Apprenticeships

Vince Cable Excerpts

Wednesday 4th February 2015 Commons Chamber

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

I am delighted that the Opposition have chosen apprenticeships as the topic for this debate. The motion’s opening line is an admirable statement of what we are trying to do:

“That this House believes that more high-quality apprenticeships are essential to the future prospects of young people and future success of the economy”.

“Hear, hear” to that. It offers a good definition of what the Government have been doing: the number of apprenticeships has doubled from just over 1 million to 2 million over this Parliament, and as the hon. Member for Streatham (Mr Umunna) has emphasised quality, I should say that the proportion of advanced and higher apprenticeships and longer apprenticeships has risen systematically as a result of our reforms.

We are therefore very comfortable debating apprenticeships. Indeed, the only subject that we would be more comfortable debating is job creation, which I think the Opposition have chosen for next week—the hon. Member for Streatham is very brave. I was trying to understand their thought processes in approaching the question. I suspect that they said to themselves, “Well, the Government actually have a pretty good record on all this stuff, so let’s try to find a negative number to debate. It doesn’t matter what it is, so long as it’s negative.” They did find a negative number. In 2013-14, for one year, and for one age group, there was a slight reduction—4%—in the number of apprenticeship starts. That fact is quite correct, but the argument built around it is utterly specious.

Let us look at that age group—19 to 24-year-olds—because it tells a good story about what has actually happened. I do not want to dismiss older apprenticeships, as the hon. Gentleman did, because many of them are extremely valuable in raising the productivity of the labour force. The time series gives us a good analysis of what has happened during our time in office. In the year before we came into government there were 114,000 apprenticeship starts for that age group, and in the last year for which we have records, 2013-14, the figure was 159,000, which means there was a 40% increase in the age group he defines as the most important. As has already been pointed out to him, there has been a 60% increase in Streatham, and a 75% increase in Hodge Hill.

The number of starts is one way of measuring apprenticeships, but in some ways participation is a better measure, because it captures the benefits of longer apprenticeships and fewer drop-outs. The situation with participation is even stronger. It suggests that over that period the numbers grew from 210,000 to 309,000, which is a 46% increase. Overall, participation in apprenticeships grew by 73%, and for advanced apprenticeships—level 3 and above—participation has grown by 90% under this Government.

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I thank the Secretary of State for giving way; he is being characteristically generous. I am glad that he has focused on the fall in the number of apprentices under the age of 25. Does he think that that trend can be reversed with the budget that the Chancellor has set out for his Department, as implied by the fiscal path for the years ahead? He knows as well as I do that if the science budget is protected, that implies a 44% cut for the Department. Does he think that it will be possible to reverse the fall in the number of apprentices with that kind of settlement?

[Vince Cable]

It is certainly possible, as I think we shall see when we get the 2014-15 figures. I agree with the right hon. Gentleman that we should be investing more in apprenticeships, not less. That is certainly my clear objective. He might not have noticed, but the autumn statement included a commitment to £40 million extra for higher and advanced apprenticeships over the next two financial years, so we have every reason to be optimistic about achieving continued growth.

The figures I have cited, which I do not think are disputed, actually understate the improvement achieved, and for precisely the reason that the shadow Secretary of State emphasised: the necessary shift to longer apprenticeships and higher level apprenticeships. When we came into government, the share of level 1 was above 40% for that age group, and it is now only 10%. We decided in 2012 not to include level 1 within the definition of an apprenticeship. As the hon. Member for Liverpool, Walton (Steve Rotheram) pointed out, that was entry level. We now call those traineeships, so there is progression. It is valuable to have level 1, but we no longer describe it as an apprenticeship. If we take out the very short courses, in particular, which tended to dominate in the earlier period, we see that the number of people in the 19-to-24 age group has actually doubled, because of the preponderance of very short courses in the apprenticeship programmes we inherited.

