Select Committee on Innovation, Universities, Science and Skills Minutes of Evidence

Examination of Witnesses (Question Numbers 140-159)


27 OCTOBER 2008

  Q140  Chairman: I was hoping you would say that because nowhere in the Bill does it say that there will be a duty on the Secretary of State through the various organisations to provide accommodation support for those living-away-from-home costs.

  Lord Young of Norwood Green: We are clear that we are offering a choice between two sectors, not specific occupations. What we cannot guarantee is that there will be apprenticeship places in all occupations in all locations of England, for example. We just could not meet that. Our task is to maximise the number of apprenticeships that are available, which is a fair old task in itself, and offer what we think is a reasonable choice. If the two sectors do not meet either the particular requirements or choice of a young person then they have a difficult choice to make, but that applies to any young person's decision about how far they want to go to pursue a particular vocation.

  Q141  Mr Wilson: As I understand it, the Government wants to put the employer right in the driving seat of the whole apprenticeship system. Indeed, we had evidence from the Chamber of Commerce weeks ago that they should be right at the heart of the system, so what does this still do when you take into account that businesses want freedom from all the red tape, the costs, the multiplicity of agencies they have to deal with? How does this Bill deliver those things that business actually wants?

  Lord Young of Norwood Green: First, yes, we do believe that they should be employer-led; they should relate to their requirements. Again, it harks back to what I said. If we want to maximise the number of apprenticeships it needs to be demand-led. Are there any parameters? Yes, there are, in terms of the fact that any framework that is agreed between a Sector Skills Council and employers will have to fit in with the blueprint of the Learning and Skills Council, which in itself in this Bill is going to be made more rigorous. That is one aspect of it.

  Q142  Mr Wilson: I want to know about the obstacles to business.

  Lord Young of Norwood Green: You want to know about the obstacles, absolutely. We do want to remove the red tape. One example of that was a requirement to keep records on apprentices for six years. It is intended that that should go. In terms of assisting employers with removing the burden of administration, again, we would hope that skills brokers would be able to do that, so a one-stop shop, if you like. If they approach the skills broker and it is clear that there is an apprenticeship requirement then they would be referred to the National Apprenticeship Service which ought to be able to meet all the requirements. There is also the vacancy matching service. Trials on that are taking place and that would ensure that apprentices who were looking for apprenticeships were matched with employer vacancies, so we think there are a number of areas where we will be making it simpler for an employer to find out about but also establish apprenticeships.

  Mr Marston: The consequence of that is that there are some components of this draft Bill that are designed very much to help employers, particularly by saying, as we touched on earlier, that an apprenticeship must always contain an employment relationship. The point about bureaucracy though not in the Bill itself, is in the way we put all these provisions into place, and there is absolutely a commitment to make sure that that is simple and streamlined and responds to those concerns from the BCC[6] and others.

  Q143 Mr Wilson: It is very expensive to train people these days and apprenticeships are a very big commitment for businesses. We have got evidence from Network Rail that it costs about £60,000 to train an apprentice over three years. The business is going to want a pretty good return on that sort of investment. Again, how does this Bill deliver a return on investment for all that cost commitment?

  Lord Young of Norwood Green: The evidence is that it does. It is a pretty detailed analysis. You started off from the aspect of the SMEs,[7] I presume, when you were referring to the British Chambers of Commerce. There are other arrangements, for example, the Group Training Associations, where they can pool the responsibility, if you like, for apprenticeships, so that is one way of keeping the cost down, and then draw from that particular pool. Certainly the analysis that we have had done on what they call the net present value has demonstrated that it is very worthwhile to employ apprentices, and the overall analysis for companies is that their chances of survival in these difficult times are about 2.5 times better with a better trained and skilled workforce.

  Q144 Mr Wilson: Where is this analysis? Is it an internal departmental thing or is it something we have?

  Mr Marston: I think some of it is in the impact analysis. There is other published evidence about the effect of training on business bottom line and survival rates.

  Q145  Mr Wilson: The Chancellor told us at the weekend that we are about to enter a recession, if we are not already in one, that will be deep and prolonged, as he put it. What impact do you think that might have on a business-led apprenticeships system, as is proposed in this Bill?

  Lord Young of Norwood Green: Clearly, 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. We do genuinely believe that, but we 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.

