Business, Innovation and Skills Committee - Minutes of EvidenceHC 83-II

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Oral Evidence

Taken before the Business, Innovation and Skills Committee

on Tuesday 27 March 2012

Members present:

Mr Adrian Bailey (Chair)

Mr Brian Binley

Paul Blomfield

Katy Clark

Julie Elliott

Rebecca Harris

Margot James

Simon Kirby

Ann McKechin


Examination of Witnesses

Witnesses: Stephen Uden, Head of Skills and Economic Affairs, Microsoft UK, Ray Wilson, Director and General Manager, Carillion Training Services, Justin Owens, Human Resources Manager, Robinson Brothers Ltd, and Alex Khan, Managing Director, Education and Training, Babcock International Group, gave evidence.

Q329 Chair: Good morning and welcome to our Select Committee hearing. Thank you for agreeing to be our witnesses. Obviously we have a number of questions; do not all feel obliged to answer every question. If somebody says something and you do not wish to either disagree or add to it, do not feel obliged to contribute. Some questions will be specific to a particular person, so obviously we will need a response then.

Just for voice transcription purposes, could you introduce yourselves?

Alex Khan: I am Alex Khan. I am the Managing Director of Babcock’s Education and Training business.

Justin Owens: Good morning, I am Justin Owens. I am the HR Manager of Robinson Brothers Ltd in the West Midlands, chemical manufacturer.

Stephen Uden: Good morning, I am Stephen Uden and I am Head of Skills for Microsoft UK.

Ray Wilson: Good morning, my name is Ray Wilson and I am Director and General Manager for Carillion Training Services.

Q330 Chair: Thanks. I am not sure if I need to declare it, but Robinson Brothers is in my constituency and I have made a number of visits to the company, so a special welcome. Can I start with a fairly general question? There has been a lot of debate about the Government proposals and the different variety of apprenticeship schemes actually potentially weakening the apprenticeship brand. How important do you think it is that the apprenticeship brand remains strong? Who would like to lead on that?

Stephen Uden: I am happy to. For us, it is very important. We are taking on apprenticeships that are level 3, level 4-higher apprenticeships-and we are trying to persuade people who would otherwise maybe go to university that an apprenticeship is a good option for them, and I think that is really important. We have absolutely no issue with the fact that apprenticeships cover a broad range of programmes; in fact, that is their strength. But there is a challenge that you are putting under the same brand everything from a shortterm level 2 apprenticeship for an existing worker up to very high level apprenticeships-say, level 6. We would certainly like to see more focus given to the word that goes before apprenticeship-advanced apprenticeship, higher apprenticeship-so it is clear that these are not all equivalent; otherwise we find it hard to recruit people on to our programmes because we have to spend a lot of time explaining to young people and their parents what the difference is between them.

Q331 Chair: That is interesting. Does anyone else wish to add to or subtract from that particular point?

Alex Khan: I agree with virtually all the comments made. I think the brand of apprenticeships is absolutely critically important. Apprenticeships are a workbased, competencybased programme. The bit that I keep coming back to when I look at apprenticeships is around the framework and the content of what they are made up from, which is driven by employers and industry. I think that is, critically, the important part of the apprenticeship programme. The brand is obviously very important, but getting the skills and the qualifications that make up an apprenticeship is probably as important because that is where the credibility comes.

Q332 Chair: If I could just summarise Mr Uden’s point as I understand it, you are saying it needs to be strong in order to ensure that it becomes an effective alternative educational route to, if you like, academic degree attainment, and that types of apprenticeships ought to be slightly rebranded to distinguish between them. Is that a fair summary of what you were saying?

Stephen Uden: It is. It is not so much rebranding, because they are already branded as that. It is just the emphasis on that. Absolutely-that is quite correct.

Justin Owens: I would agree with Stephen there. The level 2 should be called a foundation apprenticeship, and then above level 3 should be an advanced; otherwise, as you say, it does devalue the apprenticeship.

Q333 Chair: My next question is specifically to Ray Wilson from Carillion. No relative of the former footballer?

Ray Wilson: No, unfortunately not, but a great servant to his country.

Q334 Chair: Yes. Interestingly, you place a number of your apprentices in smaller firms in your supply chain. Given that a lot of firms use the fact they will be poached by other companies as an excuse for not having apprentices, yours seems a very altruistic approach. What are the benefits to your company from this?

Ray Wilson: There are absolutely huge benefits. Primarily this is about us as an organisation supporting young people into training with the relevant skills for the industry. That then supports the supply chain in that industry, which then goes on to support us within Carillion itself. These young people-young people on an apprenticeship basis; those are the majority of people that we employ-are often leaving school looking to forge a career, sometimes perhaps not quite understanding where they want to be and it can be a "light on" moment for them. For me, it is vital for them to be given the opportunity to develop the skills that are relevant for our industry in a framework and a brand of apprenticeship that they and employers can trust. So it is very important for those young people.