Let us look at the higher level apprenticeships. For level 3 the number of starts has doubled. For higher—level 4, foundation degree and above—we have seen a tenfold increase since we came into government, from 1,700, which was negligible, to 18,000. There is an important point to make about levels. I think that the hon. Member for Streatham dismissed too easily the value of level 2 apprenticeships.

[Mr Umunna]

indicated dissent.

[Vince Cable]

Well, he seemed to imply that they were not quite apprenticeships. Actually, there is a lot of statistical evidence that people who do a level 2 apprenticeship and no more have significantly higher earnings than those who do not—about 11% or 12% over a three to five-year period. There are many important trades, such as bricklaying, in which a level 2 qualification offers valuable progression into a badly needed occupation. The hon. Gentleman is right that we should be moving up the level chain, which we are doing, but I do not want him or anybody else to devalue level 2 qualifications or to seek to eliminate them.

[Mr Umunna]

I agree with what the Secretary of State is saying. I am seeking not to devalue level 2 qualifications but to bring us up to—[Interruption.] Well, Mr Graham says that we want—[Interruption.]

[Mr Umunna]

What we are proposing is to bring us up to the same benchmarks as our competitors, who are more productive than we are.

[Vince Cable]

I hope that is a clarification that level 2 will not be removed from the hon. Gentleman’s definition of an apprenticeship, should he find himself in government. I hope that the Deputy Prime Minister is not right that this is some kind of ploy to reduce the numbers and save money.

[Richard Graham]

My right hon. Friend makes an extremely valid point. It is quite extraordinary that the shadow Secretary of State has not read his own motion, which states very clearly

“so that all apprenticeships are at least level three”.

What is the role for level 2? My right hon. Friend is right to question that.

[Vince Cable]

That is a valid clarification.

[Mrs Caroline Spelman (Meriden) (Con)]

Does my right hon. Friend share my concern about the message that the hon. Member for Streatham (Mr Umunna) is sending to young people in my constituency who are studying hard right now for level 2 qualifications, and about the message he is sending to the colleges and staff who are working hard to ensure that they have the sorts of relationships with employers that can make that happen? Should he not think more carefully about what he says?

[Vince Cable]

The right hon. Lady is absolutely right. Level 2 qualifications are valuable in themselves, as she rightly emphasises, but they are also part of a progression route. Many people who do a level 2 qualification take a break before going back and doing a level 3. I hope that we have now clarified that level 2 is a part of apprenticeships.

[Steve Rotheram]

With regard to proper apprenticeships, it depends on what a person’s qualification is on entry. With a lower qualification threshold, they would do a national vocational qualification level 2, on the way to doing an NVQ level 3. It is not either/or; it is part of an apprenticeship.

[Vince Cable]

That is very helpful. The hon. Gentleman clearly speaks from experience and knowledge, and we respect that.

The figures are very clear: we have seen a big increase in volume and a big increase in quality. That did not happen by accident. It is important to talk through the constraints on the public finances that I inherited, and on which the hon. Member for Streatham elaborated with regard to the problems that will face the next Government. When I came into office, I was told that the previous Government had planned to cut the Department’s budget by 25% had they returned to office. That was clear and explicit. Indeed, we have had to confront that in office. Let us be clear that it would have been no different had he been doing my job.

The Department’s budget is dominated by two items: higher education, including teaching and student support, and adult skills. There are other, smaller items such as industrial support and science. We were therefore faced, in office, with some very painful and difficult decisions. The advice I got from the Opposition, in a particularly shrill and angry way, was that we must give priority to university undergraduates—future graduates. We did the calculations and found that had we followed the advice from the Opposition, and had we introduced the policy that I think—it is not totally clear—they are now considering introducing on tuition fees, we would have had to cut the adult skills budget by about 40%. Within that, we would have had to cut apprenticeships by even more, because, being of higher quality, they are more expensive than other forms of training. Apprenticeships, which the hon. Gentleman described as growing steadily throughout the time of the Labour Government, as they did, would have been emasculated as a result of the public spending cuts that I think his party would have made had it been in government, and that I was being advised to make.

