Apprenticeships

APP 124

Written evidence submitted by the Local Government Association

1. The LGA is a membership body representing local authorities in England and Wales.

2. The LGA welcomes the committee’s inquiry into apprenticeships and scrutiny of the current governance and funding arrangements to establish whether they maximise the effectiveness of the apprenticeship system.

3. Apprenticeships are of course crucial to national productivity, the success of local economies, businesses and individual success in the labour market.

4. The inquiry takes place at the same time that the LGA is conducting a series of town hall debates as part of its Local Growth campaign. In the campaign we are exploring how councils promote growth and jobs in local economies and how they could do so more effectively.

5. One of the dominant themes of these debates, raised by employers and elected councillors alike, is the structural mismatch in local economies between the skills needs of employers and local skills provision. Equipping local people with the skills they need to compete in a global labour market will help reduce unemployment.

6. This skills mismatch goes much wider than apprenticeships – it is an issue for the whole education and training system and one in which employers have a key role to play in ensuring the mismatch is addressed. A particular gap is around local employer engagement which national bodies struggle to deliver.

7. Looking specifically at apprenticeships, the national statistics cast doubt on the mixed performance of the apprenticeship system over successive administrations. The committee will have seen the recent National Audit Office report into adult apprenticeships (February 2012) but it worth highlighting some of the statistics:

–68% of the expansion in apprenticeship starts between 2006/7 and 2010/11 is accounted for by people over 25 years old;

–84% of the expansion occurred in just 10 apprenticeship occupations;

–whilst completions have risen from 47% in 2005/06 to 75% in 2009/10, the dropout rate is currently much higher than for higher education;

–19% of apprenticeships in the last year lasted less than six months.

8. These statistics bear out the comments we have heard at each of the LGA’s town hall debates that: as a country we need to re-invigorate the apprenticeship model; we are having some success; but that there are too many apprenticeships that lack quality and relevance and the current economic conditions require a transformative approach.

9. There are some aspects of the national system that are clearly open to challenge – the economic rationale for funding an apprenticeship at 100% for 16-18 year olds and 50% for 19-24 year olds is unclear. It is much easily rationalised as a convenient

bureaucratic method for rationing public resources across two government departments. It mistakenly assumes that age 19 is an important milestone for young people.

10. But our principal concern with policy on apprentices is that it does not have a spatial dimension. It does not recognise that local economies perform differently and that skills needs are different from one functional economic area to another. In our view public subsidy could be targeted more effectively to generate training outcomes with higher economic returns.

11. There is a strong value for money case for exploring whether decentralised approaches could deliver even better apprenticeship outcomes:

–there are local and regional imbalances in skill levels, with spatial concentrations of low skills;

–employers and UK Commission for Employment and Skills report continuing skills gaps [1] [1];

–there are local concentrations of high unemployment where the integration of skills and employment support provision will be critical (this is recognised in new skills conditionality for the unemployed);

–there is a risk that public subsidy lacks additionality and that it funds activity employers would have funded themselves in the absence of subsidy. This risk is difficult to mitigate nationally. At the level of functional economic geography it is easier to identify market failure locally and where there is a higher return to public investment, for example to attract inward investors or boost exporting companies.

12. Whilst apprenticeship provision will be determined by individual and employer choices in the market, there needs to be a wider local discussion about how colleges and training providers best serve their communities and how any local market failure needs to be mitigated.

13. Geoff Russell, the Skills Funding Agency has said "colleges and training providers will have to engage closely with employers and stakeholders in the local communities and sectors they operate in so that they can understand the demand for skills and deliver what learners need to fulfil that demand." [2] [2]

14. Voluntary partnerships are of course very effective in some places (for example in Jaguar Land Rover’s decision to locate its low emissions engine plant in South Staffordshire), but in other places both employers and local government have found it more difficult to establish locally responsive training provision.

15. Local Enterprise Partnerships, bringing together civic and business leaders, provide a new forum for such a conversation within a natural economic geography. They have an ambition to play a bigger role in skills and apprenticeships have ideas about how they would drive more value from the system.

16. The starting is that councils and local businesses know their area well and are best placed to work together to employ apprentices. The natural default of national schemes is to focus on big employers who would tend to take on apprentices anyway or who do so to demonstrate corporate social responsibility.

17. This added local value could be driven out in various ways. At its most radical, there could be a full devolution to councils or local enterprise partnerships of the apprenticeship funding as part of a wider decentralisation of skills funding. There is of course an economy of scale argument for retaining a National Apprenticeship Service that operates a national payments system to colleges and providers, but that only applies to the bulk processing.

18. In theory the function and funding rules could be disaggregated and decentralised in particular places into a local apprenticeship investment fund - where there is a local consensus behind such a proposition, and evidence that a new approach would produce better, more targeted outcomes.

19. Less radically, decentralisation could take a number of forms aimed at improving:

–the local accountability and performance of providers. We know that improving information flows, greater transparency and scrutiny improve provider performance. Local enterprise partnerships, councils and other local fora could provide this role acting as the local customer champion (for both individuals and employers);

–the delivery of particular apprenticeship outcomes through locally agreed variations to tariff and payment structures;

–through the aligning and pooling of budgets (community budgets) to provide a more co-ordinated approach to apprenticeship pathways – both entry to and progression from.

20. Essentially these measures would ensure the more effective targeting of public subsidy to encourage apprenticeship provision to meet the skills needs of local employers. The National Apprenticeship Service would become more locally accountable.

21. The Government is taking some steps towards decentralisation through its offer to core cities of city deals, [3] [3] and specifically the offer to create a City Skills Fund to enable the tailoring of adult skills to the needs of local employers and to create apprenticeship hubs that allow access to national funds to promote new apprenticeships in small businesses.

22. The LGA welcomes these measures – they could be applied more widely in all places not just the core cities to ensure that the apprenticeship model subsidises and delivers high quality work-based training that is targeted at closing skills gaps.

13 February 2012

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[1] [1] Strategic skills needs in the low carbon energy generation sector, UK CES, March 2010

[2] [2] Geoff Russell, CEO Skills Funding Agency, Annual Report, July 2011

[3] [3] Unlocking growth in cities, HM Government, December 2011