  Jim Knight: Clearly, there are a lot of things that are difficult to predict as we look forward on the economy, but it is probably fair to predict that in terms of demand for apprenticeships that might increase as a result of an economic downturn because people who might otherwise think it was okay to continue on a fairly low-skilled basis would see the benefit of spending time uprating their skills.

  Q146  Chairman: Why would employers, when they are shedding workers, want to take on more apprentices?

  Jim Knight: That is what I am saying. On the supply side of apprenticeships you have more difficulty potentially in terms of employers wanting to take them on. That is why it is significant that the CBI,[8] the TUC[9] and the UK Commission for Employment and Skills wrote an open letter to employers this week, and I am not sure the Committee has seen that. It is a really strong letter setting out all the arguments why it is in businesses' best interests to invest in skills, to invest in apprenticeships. There is targeted work that we will also do with an expanded workforce in the National Apprenticeship Service. We have currently got a field force of some 230. That will expand to 400. Currently we are doing some targeted work with Construction Skills, for example, around sustaining construction-based apprenticeships because whilst we have got a reduction in the amount of housebuilding going on we have got public sector building going on and we need to maximise our leverage through procurement and other routes in order to sustain that in construction as well as win the arguments with employers.

  Q147 Mr Wilson: But even in the answer from Lord Young and you, Jim, there does seem to be a tension at the very least in what you are saying. On the one hand you are saying, Lord Young, that you hope that apprenticeships will not drop, but they probably will, and, Jim, you are saying that they will probably increase.

  Jim Knight: No, what I am saying is that 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.

  Lord Young of Norwood Green: There are another couple of points. Certainly there is this battle of hearts and minds that we have to have with them that there are real benefits in improving productivity if the people they employ have the skills. After all, we 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.

  Q148  Mr Wilson: Government-provided wage subsidies, at least to apprenticeships?

  Lord Young of Norwood Green: Yes.

  Q149  Mr Wilson: To what level? Will you be paying at least minimum wage?

  Lord Young of Norwood Green: I am not in a position to give details. I think the best thing we could do about that one is that if there is more information available we will let you have that, but it is a clear intention that we will try that. Do not forget we are already picking up the costs of training, but what we are not dealing with is the cost of wages. Also, do not forget the idea of the Group Training Associations where SMEs form a group training company which employs apprentices, so again we are very cognisant of the costs, the impact of this in the current climate.

  Q150  Mr Wilson: How will the Bill make sure that apprenticeships deliver to existing employees, that they do not just accredit existing skills but take them on from where they are?

  Lord Young of Norwood Green: We are looking at how they can move into further and higher education as a result of that, so yes, we are—

  Q151  Chairman: Lord Young, you have missed the point. The point is that we heard clear evidence both in this and indeed in our Leitch inquiry that the largest group of apprentices is those already in work, already being trained, and that this is really a re-badging exercise which is going on. The question that we want answered is how does the Government justify the dead-weight costs which are there to meet your targets but are not doing anything extra for the employee?

  Jim Knight: Can I start and then others carry on? I know there is a statistic out there that over 70% of those starting apprenticeships are currently in employment. When you look beneath the surface of that what you find, and it is spread fairly evenly between young people and older people starting apprenticeships, is that there are quite a number of employers who will take people on first and then decide whether or not they are suitable for an apprenticeship, and there is a certain amount of logic attached to that. Equally, amongst young people it might be that they are working part-time and then they decide that they want to pursue an occupation with that employer and so they apply for an apprenticeship. There are all sorts of reasons why starters might be in employment at the point at which they start. In terms of this being just a badging exercise, my response to that would be that we are deliberately putting this in the hands of employers. I do not know that there are very many employers that would be complicit in a badging exercise. They will want to pursue apprenticeships because they are adding skills and value to their employees and getting the consequent benefits of in improvement retention rates and improved productivity as a result. They are not going to faff about helping Government achieve their targets, if that was the implication.

  Q152  Chairman: I think the implication is they get money for it. Perhaps you would let us know, Jim, how many apprentices come from this trial basis. Do you have some stats on that?

  Lord Young of Norwood Green: The fact that they are merely asked to put in a box whether they have been in employment prior to starting an apprenticeship does not—

  Q153  Chairman: You do not know, do you, really?