I then made a decision, which I think was one of my better ones, to listen to the advice, to reject it, and to do the exact opposite. We took a serious political hit on higher education, but we did the right thing in ensuring that universities were properly funded and that we got a fair repayment system. We also made the decision to invest more, not less, in apprenticeships. That is how we have got to where we are, with not only the volume but the quality. That is because we followed up getting the volume by taking short apprenticeships of below one year out of the system; by significantly supporting advanced and higher level apprenticeships; and, perhaps most importantly—the hon. Gentleman did not mention this at all—by introducing employer ownership through giving business a greater say in how these funds are allocated. In all those ways, we have improved quality.

Let me deal with some of the other critical comments in the hon. Gentleman’s speech and motion. First, he quoted the figure, as he did when he was on television with me the other day, regarding what he calls the lack of formal training—[Interruption.] Indeed, there was a survey that suggested that some apprentices—

[Mr Umunna]

It was your survey.

[Vince Cable]

There were a substantial number of surveys; I am quoting the one that the hon. Gentleman has highlighted.

[Mr Umunna]

It was your survey.

[Vince Cable]

We have published a survey in which 24% of apprentices said that they had not received formal training. The hon. Gentleman has built his criticism around that.

[Mr Umunna]

It was your survey.

[Vince Cable]

I am not disowning the report; it clearly exists. [Interruption.] Perhaps the Opposition could be a little less silly and just try to follow the argument. The key is in the word “formal”. Many people do good apprenticeships in business that involve informal work in the workplace, and many people define good training in that way. The survey that we conducted, which the hon. Gentleman is having a little giggle about, tells us very clearly that 90% of those trainees are satisfied with their apprenticeships, while 72% are very satisfied. Ninety-seven per cent. said that they had been trained—sometimes informally, sometimes formally—and 90% got a job. Perhaps most crucially, there is a very high earnings premium. I have quoted the figure for level 2, and for level 3 it is significantly higher—about 16% three to five years after graduation. The proof of the pudding in is in the eating: these apprenticeships do provide satisfaction, jobs and higher salaries for the people who do them.

Let me address the minimum wage. The survey shows that 15% of people are not being paid the minimum wage. That figure is clearly too high, and unacceptable. The motion says that it is “one in five”. I am not sure who did the maths on this, but one in five is not 15%. Perhaps we need compulsory maths for Opposition Front Benchers as well as apprentices. The key point is that 15% is way down on the 30% figure that we inherited. As the hon. Gentleman knows, because he has been part of these debates during the past year, we have significantly improved enforcement measures. We have increased penalties from £5,000 per firm to £20,000 per person, we have introduced naming and shaming, and we have increased the enforcement budget by 30%. We do take the minimum wage seriously. We believe that it must be enforced and that it should apply to apprentices as it should to anyone else.

The hon. Gentleman is right that procurement is a lever for the public sector to employ. We already have many examples of good practice in public sector procurement. Crossrail is a company that has really committed itself to high levels of apprenticeships. There are a couple of practical problems, as I hope he recognises; I think he hinted at one of them. First, for small and medium-sized enterprises and social enterprises, where we are trying to increase the share of public procurement, there is a conflict of objectives. Do we regard getting SMEs into procurement as more important than increasing their number of apprenticeships? There is no clear answer to that. Secondly, companies that are required to introduce apprenticeships would simply add that to the cost and it would be passed on to the public sector, so instead of a direct subsidy through our 50:50 payment system we would be providing indirect subsidies. These are not crippling objections. We need to reflect on how we can better use public procurement, but crude legislation and compulsion is probably not the best way. I accept that public procurement is a good vehicle, and we have to work on this.

[Bill Esterson]

I agree that it is a real challenge, given the current situation, to enable more SMEs, particularly the smallest businesses, to take on apprentices. Does the Secretary of State agree that countries such as Germany have cracked this problem over many years, and that there are things we can apply from Germany and elsewhere to achieve the goal of getting more small businesses to take on apprentices?

