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

Peter Swallow Excerpts

2nd reading
Tuesday 25th February 2025 Commons Chamber

[Peter Swallow (Bracknell) (Lab)]

A Government who are ambitious about growth need to be serious about skills, because without the workforce trained to build and insulate the homes we need, to install the next generation of electric vehicle charging infrastructure, to deliver excellent health and social care and to deliver high-quality early years education, none of the Government’s missions are achievable. Better skills mean good, often well-paid jobs. Apprenticeships are a driver of social mobility, and I am determined that my constituents feel the benefit of those opportunities. Skills England will have much to do to pull together a fractured skills landscape and deliver real change, but the Bill will enable it to make a solid start.

My constituency is home to the excellent further education college Bracknell and Wokingham college, which already does so much to offer young people the chance to deliver the skills of the future in everything from social care to sustainable technologies, from pharmaceuticals to construction. The college trains over 100 electrical installation apprentices, providing them with hands-on training in state-of-the-art electrical installation workshops, which were recently renovated with more than £200,000 of investment. The facility ensures that learners gain practical experience with the latest industry-standard equipment, preparing them for high-demand roles in electrical engineering, construction and sustainable technologies.

Last week, I visited the Bracknell Forest skills hub, led by Nikki Burns, a small business owner with years of experience. The hub is proactively identifying with employers where the skills gaps are, working with potential and existing employees to address those gaps, and teaming up with education providers, including my local college, to design bespoke courses to plug the gap, all backed with support from local and national Government. Since launching in September, the skills hub has already engaged with over 40 businesses, offered tailored support for over 50 jobseekers, trained 300 employees and built two bespoke courses. That is a system working as it should, but we need more collaboration, and Skills England will have a huge role to play in identifying skills gaps at both national and local levels, and in ensuring that businesses and Government are talking to each other.

Businesses understand the value of good skills and apprenticeships for their workforce. Waitrose, whose head office is in my constituency, is just one example. It currently has 1,200 partners on live apprenticeships across 30 schemes. When I visited Waitrose last year to meet some of its apprentices, I saw the true range of opportunities available, from people training up to look after Waitrose’s delivery fleet and maintain its bodywork to apprentices studying for a T-level in finance, in partnership with Bracknell and Wokingham college. Smaller-scale schemes also offer routes into employment. Waitrose’s “Building Happier Futures” programme is designed to support care-experienced young people—including those who have been in kinship care—into work.

When I have spoken to Waitrose and other businesses in my constituency, they have told me that among the barriers they face to offering more apprenticeships are the inflexibility of the apprenticeship levy and the overly burdensome requirements needed to run and recruit to an apprenticeship. That is why the reforms to apprenticeships that the Government announced two weeks ago are so very welcome. They will provide more flexibility for employers and those who want to take up these opportunities, shorten the length of some apprenticeships, and scrap the need for adult apprentices to pass English and maths GCSE. Those are common-sense changes backed by business. To be successful, Skills England will also need to get a grip on the lengthy time that it takes to update frameworks, to ensure that apprenticeships always remain at the cutting edge.

It is also vital that opportunities be genuinely open to all, including those with additional needs. Data from the Office for National Statistics shows that only 29% of autistic people are in paid employment—that is not good enough. More targeted support is needed at local and national level to ensure that more autistic people can better access apprenticeships and other skills. Bracknell Forest council is currently looking at how to address that autism employment gap, particularly through more support into apprenticeships and other forms of work experience.

Skills England has a huge job ahead of it. Our country has too often relied on importing skills rather than nurturing our own talent, which is not progressive, and too many young people have missed out on valuable opportunities. Skills gaps are preventing us from building, growing and thriving. Skills England will be at the vanguard of the Government’s work to fix all that—no small task, but one for which the reward is great.

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

I start by paying tribute to the work of Mr Speaker and the Deputy Speakers in driving up the number of apprenticeships in this House. Not only is that creating brilliant opportunities, but it is setting a brilliant example, so I pay tribute to them for the work they are doing.

We have heard some brilliant speeches today, and not just from right hon. and hon. Friends on the Conservative Benches. We have heard really important questions from the Chair of the Select Committee, the hon. Member for Dulwich and West Norwood (Helen Hayes); from the chair of the APPG, the hon. Member for Chesterfield (Mr Perkins); and from the hon. Member for Ribble Valley (Maya Ellis). We also heard a great speech from the hon. Member for St Neots and Mid Cambridgeshire (Ian Sollom). We do not always agree with the Liberal Democrats about everything, but a strength of the liberal tradition is suspicion of centralisation, which is what is in front of us today.

