Memorandum 13
Submission from The Business Services
Association (The BSA)
DRAFT APPRENTICESHIPS
BILL
Introduction
1. The BSA—The Business Services Association—represents
companies, and their advisors, providing business and outsourced
services in the private and public sectors. We promote the industry
and the positive contribution it makes to the economy.
2. The UK business service and outsourced
service industry is one of the largest sectors in the UK and plays
a significant role in delivering training, employment and economic
growth. It helps to drive innovation, choice and diversity across
the private and public sectors.
3. Full Members are active in providing
business and outsourced services. Associate Members are professional
firms including lawyers, accountants and consultants who advise
in the sector. BSA Full Members have a combined worldwide turnover
of c.£67 billion and employ around one and a half million
people. In the UK the combined turnover is c.£14 billion
and c.340,000 people are employed across the country.
Summary Of Principal Points
4. The BSA welcomes this opportunity to
submit evidence to the Innovation, Universities, Science and Skills
Committee on the draft Apprenticeship Bill. Apprenticeships are
crucial for the future success of the business service industry.
This submission makes the following key points:
— The apprenticeship institutional
framework is very bureaucratic and confusing for users. This may
hinder the rapid expansion of apprenticeship schemes.
— A more streamlined funding system
is needed. Currently access to funding is through local training
providers and the time and effort required for an employer to
identify the relevant organisation and then to get signed up is
a disincentive to providing apprenticeships.
— The Apprenticeship Bill will raise
the cost of providing apprenticeships, which will concern employers,
particularly in this time of economic uncertainty.
— The Government could improve the
supply of apprenticeships by offering incentives to employers.
A recent BSA survey of its members found that cost was the main
barrier to provision. For instance, there could be tax breaks
for companies taking in over a certain number of apprentices in
a year in sectors that are currently hard to recruit and employer
National Insurance Contributions could be reduced for apprentices.
Does the bill meet the Government's policy objectives
to set up a system of "world class" apprenticeships
in the most effective way within a reasonable time frame?
5. The task of raising the number of people
undertaking an apprenticeship scheme from 184,000 in 2007 to 250,000
by 2020 is large. The Leitch Review highlighted the importance
of developing the market for apprenticeships in the face of large
skills gaps in the UK labour market and competition from newly
emerging economies. Apprenticeships can give adults the opportunity
and flexibility to improve skill sets they missed out on gaining
in with previous institutions. The BSA welcomes the Government's
aim to boost the supply of apprenticeships, as this will help
firms who are struggling to recruit the right people in the business
services and outsourcing sector. This is crucial as the business
services sector employs one in seven UK workers. In the public
sector alone the "Public Services Industry" employs
1.2 million people.
6. There is a need to improve certain skill
sets in the workforce in order to make it easier for the industry
to deliver services to the public sector. More apprenticeships
in the services sector will help solve the current skill shortage
in this industry. The extra funding the Government will put towards
providing more apprenticeship places for those who want them is
welcome. The BSA is particularly pleased the Government is making
an effort to improve the career advice and information available
on apprenticeships. This will play an important role in raising
the demand for apprenticeships and expanding the pool of suitably
qualified potential employees.
7. The Government has stated that it is
committed to involving businesses more in designing apprenticeship
schemes. The BSA welcomes this and believes it will ensure they
are relevant and of high quality to the employer. However, the
bill does not specify that industry should play a role in designing
apprenticeship schemes provided by the Government to ensure quality
and relevance to employers. There needs to be opportunities for
employers to work with Skill Sector Councils on the content of
the apprenticeship framework.
8. Moreover, the apprenticeship institutional
framework is at the moment very bureaucratic and confusing for
users, which may hinder the rapid expansion of apprenticeship
schemes. The bill does not address this problem and given these
obstacles, the timeframe may be ambitious. To increase effectiveness,
new apprenticeship places should be targeted in areas where they
are needed the most.
Is the Bill workable?
9. The BSA believes the Apprenticeship Bill
is workable but the current apprenticeship framework could get
in the way of expanding apprenticeships quickly and efficiently.
Reducing bureaucracy and the number of Government agencies responsible
for delivering the skills national strategy will make a large
difference in freeing up resources for training and apprenticeships.
10. The BSA supports the idea of a single,
streamlined funding agency for FE colleges. Currently the skills
system is very complex, with various agencies having overlapping
responsibilities at a regional and national level. Therefore any
policy to simplify the current system would be considered a move
in the right direction. Creating a single funding agency will
make it clearer and easier for FE colleges to receive the help
they need and reduce the bureaucracy involved in providing training
schemes.
11. A more streamlined funding system would
also be a real advantage to employers. Currently access to funding
is through local training providers and it takes time and effort
to identify the relevant organisation and then to get signed up.
For example, one BSA member took on five apprentices in different
geographical areas but had to get funding through five different
providers, who each had their own paperwork that needed to be
completed.
12. The National Apprenticeship Vacancy
Matching Service could be further utilised to assist with streamlining
the system and give more visibility to all vacancies that are
available and visible to apply for, possibly by using it to deal
with all apprenticeship processing.