In Carillion, we have a huge sustainability policy. We are very committed to working with our communities. I feel that working with young people who perhaps otherwise would be unemployed if we did not give them the opportunity to commence an apprenticeship with us is a very strong message for us to give to our communities about the work we want to do with them, so that we can become sustainable in employment, offering real opportunities and real jobs for them. Yes, there is huge benefit there also. Finally, as an organisation, of course, we will benefit through procurement programmes and others that give benefit to Carillion for potentially workwinning. So for a number of reasons apprenticeships are extremely important to us and we have to have a very strong brand to support them.

Q335 Mr Binley: Can I ask a quick supplementary? Are most of those apprentices put with allied direct labour organisations? You do a lot of resource work with local government. Are those apprenticeships placed with your allied direct labour operation?

Ray Wilson: Absolutely. For example, what we will do is work with Carillion and its full supply chain to place apprentices to give them opportunities. We will rotate them; so they may get a bit of experience, for example if they are a carpenter, in hanging some doors with one organisation, and then they may need some roofing experience, which that organisation may not be doing. So we will rotate them through our supply chain and other organisations with which we work to give them a fully rounded experience. Not only does it give them the technical skills, but experience and exposure to other organisations, and I think, therefore, their apprenticeship is fully rounded.

Q336 Chair: Tangential to this, do you actually employ a training provider for some of the skills provision or is it all done with either you or your supply chain?

Ray Wilson: No, it is done directly by us, so in fact we are the training provider and we are the employer. For the vast majority of what we do, we recruit, we employ, we train and we place. We take the risk on the employment, we take the risk on the training, we take the risk on the funding and we take the risk on the results, so we take all of that risk. We have a couple of examples where we have developed into further collaborative models. For example, in Glasgow we have partnered with a company called Tigers and we have shared that, so we do the employment and they do the training. Working together we are able to provide the same service.

Q337 Chair: I was particularly interested in your comment that you place. Do you actually determine which part of your supply chain a qualified apprentice goes to subsequently, or is it basically left up to their individual preference and the demands of the supply chain?

Ray Wilson: In the main, we will place them with a relevant work experience provider that will provide for them at that time the training that they need or the experience they need on that particular element of workbased learning; 90% of the time it is done on where we place them. In some instances, if a young person says, "I am not getting on working with that particular supply chain company," we will look to move them somewhere else. But, as our employees, we will place them where we feel it is most relevant, and as long as they agree and are happy with that, it is fine.

Q338 Chair: What happens once they have completed their apprenticeship? Do you keep them or do some of them stay in the supply chain?

Ray Wilson: A number of things can happen. First of all, the apprentice may then progress to the next level of apprenticeship with us. Others will then move into work with Carillion and its supply chain or, indeed, the partners we have in addition to that supply chain in the external market, and they will work for those. Approximately 70% of our apprentices who complete will go on and find employment with those organisations.

Q339 Chair: Thanks. Have you come across any obstacles in doing this? Have there been any problems?

Ray Wilson: I think I have outlined to you that there are a certain number of risks associated with this, in that we take the risks associated with placement opportunity and employment. The obstacles for us particularly are around the funding. Our starts are predominantly at level 2, and we find the funding for those young people is then separated at level 3. That creates some issues for not only us but the industry, in that the funding is then reduced by half but the costs of employment almost double. It is a bit of a double whammy, so for us that becomes a bit of an obstacle in retaining someone at a very high cost and sometimes being unable, for example, to find them the relevant experience externally in the volumes we might need. So it becomes a difficult situation. It is something I think we manage particularly well, but it reduces the volume somewhat.

Q340 Chair: You obviously have a model of training that works for you. What have you learnt that you would pass on to other large companies who might want to replicate it, or would you prefer not to pass it on because of the competitive advantage you feel you have?

Ray Wilson: No, I think it is an absolutely fantastic model. As an employer, we have taken the lead where a lot of organisations have not. Small and medium-sized enterprises who would dearly love to take an apprentice-those I speak to would love to get involved in apprenticeships, but find that the funding drop I have just described is very difficult for them-have found the administration of an apprentice very difficult in terms of the uncertainty of their workloads and moving from place to place. They desperately want to get involved in apprenticeships as SMEs, but cannot commit to the time and the employment. So, in effect, we derisk that on their behalf, and that is why the model is very attractive to them.

If you are going to go into something like this, there are huge benefits, but you have to manage the programmes particularly well as you are the employer. Key for you if you are going to look at this is to make sure that your model is very clearly understood. That has been probably the predominant issue for me over the past two to three years: getting the Skills Funding Agency and the National Apprenticeship Service to fully understand the model we operate as both employer in the industry and training provider in the industry.

Q341 Margot James: The NAS is responsible for running a dedicated responsive service for both employers and learners. What is your experience of the NAS? Is it delivering?

Justin Owens: Certainly Robinson Brothers have no direct experience of the NAS. Very early on when we were designing our apprenticeship scheme we decided to partner with a local training organisation that was in close proximity to the site and that had lots of advantages for us.

Q342 Chair: Can you say which training organisation that is?