We have three main concerns about this Bill. First, there were good reasons why standard setting was put at arm’s length and closer to employers. As we have heard from Members across this House and in the Lords, this is centralisation, and alongside the other changes that 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 apprentices, but rather than fixing those problems, the Government are reorganising. Skills England will be the 13th skills body in 50 years—it is yet more reorganisation, rather than a focus on the real issues, and from the Secretary of State’s comments earlier, it sounded as if there might be a further reorganisation later to boot.

Thirdly, we have real concerns that this reorganisation of the machinery of Government will lead to harmful delays in addressing some of the most important strategic issues that we face. Those concerns are borne out by the Government’s own impact assessment. As with the schools Bill, this Bill is highly centralising and does not address the real issues. There are multiple things in the skills system that we need to address, but I am slightly baffled as to why the Government are starting by creating a new agency within the DFE and abolishing IfATE.

It is worth explaining how we got to IfATE in the first place. For decades, people said that they wanted to make apprenticeships more prestigious, and part of the answer was growing higher apprenticeships. The number of people on higher apprenticeships went up from just over 3,000 in 2010 to over 273,000 last year—a huge increase—and the hon. Member for Erewash (Adam Thompson) was absolutely right to talk about how good those degree apprenticeships are. They are great routes into good jobs. Indeed, the latest data shows that the median first degree graduate earned £29,900 five years after graduation, whereas a level 4 apprentice earned more—£33,800 on average.

As well as creating and boosting those higher apprenticeships, the other big change was a shift from a frameworks-based approach to a standards-based approach, and those standards meant a shift to a higher quality. They were led by employers, they had a longer duration—at least a year—and they had more off-the-job training and rigorous final assessments. That was much needed. In 2015, an Ofsted report found that even though some apprentices had been on the job for more than a year, they were not even aware that they were on an apprenticeship, such was the problem of quality. Things were being funded that did not ultimately benefit young people, but did allow employers to pay a lower wage, which was obviously concerning.

The apprenticeship levy was designed to give employers much more ownership of the skills system, and making IfATE independent of Government was a big part of that, creating a properly employer-led system. I pay tribute to the work of IfATE—the Secretary of State did not thank it for its work, but I will do so. IfATE has created and maintained around 690 apprenticeships, supporting around 750,000 people on apprenticeships last year. It created 21 T-levels and 174 higher technical qualifications and enabled employer leaders to set a strategic direction for schools in their sector, and its website is an amazing resource.

However, we now see the Government completely reversing the direction of policy. While we lengthened apprenticeships, they have cut the length of an apprenticeship to eight months. While we grew higher apprenticeships, they are abolishing most level 7 apprenticeships, and by abolishing IfATE and bringing it in-house at the DFE, they are eroding independence and employer ownership. Why are the Government suddenly moving in a reverse direction?

[Peter Swallow]

Does the hon. Gentleman not see that the Government are doing so because this is precisely what businesses are calling for?

[Neil O’Brien]

I will come on to what businesses are saying in one second. The Government are doing two things that are going to be very bad for apprenticeship numbers. First, while apprentices are exempt from national insurance, the Budget—particularly its £25 billion increase in national insurance contributions—is cutting hiring and leading to job losses across the board. What employer groups are saying about that is pretty damning; be it the Institute of Directors, the Federation of Small Businesses or the Chartered Institute of Personnel and Development, they are warning of serious job losses as a result of the Budget. That tax increase, and the damage it is doing, is focused on exactly the type of jobs that apprentices might traditionally get, so apprenticeships are being hit by the backwash from the Budget.

Secondly, the Government are planning to move funding from apprenticeships to other areas. In opposition, Labour talked about allowing employers to spend 50% of their apprenticeship levy funds on other things. As the election drew nearer, that commitment seemed to be disappearing. On 20 November, the Minister said that the commitment to 15% was “currently being reviewed”, but just weeks later, on 9 December, the Secretary of State said that the Government were still committed to “50% flexibility for employers”. It would be interesting to hear from Ministers whether that 50% still stands now.

