If a motion under subsection (3) or (4) is approved by both Houses of Parliament, the Secretary of State must make an annual statement in each House of Parliament on the work of the agency.

(7) Within twelve months of a motion under subsection (3) or (4) being passed, the Secretary of State must lay before Parliament a report evaluating the effectiveness of the “Skills England” governance structure in delivering on the organisation's aims and objectives.”—(Ian Sollom.)

This new clause requires the Secretary of State to bring forward proposals for the executive agency, to be known as Skills England, subject to the approval of both Houses of Parliament.

Brought up, and read the First time.

[Ian Sollom (St Neots and Mid Cambridgeshire) (LD)]

I beg to move, That the clause be read a Second time.

It is a pleasure to serve under you in the Chair, Ms Furniss. I rise to move new clause 1, which addresses fundamental concerns about the governance and accountability of Skills England. While the Bill as amended in the Lords does now make reference to Skills England, which the original Bill presented to the Lords did not, it still does not establish it properly as an organisation, define its powers, or provide robust mechanisms for parliamentary scrutiny of its work.

The Bill, as we know, simply abolishes the Institute for Apprenticeships and Technical Education and transfers its functions directly to the Secretary of State, with only limited reporting requirements. The most recent evidence provided to the Committee reinforces those concerns, particularly the evidence from the Skills Federation, as was highlighted by the shadow Minister.

New clause 1 remedies that by requiring comprehensive proposals for Skills England to be laid before Parliament for proper scrutiny and approval. It would ensure that both Houses have a meaningful say in how the organisation is structured and operates. It would establish ongoing accountability through annual statements to Parliament and formal evaluation of its governance structure within the first year.

The Government have positioned Skills England as transformative, and the Minister’s letter to peers, which was also shared with the Committee early this week, outlines hugely impressive ambitions for Skills England. I welcome those, as I think we all do. But the governance framework described in that letter is largely discretionary. The framework document that the Minister references in that letter, which has still not formally been published, will be finalised by agreement between the Department and Skills England, with no formal parliamentary input at all.

We are being asked to approve a fundamental restructuring of the skills system without proper guarantees about how the body will operate or be held accountable. The skills system is simply too critical to proceed just on faith. I think Members on the Government Benches would be making the same arguments if they were in our position. I want to stress that the new clause is not about preventing the creation of Skills England; it is about ensuring it is established with the proper scrutiny and accountability that an organisation of such importance deserves. If the Government truly believe in Skills England as the vehicle to address our skills challenges, they should welcome the provisions for proper accountability in new clause 1.

[Neil O’Brien]

I rise only to support the hon. Member for St Neots and Mid Cambridgeshire. I shall speak to new clauses 2 and 3 later, but I do not want the hon. Member to feel that that is because I do not support new clause 1. I absolutely do. I think it is entirely sensible, and if the Government had sense then they would listen to him and include the new clause in the Bill.