13. The Government could improve links between
employers and potential apprentices by setting up an agency that
helps companies establish links with local schools. This could
provide an incubator type approach for apprenticeships and could
encourage individuals from under represented groups into, say,
engineering degrees.
14. Also a partnership apprentice approach
for all sorts of jobs could be developed. For instance the first
18-24 months are owned by the school/college, but are allocated
to a business. Time could be split between technical/skills training
both in a classroom and the work environment, with companies committing
to employing suitable apprentices.
Will the Bill lead to a renaissance in apprenticeships?
15. The BSA believes the bill is a step
in the right direction in improving the attitude of young people
towards apprenticeships. We particularly welcome the focus on
improving careers advice and guidance for young people on the
apprenticeship route. There is often poor quality careers advice
which could dissuade people from considering this route. Better
access to information on apprenticeships and the career path it
can offer will make it a more viable option to young people. It
is essential that advisers are provided with resources and training
about opportunities available across the economy.
16. However, we would again like to stress
that cutting bureaucracy and creating a simpler apprenticeship
framework will improve the information flow on apprenticeships.
With overlapping responsibilities of various agencies at a regional
and national level, it could dilute the message the Government
is trying to get across. Therefore any policy to simplify the
current system for users would be considered a move in the right
direction.
What is the cost?
17. The Apprenticeship Bill will raise the
cost of providing apprenticeships, which will concern employers.
From August 2009, employers will be required to pay apprentices
at least £95 per week, rising from the current rate of £80
per week. However, if the bill receives Royal Assent, we may see
the introduction of prescribed apprenticeship agreements that
will have the status of contracts of service, not of apprenticeship.
Accordingly, "apprentices" under these agreements would
be entitled to receive the national minimum wage the same as any
other employee. This is unless the definition of apprentice in
existing legislation was widened to encompass such prescribed
agreements.
18. This could exacerbate a problem that
employers already face. In a recent BSA survey, our members said
time and cost were the main barriers to training employees. Increasing
the cost would not be well received as this would have an impact
on the bottom line. Starting salaries for apprentices are relatively
low but they are effectively in full time education for year one
for technical apprenticeships and assuming they progress well,
their salaries jump significantly as they progress through their
training. Also unless additional costs can be covered by increases
in the provision of service or product, additional salary costs
will impact in the same way as for all increases in salary costs
to employers. Therefore we do not see any need to change the current
funding model.
19. Furthermore, most of the larger companies
have, and can afford to have special courses and departments.
But for the smaller and medium sized companies there is clearly
a proportionately greater impact on having to spend money and
time on training. Indeed for many it seems to be a deterrent to
expanding or recruiting certain types of people. In addition,
the effect of implementing this increase at this time of economic
uncertainty will have a greater impact than in steady state times.
Although Government funding is improving, funding for NVQs is
generally lacking. BSA members want more clarity of support, funding
and access to training.
20. The bill does not incentivise employers
to provide more apprenticeship schemes. The Government could offer
incentives through different types of tax breaks. For instance,
there could be tax breaks for companies taking in over a certain
number of apprentices in a year in sectors that are currently
hard to recruit and employer National Insurance Contributions
could be reduced for apprentices. The Government could look at
VAT rules as it is currently exempt, as a zero or standard rated
would best serve the employers. Also the Government could make
allowable contribution to offsetting CR taxes.
21. We support incentivising employees through
grants, although the administration in drawing this needs to be
slicker and more flexible. The Government could also publish a
directory of "good apprentice employers".
What impact the bill will have on current institutional
structures?
22. The proposed national apprenticeship
vacancy matching service linking potential apprentices with potential
employers will improve the information flow on apprenticeships.
Therefore this should make it easier for employers to recruit
the right apprentice who will get the most from their apprenticeship.
Improving links between these two groups is an area which should
be developed further.
23. The Government should be careful that
the extra responsibilities it gives organisations to promote and
provide apprenticeship places will not add another layer of bureaucracy
on the already complex institutional framework. The roles and
responsibilities should be placed on institutions so that they
do not overlap.
Is there anything missing from the draft bill?
24. The draft Apprenticeship Bill does not
specifically target basic numeracy and literacy skills as part
of improving the productivity of the workforce. The government's
first priority should be to improve the level of basic skills,
such as literacy and numeracy. Poor basic skill levels have significant
impact on business and the economic competitiveness of the UK.
25. Many BSA member companies highlighted
in a recent survey that it was often difficult to find employees,
at all levels, with the appropriate educations and skills for
the roles they are being asked to fulfill. Members went as far
a saying they are sometimes forced to employ people with lower
than desired standards of literacy and numeracy. There was a general
perception that educational standards are falling and that this
is having a direct impact on individuals employability.
26. The impact on employers of poor basic
skills in the workforce manifests itself in many ways. Managers
and supervisors often find themselves having to spend increasing
proportion of their own time ensuring employees are working safely
and effectively. Companies face the direct costs of having to
train the workforce themselves with skills they should already
have when taken on. There may also be a direct loss of business
due to service user's perception of the quality of the service
being provided. This is difficult to quantify, however, some estimates
calculate the cost to the economy is approximately £10 billion.
October 2008
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