House of Commons - Innovation, Universities, Science and Skills

Select Committee on Innovation, Universities, Science and Skills Seventh Report

3 Employer engagement

The Government starts, as we have noted, from the position that "Employers will always be at the heart of the Apprenticeship programme: their willingness to offer a place is a necessary condition for any Apprenticeship to happen"[63] and employers endorse this approach.[64] The British Chambers of Commerce told us that the "employer must be at the heart of an apprenticeship system. It must be employer led."[65] Both the CBI and the British Chambers of Commerce considered that the draft Bill was needed.[66] We agree with the Government that employers have to be at the heart of the apprenticeship programme. Without their full support the renaissance in apprenticeships will not be achieved. We welcome the support that employers' organisations have given to the policy.

We considered two issues. First, does the policy put employers at the heart of the apprenticeship programme and, second, will employers meet the challenge to deliver the expansion and improvement in apprenticeships? The Learning and Skills Council pointed out that "nine in ten [employers were] not engaged in apprenticeships"[67] and therefore there is considerable scope to expand the number of employers taking on apprentices. From the evidence we received, we identified several changes that employers were looking for to enable them to take on more apprentices: less bureaucracy; a streamlined service from government; and more funding.

A REDUCTION OF UNNECESSARY BUREAUCRACY

In its response to World-class Apprenticeships the CBI said that "the removal of unnecessary red tape and greater simplification must be a key focus".[68] In oral evidence to our inquiry Richard Wainer from the CBI said:

I think we do need this Bill. It introduces a number of very welcome flexibilities in the way employers will be able to run their apprenticeship programmes, in particular allowing employers themselves to design, probably with support from the new National Apprenticeship Service and the Sector Skills Councils, their own frameworks for the benefit of their businesses' skills needs.[69]

By making sure that employers can have the power to design their own frameworks and make sure that the skills the apprentice is going to be learning and the qualifications they are going to be working towards are relevant to that sector, that is the most important point in this Bill.[70]

In terms of whether [the National Apprenticeship Service] will be a success, it really has to focus on helping employers reduce the time they spend on bureaucracy, encouraging more young people of all abilities to take an apprenticeship.[71]

REDUCTION IN THE NUMBER OF AGENCIES DEALING WITH APPRENTICESHIPS

The British Chambers of Commerce said that employers were "confused and bemused by the constant, frequent changes in vocational training and are also concerned about the number of agencies literally that are knocking on their door, trying to sell them training services."[72] The draft Bill does not reduce the number of central government agencies. Nor does it increase them, though arrangements will change considerably as a consequence of the Government's proposal that all young people stay in education or training to at least 18 years of age and to transfer to local authorities the responsibility for commissioning and funding education and training for all 16-18 year-olds. The National Apprenticeship Service will assume responsibility for apprenticeships and the Learning and Skills Council will be wound-up.[73] We welcome the Government's concern not to increase the complexity of arrangement and believe there should be a clear statement on the face of the Bill that the direction of travel towards simplification is one that Government wishes to continue. We examine the National Apprenticeship Service further at chapter Error! Reference source not found. but the Government has said that it will be "customer-facing […] with the senior leadership and resources to have end-to-end accountability for the Apprenticeship programme."[74]

CHANGES TO THE FUNDING STRUCTURE

To deliver more apprenticeships Network Rail called for measures in the Bill to increase places and funding for apprenticeships for those aged 19 and over and in geographical areas with shortages, such as London and the South East.[75] Network Rail estimated that it cost £56,000 to train an apprentice over three years (i.e. salary, training costs and accommodation) in addition to any funding from the Learning and Skills Council. It also pointed out that the Council provided £14,500 of funding for all apprentices aged 16-18, but only half as much towards the cost of training for those aged 19 and over.[76] The Bill does not contain provisions establishing new funding arrangements and we have not taken evidence on the question of funding. But it is pertinent to note that the Government has said that funding for apprenticeships will increase by almost a quarter between 2007-08 and 2010-11—to over £1 billion and that funding will be available specifically for expanding apprenticeships for those aged 25 or over.[77]

Taking the draft Bill as a whole, we conclude that, for those employers represented by the CBI and the British Chambers of Commerce, the draft Bill has the potential to deliver two of their key requirements: a reduction in unnecessary bureaucracy through greater flexibility and streamlining of the central government agencies supporting apprenticeships. The extent to which these goals are achieved will depend on the implementation of the framework provisions and the operation of the National Apprenticeship Service.

