Select Committee on Innovation, Universities, Science and Skills Written Evidence

Memorandum 13

Submission from The Business Services Association (The BSA)



  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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