Justin Owens: Sandwell Training Association. We partnered with them for a variety of reasons: proximity, supply of good-quality apprentices. They also understood our needs as a company. They took the time to come into the company, understand our processing, the functions required of an apprentice, and they are able to alter their apprentice training, still within the framework, to deliver a very relevant apprenticeship with us.

Alex Khan: Regarding my experience with the NAS, I am here with two hats on, because we are an employer that employs a whole bunch of apprentices, but we are also a training provider, so we train apprentices for other organisations. As a training provider, I guess I have quite a few interactions with the NAS, especially through their vacancy matching service, which they launched a couple of years back. As an employer, I have very little. They have a field force team, they are engaged with employers and they are selling the benefit of apprentices to employers. I have always felt that they could probably do more work with schools and parents in selling the benefit of apprenticeships to young people leaving school or coming up to the point where they make the decision on what they are going to do next.

Ray Wilson: I would echo that point. My experience of the NAS has been pretty reasonable to good. I think they are a good organisation. However, while their engagement, for example, with employers and large training providers is all well and good, I guess we know what we are doing, and therefore should the focus really be for schools and others to promote apprenticeships at that level and also a bit of a deeper dive into the SMEs?

Stephen Uden: I certainly agree with that. Given that they are facilitating the investment of quite a lot of public money in training, the level of administration and bureaucracy around it is reasonable and commensurate. It does present a challenge to smaller organisations, which do not have the specialist people to do so, so they need some kind of intermediary organisation to sit between them. Whether it is an area training association like Sandwell or, indeed, organisations like Microsoft and Carillion who are doing it on behalf of their supply chains, you need to have something that stands in the middle. But it would be dangerous to reduce the amount of paperwork from them to too much of a degree.

Q343 Paul Blomfield: I wanted to follow up on Mr Wilson’s point about the NAS taking a deeper dive into SMEs, because it is a critical area of our investigation about how we, as you said in your earlier comments, can derisk the opportunity for SMEs to take on apprentices. Clearly you have developed a model in relation to your sector. Have you any further thoughts about what that deeper dive from the NAS might look like and how they might derisk apprenticeships for SMEs across sectors?

Ray Wilson: There is an ideology that employers should take apprentices and particularly, if we are going to grow the UK’s economy and grow our skills, that has to start with SMEs. It has to start with employers; it has to start with SMEs. That is the foundation of our infrastructure, if you like. It is those organisations that are, of course, most probably risk averse in these circumstances because of fluctuations of work across the country, and the like.

One thing they could clearly do is promote models such as ours and support us in doing so, because that takes away a lot of the mechanics of managing the interface, but targeting certain areas of that sector will be very important for them as well. In terms of derisking, it is perhaps providing a layer of insurance or protection against that, and allowing organisations such as ours to continue to do this on their behalf, but ensuring that they reward us for taking the additional risk. Doing that then enables more organisations, such as us, as employers within the sector to take a lead and train on behalf of the sector.

Q344 Paul Blomfield: Did Mr Uden want to come in on that point?

Stephen Uden: Yes, only to add to the point. We work with 300 of our SMEs and train 1,200 people through them. It would be difficult for a Government organisation like the NAS, to be frank, to develop the skills and expertise to engage SMEs when, whether it is chambers or training associations or larger companies, there are other organisations that can do it on their behalf. I see their role as facilitating it.

When we set up our scheme, we found that initially, because it was a big company involved, we had to do a lot of explaining to say, "This is a small company scheme, because they are the people being benefited." But to be honest, I do find them willing to listen and to get round things, and as a public body, and we deal with a number, they have very much a can-do attitude. Encouraging them to identify and engage organisations that can act as intermediaries would be a very effective way of reaching SMEs.

We find that when you listen to SMEs and you deliver something to them that is valuable and helps them grow their business, the criticisms I have heard of SMEs-that they do not want to take on apprentices and will not take the risk-are unfounded. The system has just not made it easy enough for them to step through the door.

Q345 Simon Kirby: You made mention of schools; do you think schools should be doing more to push apprenticeships as clearly an alternative to going to university, certainly at higher levels? Is there a particular problem with the information that schools give about apprenticeships, say, in SMEs? Is there an image problem from both ends?

Ray Wilson: I am not sure I would define it as a problem. What I would say is I think they can do more. Young people will be influenced very much, clearly, by schools, but also by their peers and their parents. Advice and guidance given to young people may well, for example, be, "You want to go into something more traditional rather than, perhaps, something more modern." It is the role of schools to help give a fuller breadth of available opportunities. Vocational training routes and advanced apprenticeships are absolutely fantastic and there is great value in them, but I would like to see the NAS and schools in particular really push that hard for young people. What I fear is that, particularly in the construction sector, perhaps the advice they are getting is not as strong as it could be.

Q346 Mr Binley: I was going to raise this a little later, but on this point the evidence we have had so far suggests, first, that there is concern amongst employers with regard to basic literacy and numeracy skills emanating from our primary and secondary education structures. Secondly, there is a distorted view of the world of work that suggests degrees are the be all and end all if you do not want to work in a dirty factory. How would you see those two particular concerns?