Small businesses

The Federation of Small Businesses took a different view. It was "at the lower end in terms of enthusiasm for this kind of Bill".[78] The Federation of Small Businesses pointed out that, according to Labour Force Surveys, 69% of all apprenticeships take place in small businesses but an "inherent problem for businesses with fewer than 10 employees remains the cost to the business of training an apprentice."[79] It explained that:

The main thing that we see of interest in this Bill is that, by giving a Bill, it gives importance to the idea of apprenticeships. Therein lies the problem. The Bill is missing certain things that are necessary for a small business and in particular a micro-business for taking on an apprenticeship. […F]or years we have been asking for informal, bite sized learning that is going to benefit the micro-business of one to two employees, but it is very difficult for the Secretary of State or the Sector Skills Council, whoever is going to authorise particular frameworks, to say what a small, micro-business needs. They are still churning out apprenticeship frameworks that small businesses do not need and they are not geared towards the needs of the micro-business.[80]

When we put these concerns to Ministers, Lord Young responded with two points. First, he said that the Government was "very much seized of the importance of focusing on SMEs" and pointed out that "there was a £350 million package announced recently to give assistance on SMEs in developing essential skills to help them survive in the current situation".[81]

GROUP TRAINING ASSOCIATIONS

Lord Young also cited the potential of Group Training Associations to assist small businesses.[82] In the Impact Assessment accompanying the draft Bill the Government explained:

The creation of group training associations is specifically intended to ease the administrative burdens on smaller businesses, because the association will take some of the administration responsibilities for employing the apprentice from its member employers, and may design and maintain each apprentice's training programme itself if the employer wishes.[83]

Some skills sectors have Group Training Associations. They are particularly developed in engineering[84] where they were first established by groups of local employers in the 1960s. According to SEMTA—the Sector Skills Council for engineering—there are a total of 88 Engineering Group Training Associations serving approximately 16,000 companies, which are estimated to employ over one million people. They offer a wide range of training provision and services, mainly to small and medium businesses, including NVQ assessment, advising on workforce development and analysing training needs, providing health and safety training and guidance, and management training, within a very tight financial regime.[85]

In oral evidence Matthew Jaffa from the Federation of Small Businesses said that the Federation "would support the idea of the GTAs as long as we know who the employer still is. From my understanding of it, it would appear that GTAs are kind of the employer so there might be issues regarding contracts of employment that might be a concern for our members".[86] The British Chambers of Commerce added its support to Group Training Associations. It said that:

The concept of a Group Training Association will be at the heart for many small and medium sized businesses because the world of apprenticeships has changed from […] where you had very large companies that were embedded in the regions that would often recruit 50, 70 or 100 apprentices at a time for both their own purposes and then for other business as well. Those have now gone. What we are looking at is a concept where one or two apprentices perhaps are being taken by a number of companies and we have effective delivery of training for those which brings in the Group Training Association.[87]

We found widespread support for Group Training Associations and recognition that they could assist small and micro-businesses to take on apprentices, particularly to carry the administrative burden of setting up apprenticeships, organising training and securing financial support.[88] As currently drafted, however, the draft Bill says nothing about Group Training Associations. This needs to be remedied. The role of Group Training Associations should be to support employers in the management of, and provision of training in, apprenticeships and Associations should not become the employers of apprentices. Apprentices should be employed by the business using the services of the Group Training Associations.

For the proposals in the draft Bill to be judged effective small businesses will have to play their part in the expansion of apprenticeships. Group Training Associations offer one route provided they can take the bureaucratic pressure off small business and not compromise the quality of apprenticeships and rights of apprentices. We recommend that the draft Bill be revised to place a duty on the National Apprenticeship Service to facilitate the setting up of bodies such as groups Training Associations, to assist small businesses to carry the administrative burden of setting up apprenticeships, organising training and securing financial support. The duty should also require the National Apprenticeship Service to ensure that such bodies cover all sectors and put small and micro-businesses within their reach. We also recommend that in responding to this Report the Government set out the extent to which it expects the public sector—both central and local government—to carry out these functions. In addition, we recommend that, where an apprenticeship is facilitated under the auspices of such a body, the apprentice must be employed by a business, not the body providing administrative support.

Minimum wage

The Federation of Small Businesses said that small businesses were "prepared to pay for apprenticeships"[89] and it considered that:

the Minimum Wage increase for Apprentices from £80 to £95 at the Trades Union Congress Conference was a good first step; however, a true renaissance will only occur if an Apprentice can achieve parity with their other working counterparts. The development rate minimum wage for 16-18 year olds is still higher at £110 for a 35 hour working week. [The] Apprenticeship Bill should provide the platform for equality so that there is value in taking and completing an apprenticeship. The FSB advocates a section in the Bill for an Apprenticeship rate to be set which is on a par with the Minimum Wage Development rate.[90]

We found the points made by the Federation of Small Businesses convincing. The fact that it is prepared to put its hand in its pocket is evidence of its support of apprenticeships. We recommend the draft Bill be amended to provide that apprentices aged 16 to 18 be paid the Minimum Wage Development rate within a specified time.