  Lord Young of Norwood Green: No, we have not got a precise statistic for that.

  Q154  Chairman: That is all right.

  Lord Young of Norwood Green: What I do not understand is why you seem to imply that that is somehow a negative approach. If a young person has been in employment with that employer or with another employer before they start an apprenticeship --- in fact I did myself before I started my apprenticeship quite a few years ago; I was in a totally different employment. It did not negate the value of the apprenticeship that I undertook or the other circumstances where they might be with an employer. Let us take an example. It might be Tesco. They might be involved in shelf stacking or whatever and then the employer and the employee decide that they are suitable or the employee decides they want to undertake a retail apprenticeship and the employer agrees and that is converted into an apprenticeship.

  Q155  Chairman: I do not disagree with you. All we have asked you for is have you any stats to support that?

  Mr Marston: Yes, we have got some stats.

  Q156  Chairman: Rather than have a debate could we perhaps have those stats? That is all we want.

  Jim Knight: I have many tables in front of me.

  Mr Marston: Chairman, might I just add one other point which I think is relevant to this? One of the best pieces of evidence we have is the rates of return to apprenticeships, which are very good. In other words, if you go through an apprenticeship programme on average you will earn a higher wage than if you do not. Why would employers pay a higher wage to people if all that was happening was the badging of skills they already had? If you look at the effects of this, the outcomes in the business, employers think it worth paying more to somebody who has been through an apprenticeship programme. That is the strongest evidence we have that this is genuine skills development. Yes, it is at work, yes, it is in the workplace, but it is genuine skills development. People are gaining skills they did not have before and qualifications they did not have before, and that has a value for them.

  Chairman: You will let us have the facts on that.

  Q157  Mr Marsden: Jim, I wonder if I could take you back briefly to what you have just said about the public sector, public procurement and the economic downturn. You talked about using public procurement as a lever to try and encourage more private sector procurement. We notice today that the Government has made a further announcement about doubling the apprenticeship commitment in the public sector and that is very good and all the rest of it. The reality, certainly in the short term, is that in particular small businesses are going to be extremely reluctant initially to take on people in this area, so you are going to have to work much harder on that. Is it the case that you are anticipating in the short term that the potential slack in take-up in the private sector will be matched by take-up in the public sector?

  Jim Knight: I do not anticipate that there is some kind of magic read-across. We are not going to focus on the public sector and just ignore the private sector.

  Q158  Mr Marsden: Have you done any modelling yet on the likely consequences of the economic downturn in terms of what you expect the public sector as opposed to the private sector to produce over the next 12 months?

  Jim Knight: The modelling that we have done is at an extremely early stage, partly because it is an ever-moving target, but when I, with Siôn Simon, had the ministerial oversight meeting that we have regularly with the Learning and Skills Council, we effectively commissioned an urgent meeting with them to discuss the model that they are working in respect of how this will work for apprenticeships but also some of their other activity. It is worth saying, Chairman, that when we appeared before your sister committee, the Children, Schools and Families Committee, last week, I told them that we were having a public sector apprenticeship summit on 29 October. Because of the change in ministerial responsibilities following the reshuffle we have had to postpone that, so it will not take place this week but it will take place in a few weeks' time. There is a very strong drive across Government to do what we can in this area, but we will equally be pressing the NAS with this enhanced resource and stronger leadership to chase after deepening and widening private sector engagement with apprenticeships despite what is going on in the economy.

  Q159  Mr Boswell: We have already touched on the Group Training Associations. Can you give us a bit of a feel as to how proactive you want to be about this? Would it make sense in the definitive Bill to put a duty on the Secretary of State to encourage the growth of group training where that is appropriate, and indeed in effect offer access to group training for everyone right down to the micro business—I am talking about the employers—and obviously then the apprenticeship follows from that.

  Lord Young of Norwood Green: I think it follows on from the last question. We are very much seized of the importance of focusing on SMEs. Indeed, 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. In terms of access to the Group Training Associations, certainly we want to maximise that. We do not see any current restriction applied to it. Let me put it this way. It is an essential tool for trying to engage smaller businesses.

6   British Chambers of Commerce Back

7   Small and medium-sized businesses Back

8   Confederation of British Industry Back

9   Trades Union Congress Back

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