Alex Khan: When we sign apprentices on to a programme, whether in Babcock itself or with our respective employer partners, we do an initial assessment, and invariably the levels of literacy and numeracy are low and require a lot of support. We had to make the move-we have about 500 fieldbased trainers and assessors-to upskill all those people to be able to deliver literacy and numeracy, because it was a problem that we faced across our learner base. It is a big problem, as it is with the learners that we take on into Babcock. I have not got the actual statistics, but I can certainly supply them to you after this.

Mr Binley: Could you? That would be very helpful.

Justin Owens: Certainly from the SME point of view, six years ago we struggled to recruit apprentices. We asked for a minimum of grade C in maths and English, and preferably a C in science. We asked for those because obviously, once they have done their level 2, we want them to progress to level 3 and the technical certificate, and they need to be fairly capable academically to do that. We struggled six years ago, but now in the last couple of years we have seen more apprentices with those qualifications and higher coming out, so it is seen now as a more viable route than previously.

Alex Khan: The point I would make on that, which I struggle with a little bit, is that I am noticing that demand massively outweighs supply. We advertised 400 vacancies for VW Audi Group and 20,000odd young people applied. I am sure you have heard similar statistics from other organisations around the country. What we are noticing, not necessarily within the example I used, is that more and more employers are now starting to state, "We want five GCSEs A to C," or whatever it may be. My concern is that if you do not make the grade in school and you want to go into an apprenticeship, I am not quite sure where you would end up.

Q347 Chair: So, in effect, the threshold for entry is being raised?

Alex Khan: If we are not careful, it will be mandated by employers that you have to have a particular academic attainment level in order to go on an apprenticeship programme. Whilst I made the point that lots of people come on to our programmes that do not necessarily have the grades in literacy and numeracy and we have the people in place to train them, and it is difficult and it adds another dynamic to it, I still think it is important that the apprenticeship programmes are open to all. Where employers try to mandate such levels, we try to get them not to.

Chair: I am conscious of the fact we need to move on. Margot has been waiting, and a model of restraint, so I will bring her back in.

Q348 Margot James: I have only one more question. For the record, our local FE colleges are having to put on more and more remedial coaching in English and maths for students who have not just C grades in those GCSEs but also B grades, which is quite shocking. How do you measure the success of your apprenticeship programmes? I mean, even if it is gut feel, what to you looks like success with the apprenticeship schemes you run?

Ray Wilson: The success of an apprenticeship is, first of all, the attainment of a full framework and, secondly, moving into employment. If we can achieve that, it is fantastic.

On the point about the academic skills requirements, I am very concerned by the introduction of Functional Skills, particularly in the construction sector, where we have seen a commensurate fall in those able to achieve those levels on leaving school. That will lead to a decline, I think, in success rate, which makes that very difficult contractually. I would call for the Government to re-look at Functional Skills very carefully in terms of its demanding requirements but also its very much classroombased nature, which many young people entering this sector-the construction sector-will find extremely difficult. Many will, therefore, leave perhaps having passed their NVQs but not their Functional Skills, and therefore not achieve a full framework, and training providers will then suffer as a result of that. So we need to relook at that.

Stephen Uden: Can I answer from our perspective? Certainly, completion rate is quite important. We get about an 85% completion rate. The young people are employed from day one by IT employers, so it is not a question of whether they have a job, but some of them do not stay the course. I could increase that rate, but that would mean, going back to the previous question, taking fewer risks with young people. If you drove it to 100%, that would mean being much surer about the people we took on. For us, it is quite an important social mobility driver. Our industry has a diversity issue, and one of the other things that we track around success is diversity, so we are looking for young women, ethnic minorities and people from diverse social backgrounds to broaden out our sector. Outcomes from that point of view are something that we track as well.

Margot James: That is very refreshing, thank you very much.

Q349 Mr Binley: I noticed that both of you were dying to comment on my previous question, so I am going to try to give you the chance to do that. Was there anything you wanted to add to what has been said in terms of the raw material you get from our schools and in terms of the attitude to the workplace?

Ray Wilson: I slipped most of it into my answer to the next question.

Mr Binley: I thought you did.

Ray Wilson: But I have to say that the attitudes I see coming from schools are fantastic. Many of the young people that come to us today perhaps do not quite know where they want to be, but over that period of 1618 they mature into some fantastic young people with energy and ideas. To have the people I work with say, "It is a pleasure to have such refreshing people," makes it worth waking up in the morning and going to work. It is fantastic as an outcome. So I do not necessarily see a change in attitude of young people.

Q350 Mr Binley: No, I did not mean in young people; I meant in what the schools were doing to help young people in that respect.