Economic downturn

We raised with the Ministers who gave evidence the impact of the current economic downturn on employer-led apprenticeships as proposed in the draft Bill. Lord Young replied:

businesses have to believe that their chances of survival will be enhanced with a better skilled workforce, and that taking on apprentices will benefit their business rather than be a burden to it. [… W]e do not discount the fact that it is going to be a somewhat harder task in the current situation. However, we ought to put it in context. We have already made significant progress on driving up the number of apprenticeships, so we do not believe it is an impossible task, but neither are we underestimating the effect of current circumstances or the impact on businesses.[91]

[W]e do still suffer from a skill shortage, even taking into account the downturn. We have to remove all the barriers, and there have been barriers that people have complained about in the past when they wanted to take on apprenticeships, and we believe that we can do that, we can simplify the system for employers with our National Apprenticeship Service. The other thing we are looking at specifically in relation to SMEs is the question of trialling wage subsidies. We are not absolutely sure about the effects of this but we are certainly seeking to trial that.[92]

Jim Knight added:

demand from young people, from potential apprentices, may well increase, so that side of things may be made easier. I think it would be extremely complacent of us to believe that it is not going to make it slightly more difficult in respect of engaging employers. That is why we need to deepen what we are doing in the public sector because we have more leverage over the public sector. There is huge room for expansion of apprenticeships in the public sector, and it will also be targeted with our expanded resource that we are putting into this. It is human resources and marketing resources. This is the tip of a large iceberg in terms of the legislation, and we will bring all of that to bear on ensuring that employers are persuaded that it is good for their medium and long term future to invest in apprenticeships.[93]

PUBLIC SECTOR APPRENTICESHIPS

Edexcel pointed out that there were "markedly fewer placements provided by central Government departments or local authorities compared to private and voluntary-sector employers" and pointed out that this gap was "amenable to policy intervention and offers the opportunity for public sector leadership".[94]

From the Minister's response it is clear that the public sector is going to play a greater role in providing apprenticeships in the face of the economic downturn.[95] While we accept that the draft Bill was published before the full effects of the downturn became apparent, the situation has changed in recent months and we consider it essential that, when the House comes to examine the finalised legislation, the Government set out in detail what part it expects the public sector, both central and local government, to play in providing and organising apprenticeships.

We conclude that the economic downturn throws up challenges and opportunities for the Government's policy on apprenticeships. There are, as far as we can see, no provisions in the draft Bill that have been specifically designed to encourage the provision of apprenticeships during the downturn. We recommend that the Government set out in detail (i) how it expects the public sector, both central and local government, to provide and organise apprenticeships to meet the challenges of the downturn and (ii) what additional resources will be provided.

"CONVERSIONS"

We established during the course of the inquiry that the majority of apprentices were not new recruits to a business but existing employees who are in work and who "convert" from their current jobs to apprenticeships with the same employer.[96] This matter has been given greater significance in light of the civil service recruiting apprentices. On 27 October 2008, the Secretary of State at DIUS announced that over 1,000 apprentices would work in central government departments and agencies this academic year.[97] The announcement did not state whether these apprentices were new recruits or "conversions" by existing employees. If the majority were to be conversions and if this practice were to be replicated across the public sector, it raises a question about the extent to which Government policy has created new apprenticeship opportunities. We recommend that, in responding to this Report, the Government clarify whether it expects the majority of apprentices within the civil service and public sector to be existing employees who "convert" to apprenticeships and what steps it is taking to monitor the quality of the training provided to apprentices in the private and public sectors who "convert".

63 World-class Apprenticeships, para 2.3; see also Q 141. Back

64 Qq 44-45 Back

65 Q 4 Back

66 Qq 1-2 Back

67 Q 98; over 130,000 employers are offering apprenticeship places (HC Deb, 10 Jun 2008, Col 200W); the Department for Business, Enterprise and Regulatory Reform estimates that there are 4,766,295 enterprises in the UK of which 3,468,100 have no employees and 1,298,195 have at least one employee (see http://stats.berr.gov.uk/ed/sme/ ) Back

68 CBI Response to World-class Apprenticeships, para 4; and see also paras 19-21, 24. Back

69 Q 1 Back

70 Q 5 Back

71 Q 40 [Mr Wainer] Back

72 Q 17 [Mr Frost] Back

73 See Appendix 1, Error! Reference source not found.. Back

74 World-class Apprenticeships, p 6 Back