Apprenticeship Levy

Seema Malhotra Excerpts

Wednesday 22nd November 2023 Westminster Hall

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I pay tribute to the hon. Member for Stoke-on-Trent North (Jonathan Gullis) for securing this debate. I know he cares deeply about the issue; his experience and expertise certainly came through in his speech.

I also acknowledge the contributions from other Members, particularly the hon. Members for Strangford (Jim Shannon) and for Waveney (Peter Aldous) and the right hon. Member for Suffolk Coastal (Dr Coffey). It is interesting that there almost seems to be a consensus that there is a need for some reform and refinement of the system. The issues raised have included access for people who may be from more disadvantaged backgrounds or who may not have the standard qualifications; access for SMEs; the need for flexibility; the potential for shorter courses; the retention of apprentices after their apprenticeship starts; making sure that people are able to complete their apprenticeship; and recognising that this is a mode of work and study that seems to be catching on with the older generation, as the right hon. Member for Suffolk Coastal commented. The oldest apprentice I have heard about was 73 years old.

I also recognise the work of the Association of Colleges and the all-party parliamentary group on further education and lifelong learning, which the hon. Member for Waveney leads. He made a very important point about the need to respond to changes in the economic landscape. I hope that I will be able to address a number of those issues in my remarks.

Labour believes that apprenticeships are a gold standard in skills development, incorporating both on and off-the-job training. Apprenticeships are transformative for social justice, career progression and business growth. Of course, the greatest advocates for apprenticeships are apprentices themselves. UCAS recently reported that 63% of apprentices were likely to recommend the training route to others. Research by the apprenticeship provider Multiverse found that 78% of businesses that hire an apprentice say that it has a positive impact on their organisation.

As shadow skills and further education Minister, and before, I have appreciated meeting and hearing from apprentices in different sectors around the country and learning from their experiences. That includes those in my constituency, those working at Heathrow, those on nursing apprenticeships at Hugh Baird College in Liverpool, and those at the Newcastle Aviation Academy, which I visited last week. They have told me how life-changing apprenticeships are and how they allow people to earn while they learn, give them specialist skills and empower working people, their regions and the country’s economy at the same time as teaching valuable employability skills and giving important workplace experience. At the same time, they support the employer’s development of the workforce, closely aligning training with skills needs.

The Labour party knows that apprenticeships are one of the most valuable tools we have to break down barriers to opportunity and shatter the class ceiling. Right now, the way the apprenticeship levy works is letting down working people, our businesses and our economy. The Conservatives have overseen a decade of decline in skills and training opportunities. Businesses are unable to fill job vacancies, and are held back by a lack of people with the skills they need. The Tories’ failure on skills is holding back our economic growth.

Apprenticeship starts have plummeted, with 200,000 fewer people starting these training opportunities. Since the introduction of the levy, intermediate apprenticeship starts have been slashed by 69%. Seven in 10 students miss out on professional careers advice, making it even more difficult for young people to discover pathways with good prospects, such as apprenticeships. At the same time, employers have surrendered more than £3 billion to the UK Treasury since 2019 in apprenticeship levy cash that they were unable to spend. According to the Government’s own findings, more than one in 10 employers report at least one skills gap.

Research by City & Guilds and the charity the 5% Club early this year found that a staggering 96% of businesses wanted to see a change to the levy, with just 4% of employers spending their full apprenticeship levy funding. SMEs have been hit hard, with apprenticeship starts in small businesses down 35% since the introduction of the levy. New data also shows that less than one in 50 apprenticeship starts in the past academic year were funded through transfer from levy-paying organisations to smaller businesses.

Today, the Government announced £50 million more investment for apprenticeships, in a pilot with Make UK and others. Investment in apprenticeships is always welcome, but I await more details. Perhaps the Minister will have some. We do know that £50 million does not scratch the surface of the £3 billion handed back to the Treasury. It is important to understand what these new pilots will address.

Just this week, there were announcements of levy reform at a time when we have the botched reform and defunding of the level 2 and level 3 qualifications, as well as a decline in apprenticeship starts. That is an issue, because our number one priority as a nation must be to grow our economy and to achieve the higher living standards and better public services that our constituents deserve. That requires investment in skills.

We have a proud record on boosting skills and training opportunities. We removed the age cap of 25 on apprenticeships, and ensured that work experience was compulsory for every student. Boosting Britain’s skills will similarly be a national priority for the next Labour Government, led by a new national skills body, Skills England, bringing together our regions, businesses, training providers and unions to drive the ambitions and skills of our industrial strategy and green prosperity plan. That is why we will also transform the apprenticeship levy into a growth and skills levy. Under our proposed system, companies will have the freedom to use up to 50% of their total levy contributions on non-apprenticeship training, with at least 50%—or 100%, if they wished—reserved for apprenticeships. SMEs that do not pay the apprenticeship levy would continue to receive 95% co-payments. We believe that that would give businesses the flexibility that they are asking for and would allow them to train their workforce, deliver growth, create modular skills in priority areas such as green skills, digital skills, social care and childcare and create functional skills and pre-apprenticeship training. It would tackle key skills gaps that hold back individuals and organisations.