Stephen Uden: Part of the case for public investment in apprenticeships is that we are taking people who have not achieved the level of qualifications from school that they maybe have the potential to do. By providing a work environment we see them come to life and, because they now know why they are learning, work incredibly hard. Our programme is a very tough programme to take people up from five GCSEs into entrylevel IT jobs. It is a shame that many of the people on it talk about their school experience as not one of engagement, success and achievement, yet they are clearly quite bright and capable. Part of what we have to do as part of the training element of the apprenticeship is get them back up to the standard that, theoretically, they were perfectly capable of meeting previous to the apprenticeship but did not have the motivation to do so.

Ray Wilson: Yes, I probably would call upon schools to ensure that for 11 years of effort, they come out with a much greater level of capability. If we do not do that and then we have a short duration for them to attain that level, we are at great risk of excluding a whole cohort of school leavers who are unable to get into a level 2 or level 3 apprenticeship. What do we do with them? That is the question we have to ask ourselves.

Chair: We have partly preempted Rebecca’s questions, I am sorry.

Q351 Rebecca Harris: We have covered my questions quite well, but I might move back to the discussion we were having slightly earlier about experience of the NAS. In particular, we have had mixed evidence about the vacancy website, and I wonder if you could tell me whether you found that useful.

Ray Wilson: We find it very useful; it is a good tool. We probably get about 60% of our vacancies filled through it. However, you can only advertise if you are an employer. We are missing a huge trick. As an industry, there are many people who want to offer an apprenticeship opportunity who do not have access, or the knowledge and understanding of how that process works, which goes back to the point about the NAS engaging with SMEs to give them that opportunity. That is where large training providers and large employers are able to access their supply chains to raise the profile and awareness of vacancies.

Alex Khan: Could I make another point on the system? It is a step in the right direction. If you go back three or four years to when it was not in place, there was absolutely nothing. On that basis it has to be a good thing, and thousands of vacancies are put on there. We work with all our employer partners and we encourage them to advertise their vacancies. If you look at the utilisation I have seen published-I cannot remember the statistics-it seems to be a site that is used a lot. We probably could improve the functionality and the efficiency of it, but it has to be a good thing coming from where we were before, which was absolutely nothing.

Stephen Uden: It is certainly the right initiative. We do not get nearly as many vacancies filled through that route for our partners as we would like, so we would like to see momentum being built because, frankly, it is more convenient to be able to just put things on there. We have to do a lot of local advertising, partly because even though Microsoft stands behind it, the jobs we are connecting people with are with smaller IT companies that do not have household names. So I would love it to work better. It has certainly developed some momentum and we get some candidates through it, but a lot more work is needed to make it the one place that everybody goes to and looks at.

Alex Khan: There have been a couple of questions about schools and what advice they give, and obviously we are now talking about employers advertising vacancies. I guess that is the issue that needs to be bridged, because even if you have the best careers advice service in schools talking about apprenticeships and the benefit that they can bring to individuals, you ultimately need an employer prepared to take people on. When young people get to the point where they are deciding what they want to do in the future, the apprenticeship might be hypothetically a great idea, but unless there is a vacancy for them to be employed to do that, it will not really work. We probably do need to refine on a geographical basis the matching, filling and marketing of vacancies, so people can not only decide to go down that route but get a job and sign on to an apprenticeship programme.

Q352 Rebecca Harris: So in fact you are feeling quite positive about this, but do you think the NAS or, frankly, even the Government is the right body to be doing the matching between apprentices and businesses’ vacancies?

Alex Khan: Their role is relatively limited in terms of doing the matching. What they tend to do is to have a field force team that goes out and sells the value of an apprenticeship. With my training provider hat on, I would see that as the space that we would occupy, so we would go in and work with employers to find apprentices, and in some instances we completely fulfil that role. In the example I used earlier, VW Audi Group will say they want to take on 400 apprentices, and we will market them, interview candidates and put them in front of the relevant dealers. Their role stops at saying, "Apprenticeships are good and valuable and can bring benefit to your business." In terms of finding young people and matching them, they do not do any of that as far as I can see.

Q353 Rebecca Harris: I have a specific question for Mr Uden. In your written submission to us you said, "Apprenticeship funding should not be invested in schemes that involve the accreditation of existing employees." I wanted to explore that a bit. What do you think the objective of Government funding should be for apprenticeships? Is it about job creation and reducing unemployment, or is it about reskilling the British work force?

Stephen Uden: Thank you for that. I did not think I was that hard on accrediting existing employees. There is a scheme in IT, in particular, where the training provider takes people on and they are technically employed by the training provider in a very different way from, for example, the way the Carillion scheme works. At the end of the scheme, they then try to place them with people. Since making the submission, I think that scheme is no longer in place anyway. What we feel we really need are schemes where there are genuine employment prospects, because there is a problem with some of those schemes: I was meeting people at job fairs who were saying, "I have done an apprenticeship and I cannot get a job." You start an apprenticeship because it is on-the-job training.

I know there are schemes, and I think the next evidence session will include one employer that does accredit a lot of existing employees. I have no fundamental issue with that. It is where you are using the apprenticeship scheme and the apprenticeship framework and the apprenticeship funding to fund schemes that do not have the fundamental creation of skills and opportunity that apprenticeships are designed for. That was what I was intending to get across in that written submission.