[Vince Cable]

The hon. Gentleman is right. There is a German model that seems to work for that country, and Austria is another example. Their approach is different from ours, but it has given them consistently high levels of skills in manufacturing industries, in particular. We should learn from that. There is an element of compulsion and levying that we have moved away from in the UK. However, I am certainly happy to learn from Germany on this and other things.

[Andrew Gwynne]

There are also some very good examples here in England. May I commend to the Secretary of State the work of Labour-controlled Tameside council, which covers part of my constituency and which has established a local apprenticeship company from which SMEs can draw down apprentices, even though the local authority is running the company?

[Vince Cable]

Yes, I believe there are lot of good models of that kind, and I commend the one that the hon. Gentleman mentions.

That leads on to another issue that the shadow Business Secretary raised—devolution and how we capture decision making to a local level. He is right that we should have as much devolution as possible. That is what we are trying to do through the city deals and the local deals. There are many good models. Leeds is one, and Manchester is also getting off the ground. Sheffield is pioneering a lot of the local-level commissioning of apprenticeships that is particularly good for getting through to SMEs.

Devolution is not simply about local government or LEPs. One thing we had to do when I came into office was strip away some of the bureaucracy governing further education colleges as leading providers. We had to simplify greatly a very bureaucratic top-down system. Devolution is also about devolving to companies, and one of our major initiatives—employer ownership schemes and the trailblazers, which set industry-level standards—has reduced bureaucracy for small companies and helped them at industry level to formulate standards that they can use. Devolution is not just about local government.

[Mr Robin Walker (Worcester) (Con)]

Does the Secretary of State agree that LEPs can be great champions of apprenticeships when they are given the power to do so? Today, the Worcestershire LEP announced that the ambitious target it set itself of having 10,000 people participating in apprenticeships in the county by 2015 has already been achieved. Is that not an example of how by using the existing structures in our existing counties, rather than creating artificial regions, we can drive forward apprenticeships and skills?

[Vince Cable]

That is one of the examples. The LEPs have demonstrated the success of devolution and there are many other models. I know that my hon. Friend the Member for Eastbourne (Stephen Lloyd) has done brilliant work locally by simply working with local colleges and local authorities. There are many local examples and that is what we should be trying to achieve.

I know that you want to bring more people into the debate, Madam Deputy Speaker, so let me make two points in conclusion.

[Mr Byrne]

Before the Secretary of State concludes, will he update the House on the potentially quite sweeping changes to how we fund apprenticeships in this country? The Minister for Skills and Equalities’ predecessor launched a wide-ranging consultation on direct payment through the PAYE system, but on 13 January the Minister of State, Department for Education, the hon. Member for Bognor Regis and Littlehampton (Mr Gibb), told the House that the process was in a state of suspended animation and that no further reform would be made. Will the Secretary of State tell the House this afternoon what on earth is going on?

[Vince Cable]

Our objective is to try to make the system of employer ownership much more extensive. We have had great success with our pilots and are anxious to extend the system. Different models have been canvassed and there has been a ministerial statement describing very clearly where we are. We are keen to do this in a way that creates incentives rather than disincentives for small businesses. The right hon. Gentleman is quite right that we are not rushing into a scheme prematurely, but are consulting. That is exactly what Governments do, and when the Government are returned, if I am still in this post, I am sure that we will see a lot of action in that area.

Let me make my two concluding points. First, the shadow Business Secretary mentioned the importance of the status of apprenticeships. That is absolutely right. For far too long we have had a two-tier system under which supposedly clever people went to university and those who failed went on to vocational courses. We need to break that down. It is being broken down and there is a change in perception. A recent survey suggested that 57% of parents are willing to recommend an apprenticeship course to their children. Many of them can see the economic advantages of such a course and the status is changing.

The big issue is the one the shadow Business Secretary started with. I agree that for the sake of the economy we need significantly increased investment in people and skills. The figure we have in the Department is that every £1 million invested in apprenticeships yields an £18 million return to the economy. It is essential that we extend rather than contract the number of apprenticeships. We have a proud record of doing that and I want to see it continue.

[Several hon. Members]

rose—