The Minister will be well aware of the calls across business and education for greater flexibility in the levy, but let me remind him of some of them. The Manufacturing 5 have called for more flexibility. During National Apprenticeship Week, the British Retail Consortium, techUK and others called for more flexibility. Calls came from the Co-operative Group and City & Guilds in February, the British Chambers of Commerce and Superdrug in August, and the Chartered Institute of Personnel and Development in October. Despite the Government’s best efforts in recent days to resist reform through a couple of half-hearted calculations about our policy, the chief executive of the Learning and Work Institute said that the Government’s analysis was

“pretty simplistic and we need a bit more of a nuanced analysis.”

Opportunity for all, skills for business, and growth for our regions and our country—that is what lies at the heart of our reforms. What a contrast they would be with this Government. We plan and will build growth from ordinary people, for ordinary people. We will back young people by expanding opportunities and boost Britain’s skills to meet the economy’s needs over the next decade. That is how we will get Britain’s future back.

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[Robert Halfon]

I would be very happy to write to the hon. Gentleman, and I respect the thoughtful way he set out his remarks today.

The hon. Member for Feltham and Heston quoted organisations that do not like the levy. I have a whole list of businesses that do like the levy and use it brilliantly. Virgin Atlantic has used the levy extensively.

[Seema Malhotra]

It was a call for flexibility. It is not the case that they do not like the levy.

[Robert Halfon]

That is a fair point. I just want to point out that many businesses not only support the levy and have used it effectively, but recognise the flexibilities that we have introduced. For example, Virgin has created an apprenticeship programme that attracted 500 engineering apprenticeships alone. I think the apprenticeship levy is like the Ronseal advert, which is one of my favourites: it does what it says on the tin. As I said, 98% of the apprenticeship budget was spent in the last two years. It is clear that employers understand this message well.

I know the value of apprenticeships to young people and under-25s. As I say, they continue to make up over 50% of starts, and just under 70% of starts are at levels 2 and 3. It is important to mention that we are spending billions of pounds not just on the apprenticeship offering and the 680 apprenticeship standards, but on skills bootcamps, T-levels and higher technical qualifications—all Government investment in skills.

The hon. Member for Feltham and Heston spoke about careers. We have introduced the Baker clause to ensure that schools encourage students to do apprenticeships. The awareness of apprenticeships in schools has now rocketed up, although there is lots more work to do. We have the apprenticeship support and knowledge, or ASK, network, reaching 2,300 schools and something like 625,000 pupils, ensuring that they know about apprenticeships. I visited the Oasis Academy to see that. We have also worked with UCAS to introduce the UCAS apprenticeship scheme, which will bring a dramatic transformation in the take-up of apprenticeships, because people will be able to access them when they decide to go to university.

Hon. Members have also spoken about apprenticeship achievement volumes, which are substantially higher than they were the previous year—in 2022-23, they are up by 20%—so we are doing a lot to drive up the achievement rate, which I know my right hon. Friend the Member for Suffolk Coastal cares about. We also have £7.5 million of investment in professional development to support the workforce.

My hon. Friend the Member for Stoke-on-Trent North talked about English and maths skills. He rightly challenged me, and if he does not mind I would like to challenge him back. I absolutely believe that people need basic English and maths if they are to do an apprenticeship. He wants that to happen in schools, and with the advanced British standard people will be learning English and maths till the age of 18, so we should have the same for apprenticeships. We should not say that one group of people does not have to do English and maths because it is too much of a burden, but that it should happen in schools, which my hon. Friend cares about. He will be pleased to know that we are increasing the English and maths funding rate for apprentices by 54% to match the adult education budget. That will kick in from January 2024.

I have talked about removing the regulation on small businesses. We have an expert provider pilot to allow the best providers to offer more support to SMEs. We have a transformation in degree apprenticeships. We created degree apprenticeships—those are my two favourite words in the English language. There have been 200,000 starts at levels 6 and 7 since 2014, and starts are almost 9% higher than last year. We are investing an additional £40 million to support more people to access degree apprenticeships.

The hon. Member for Feltham and Heston spoke about social justice, which is why I am such a passionate supporter of apprenticeships—it is what motivates me. We increased the apprenticeship care leavers bursary to £3,000 this August and, as I said, we give £1,000 to employers and providers who take up apprenticeships; that is very welcome.

I really hope the hon. Lady moves away from the policy that the Labour party announced on skills. As I said, you had a target of 50% of people going to university because Labour believed it to be the only route to success. That led to the growth of poor-quality university courses, although of course most of our universities provide excellent courses. That was all about quantity over quality. The DFE analysis has found that your apprenticeship policy would slash the number of apprenticeship starts.

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[Robert Halfon]

DFE analysis has shown that the policy the hon. Member for Feltham and Heston is suggesting would reduce the number of apprenticeship starts by 140,000 per year, cutting them in half. The reality is that the moment the apprenticeship levy is diluted, there will be gaming of the system and much less spending on apprenticeships. The policy would undermine the apprenticeship starts that the hon. Lady says she is so keen to increase.

[Seema Malhotra]

I return to the quote I shared from the CEO of the Learning and Work Institute, who said that the Government’s analysis of our policy was pretty simplistic and that we need a bit more of a nuanced analysis. There is a long way to go before that analysis challenges our policy and the outcome it would achieve. We should remember that it is up to 50%. For those who spend their full apprenticeship levy, it does not say that they have to spend it any other way.

[Robert Halfon]

The reality is that if the levy is diluted and people are allowed to spend it on skills, there will be thousands and thousands fewer apprentices. As I say, I want the apprenticeship levy to do what it says on the tin: it should be a levy that supports the take-up of apprenticeships. I want to build an apprenticeship nation.