Q354 Rebecca Harris: On the wider philosophical point, do you feel apprenticeships should be about simply job creation or upskilling? Which do you think is the most important thing that we should be focusing on generally there?

Stephen Uden: There are different degrees of public benefit. Certainly in the scheme that we run, because we are helping small businesses to expand, 80% of the jobs that the apprentices go into are newly created jobs. That is generating jobs and growth, and I can make a case that there is a very high public benefit and need to invest in that kind of scheme, because it is turning people who have been receiving benefits into taxpayers in a sustainable way as well.

That is not to say, though, that there are other schemes that may have different degrees of public benefit, because retaining a worker and developing their skills level, for example getting their first level 2 qualification, has a public benefit as well. It is not necessarily the same degree of public benefit though. When you look at the frameworks and the way in which the funding is allocated, there is not necessarily a complete match-up between public benefit and public investment. The focus on more employerled schemes and an open approach to funding that looks at the outcomes of the scheme has been a welcome change, but there is still work to do in taking that forward and aligning those two things effectively.

Ray Wilson: I would put it quite simply. Apprenticeships, to me, are about having the right skills in the right place at the right time, and if we do not get that right, we cannot grow as an economy and we do not have the right skills base to compete in international markets. Organisations like Carillion want the best people and we want the right skills, and we deliver that through apprenticeships or graduate schemes, but we need the right people at the right time if we are going to continue to grow as a business.

Rebecca Harris: You put that very well. Anyone else want to add to that? Thank you.

Chair: We will take that as assent.

Q355 Ann McKechin: The current funding framework means that if you are an apprentice aged1618 the Government funds 100%, whereas if you are 1924 it funds 50% only. I am wondering what the panel’s opinion is of whether the funding structure is skewing preferences in terms of the age of recruits or is it no longer having as much impact as it previously did?

Justin Owens: It does have an effect, for sure. It has two effects. Yes, the funding is one side of it, but you are potentially missing out on people who might have A-levels going into an apprenticeship, which gives you those advanced skills to go forward in an advanced apprenticeship. Certainly for an SME it becomes less attractive. Certainly I know the training association we use has a lot of 1924 people on its books they cannot get an apprenticeship for because they cannot find somewhere to place them. So in my experience, yes, I would say it has a negative effect.

Alex Khan: My view is there is an assumed level of skills or abilities based on age, and what we find is that regardless of people’s age and what they have been doing in work, there is often quite a long journey for them to travel in order to meet the requirement of an apprenticeship programme. There is a 50% funding reduction for 19plus, which makes it difficult, in a lot of cases, to deliver the programme when we talk about the issues in terms of literacy and numeracy. People might have experience, but they might have worked in different sectors. Sixty per cent of the 25plus starts who were signed up last year did not have a first level 2 qualification, so quite often there is a big learner journey for people to have within the sector that they are in, but quite often they move around.

Q356 Ann McKechin: So you might have a youngster leaving school at 16 or 17 who might go into a casual job, but then from there tries to seek an apprenticeship?

Alex Khan: Sure. We did a piece of work with an awarding body looking at what motivates or drives young people and helps them make their decisions in terms of going into the world of employment and apprenticeships. What we found was that employment came first in a lot of cases and apprenticeship came second. If they made the decision that they wanted to leave school and go into the world of employment, they would find a job and then, hopefully, be able to sign on to an apprenticeship programme. They would not necessarily go out and look for an apprenticeship programme.

What we found most interesting was that the sector was almost secondary. We do a huge amount of training in the engineering sector and the automotive sector. We envisaged that little Johnny would decide he wants to be an apprentice technician in the automotive industry and would apply to those jobs. He would do that, but also he or she would just see what local jobs are available and end up in one of those, and if they are with apprenticeship training, great, and if they are not, they have to go out and find a training provider.

Stephen Uden: There is a specific problem that we encounter around the age breakdown, because we get people on our programme who finish their A-levels and then are looking to make a decision. They then investigate apprenticeships, maybe in the summer and early autumn, and get into a programme that is going to start the following January, by which time they have just turned 19, and suddenly it is much, much harder to persuade an employer to take somebody who has just turned 19 than somebody who is 24, so they effectively lose out. While more young people are considering apprenticeships as an alternative to university, which is positive-it is good that people make the decision that is best for them-that time period is often when they hit their 19th birthday. One thing that I put in our submission was that if we did not make it so much of a cliff edge, or changed the threshold to 19, we would be able to help those young people much more effectively. We are certainly coming across a lot who are getting caught by that particular sudden change on their 19th birthday.

Q357 Ann McKechin: Is that a similar experience for you, Mr Wilson, about the cliff edge, or is it not quite such an issue in construction?