Given that the levy funds £2.5 billion of spending, 50% is a lot of money to potentially move out of apprenticeships. We can argue about whether that is desirable, but all things being equal, it will certainly cut funding for apprenticeships. We might also be wary that it will undercut the purposes of the levy and have high dead-weight. In fact, the Institute for Fiscal Studies has pointed out:

“In principle, this could help employers to pay for other forms of training that they and their employees would find valuable. But the history of these wider training subsidies, such as the former Train to Gain programme”—

a programme under the last Labour Government—

“suggests that the result is often that much of the spending goes on training that firms would have provided—and paid for—even without the subsidy.”

The apprenticeship levy, whatever its flaws, did at least attempt to address this problem of dead-weight and discouraged freeriding by large firms, so that firms that invested in their workers did not lose out to those that did not. Since the levy was introduced in 2017, real-terms spending on apprenticeships and work-based training has increased in real terms by about a quarter, from £2 billion to £2.5 billion.

In a written answer to me, Ministers have confirmed that the Department has a forecast for the number of apprenticeship starts, but they have also said that they will not publish it. If it was published, it would surely show that removing possibly half of the funding would lead to a substantial drop in the number of apprenticeships. Perhaps that is why we are not allowed to see it. Those same reasons are why the Government are going back to shorter apprenticeships and away from the higher level, reducing quality and cutting length to try to offset the hit to numbers from other Government policies.

There are bits of this agenda where we share the same goals. We all want to see more SMEs offering apprenticeships and more young people getting apprenticeships. Although on average twice as many people started apprenticeships each year under the last Government as under the previous Labour Government, we still wanted that to be much higher. Although we are interested in the same questions, we have quite different ideas for how we address them. Part of the Government’s answer is to abolish the highest level of apprenticeships in order to redistribute the money.

The level 7 apprenticeships that the Government are axing currently account for just 9% of apprenticeship spending, but a lot of good things will potentially be lost by abolishing them. I have been contacted by firms worried about the abolition of the solicitors apprenticeship, which is a great way into the law for people from less privileged backgrounds. One firm worried about that is Bolt Burdon Kemp, which told me:

“This will really impact social mobility into sectors like law, accountancy, and consulting. The traditional route into law is expensive and therefore without the apprenticeship scheme many would not be able to afford to do so. We also believe it will have a wider detrimental impact on the reputation of apprenticeships.”

It has taken such a lot of effort to get that route going, and it would be a huge shame to lose it.

Likewise, level 7 apprenticeships are opening up great jobs and leadership roles in the public sector, too. Some 56,000 people started apprenticeships in the public sector last year. More than half of management apprenticeships at level 7 are in health and education. In fact, they were identified as having a key role in the NHS’s own long-term workforce plan. Public services will lose out, as will ambitious apprentices.

Because level 7 apprenticeships are a small part of funding, I am worried that the Government will now go after level 6 apprenticeships, which is a much bigger share of spending. A lot of employers are worried about that, too. [Interruption.] The Secretary of State sighs as I say that. Presumably when the Minister gets to her feet, she will promise that they will not do to level 6 what they will do to level 7. It sounds like Ministers will be clear when they stand up, will they not, that they definitely will not do that to level 6 apprenticeships.

The last Government moved to make it more attractive for SMEs to take on younger people. From April, 16 to 21-year-olds have had 100% funding, rather than requiring the 5% employer contribution. We need to build on that by cutting bureaucracy and making it easier and more attractive to take on young people. Building on that would be more sensible than reorganisation, centralisation and the defunding of higher apprenticeships. This Bill abolishes IfATE and gives the Secretary of State significant powers as a result, but it says nothing at all about the new body, Skills England, which is intended to be at the centre of the skills landscape under this Government. That has been a pretty unwelcome surprise to some in industry.

In its briefing on the Bill, the Construction Industry Training Board noted that this was

“contrary to the previous characterisation of Skills England that was outlined in the…King’s Speech…and contrary to the vision for Skills England to be an independent body, established in law, with a cross-governmental role”.

The CITB makes an important point. IfATE existed to serve all employers—public and private—and across every Department. In contrast, Skills England will be a part of the DFE. The CEO of Skills England will be a job share between two civil servants who are currently running post-16 skills at the Department. I am told by former Ministers that they are good officials, but this is a recentralisation into the Department—as was pointed out by both the Chair of the Select Committee, the hon. Member for Dulwich and West Norwood), and the Liberal Democrat spokesperson, the hon. Member for St Neots and Mid Cambridgeshire.