Ray Wilson: It is actually, and not only for ourselves but for many SMEs. Whilst I can understand the argument that once you are over 19 you can become more productive and therefore you are obtaining more value from that as an employer than you otherwise would, that segregation of 1618 and then 19plus can lead to some problems simply because the funding has been reduced. A better solution for me would be to link them together. So if you are starting on, for example, a level 2, you should be able to progress to a level 3 at the same funding level. Once you segregate them what happens is organisations, for example, will then be penalised if that person then leaves at level 3, because it is seen as a failure rather than a success at level 2. So my view would probably be let’s change it and start to reduce funding perhaps at age 22plus.

Q358 Ann McKechin: Mr Owens, do you make contributions to your training providers for your apprentices who are only partially funded? Are you in that situation at all?

Justin Owens: We do not for level 2, as they are fully funded. At level 3, yes, we have to contribute. We are obviously employing them at the same time as well. For us, the way the apprenticeship works is that they go into the training centre for three months and learn basic skills, and then they start to be released to us maybe one day a week. As their training progresses through the centre, they are released more days a week until they become fulltime. We then enrol them at the local FE college for their level 3 City & Guilds. So we pay them day release to go to college one day a week and employ them ourselves and pay a wage to them through that period.

Q359 Ann McKechin: Mr Khan, as a training provider as well as an employer of apprentices, how do your employers generally make contributions for apprentices who are only partially funded?

Alex Khan: It is a mix, and it is a mix by different sectors as well. There is a huge amount of what is termed in a lot of the reports as "in-kind contribution"-a lot of the stuff that Mr Owens mentioned, where they employ apprentices, they allow them time off to study, they buy them tools, equipment, provide academies and workshops and buy training materials for them to practise on. Some of the programmes make a cash contribution. To take one of our programmes, I have been doing a bit of work with EDF Energy; it is a huge programme involving overseas trips, etc, so they make a considerable cash contribution. One of the sectors that we struggle in is the service sector, where typically it is more transient. People move around and SMEs in the service sector struggle to find the money to make contributions to 19plus apprenticeships.

Q360 Ann McKechin: The National Audit Office says that many training providers did not charge fees to employers for adult apprentices. Do any of you have any experience of this?

Alex Khan: From Babcock’s experience, we do everything we can to take a cash contribution for adult apprentices, but quite often we will work with the employer in a triparty way to look at what we can do and what they can do, and how they can play a role in the apprenticeship programme and actually pick up and deliver some of the programme themselves.

Q361 Ann McKechin: The next question is on the Government’s initiative about an employer ownership pilot scheme. Would you describe the current apprenticeship programme structure as being employerled or training providerled? What are your thoughts about this pilot programme of giving money directly to employers?

Alex Khan: From my personal experience, it is probably a little bit early for me to comment. If you go back a couple of years, there was a big initiative to grow the number of apprentices on programmes in the country, and there were three ways of doing that. The first was to allow more training providers into the industry and simplify the process for them to set up and to talk to larger training providers-like us, I guess-to try to get them to deliver more. The second was to set up the NES, or the National Employer Service, which was the NCS, I think, in a previous life, to work with employers, to have contracts. From my experience, it started off really well; loads of employers saw it as a really good opportunity, but it just got complicated. It was weighed down with bureaucracy, and we have seen a reduction in the number of employers with direct contracts to train their staff. We went through a period of time when employers were coming to us asking us to pick up the contract and deliver it for them to their staff, because all of a sudden you have an Ofsted inspection, you have PFA audits, you need to have a system to claim the funding; it is a complicated process.

Q362 Ann McKechin: So it is really going to be a process that people such as you, who have already got training divisions set up, can handle, but if you do not, you are going to find it difficult.

Alex Khan: My understanding of the employer ownership fund is that you bid for an allocation of money depending on the size of your organisation, and SMEs can cluster together and bid for, I think, a minimum of a quarter of a million pounds, but it is to deliver training that you would not already have done.

Justin Owens: We will be using our sector skills body, Cogent, to make the bid for us, because of the bureaucracy, etc, and also to get a package together where other companies can join in. We will be taking that approach.

Stephen Uden: We do not train our apprentices ourselves. We use training providers to do so and we work with a number of excellent ones. It is employerled-employers identifying skills gaps that they have or in their sector and how those can be filled-and the funding is driven around the outcomes of that. Training providers will often need to be involved to do it. Some employers may do it directly, some may not, but the fact that it is employerled makes sure the investment is going to deliver skills and jobs that directly fill an economic need in a way that just leaving it to training providers would not necessarily do in all cases, so I welcome that.

Q363 Ann McKechin: If it is focused in that way, in terms of greater employer participation in framing the apprentice programme, that to you would be a success.

Stephen Uden: Yes, I think so.

Ray Wilson: Ownership has to sit with employers. I agree with Alex; it is probably a little bit too early to say at this stage, but I am looking forward to that and, hopefully, that is something that we can support fully.

Q364 Simon Kirby: Mr Khan, you mentioned Ofsted. As far as I understand, Babcock was graded outstanding. What does that mean?

Alex Khan: That was for our most recent inspection, which was on our engineering programme. The Ofsted process looks at a number of different things, ranging from leadership and management to how well learners achieve capacity to improve and the quality of the way we engage with employers. There is a whole raft of different measures that they come and look at, and for that particular inspection a team of inspectors was with us for just over a week. They talk to learners, they talk to employers, they look at our statistical reports, and they graded us as outstanding.

Q365 Paul Blomfield: I want to explore some issues in relation to quality, but first I want to ask a question about work readiness. We hear a lot from employers that schools do not prepare people for the world of work sufficiently for the start of apprenticeships, yet when I talk to men in steel and engineering-in this context it is largely men-who went into an apprenticeship 40 years ago, it is pretty clear that in Sheffield they were not work-ready in terms of the discipline of attendance and of the workplace and so on. It was the apprenticeship that made them work-ready. It was peer support and peer pressure that made them work-ready. Where do you think the balance falls between the responsibility of schools and employers through the apprenticeship? I am asking because I am concerned that a lot of employers are suggesting that schools should sort all this out: "We should have pristine, ready, enthusiastic, disciplined young people who we can take on straight away."

Ray Wilson: There has to be a balance. I do not think it is one or the other. It has to be something where the school will take a responsibility in terms of the tools and techniques for work readiness. As a training provider, I think employers have a responsibility for shaping those young people into what is relevant for their industry and the world of work within their industry. Therefore, between the two you will strike a balance that will ensure they are fully work-ready, simply put.

Q366 Paul Blomfield: Any other views?

Stephen Uden: It is not in the nature of employers to be 100% satisfied with any recruits and never has been, in my experience. But I have not seen anything change, and I would agree that there is a shared responsibility. There are certain things it is reasonable for employers to be able to expect from young people, for example basic literacy and numeracy. Regarding some of the things to do with the working environment and how young people know about the world of work, there is, firstly, a responsibility, which I am sure many here will step up to, to go into schools and help young people when they are at school get a sense of the world of work. But also, when apprentices first come along they do not always understand fully the fact that when you are meant to turn up on time, you turn up on time. But they learn those things and we have a high success rate, so we are able to educate people. It necessarily has to be a balance. Would I say that there is a major issue and that our young people are wholly unprepared? No, I do not think so.

Alex Khan: To make a final point on that, let’s not forget that the number of potential places for would-be apprentices is quite low, so if they are successful in getting an apprenticeship place they have probably worked quite hard to get there and gone through a fairly lengthy process. That might influence their work readiness. You would expect that the calibre and the enthusiasm would probably be higher.

Q367 Paul Blomfield: As I said, I wanted to probe around issues of quality. Mr Uden, in your written evidence you said that an apprenticeship should be at least level 3, and that level 2 apprenticeships should be rebranded almost as preapprenticeship training. I realise we explored some of these issues in the opening questioning from the Chair, but I wondered if you could develop that point a little.

Stephen Uden: We certainly have to get the branding right and there is-we covered this a little bit earlier-an incredibly diverse range of programmes that go from level 2 all the way up to level 6, and we have to do a better job of making sure that the young people in particular, but also the employers we work with, understand the difference between them. So there are various ways you can approach that rebranding and, not being a marketing expert, I do not plan to tackle that.

I do think we should fund programmes of all lengths, that go all the way up, because they do valuable economic things, but it is very difficult to contain in one brand something that varies from a short retail experience through to some of the level 6 engineering and professional services programmes. I do not think the word "apprenticeship" can do the job around that, so we have to find a better way of doing that branding. We are getting a great explosion of numbers that tend to be towards the lower end of the spectrum, and it is getting much harder to persuade people who would otherwise be considering university to come on some of the level 4 or level 5 programmes.

Yet for the credibility of the whole apprenticeship system, it is really important that people look at whether they want to learn on the job or whether they want to learn in an academic environment. This country has been plagued for many years with the artificial dichotomy between academic and vocational, with the view that if you are capable, you go down the academic route, and if you are not, you do not. So it is incredibly encouraging we are getting young people who are saying, "I am not sure whether I should go to university or do an apprenticeship," and almost at any cost we should make sure that we encourage that, because young people will then choose the option that is best for them, which will be good for everybody.

Q368 Paul Blomfield: Mr Wilson, you were nodding at that point and, indeed, earlier you made the comment that we needed to compete internationally.

Ray Wilson: Yes.

Q369 Paul Blomfield: But in terms of levels of apprenticeships, we do not. We are lagging behind our competitors in settling for level 2 in too many cases-well, that would be my view. But in your evidence you said that in some sectors level 2 apprenticeships are the right level for a skilled, competent worker. Where do you stand on that?

Ray Wilson: I agree on the fact that if we want to become competitive we have to raise skill levels. We have to have aspirations to grow our economy and have the right skill base to support it. That will work very well in saying that a level 3 apprenticeship is appropriate only as a starting point within IT, for example, but within construction I would beg to differ, and there it would have to be at level 2; 60% of the labour within the construction industry is young people entering with very few GCSEs and, if they have them, Ds to Es. We have to be careful, as I mentioned earlier, about excluding those young people, so it does have to have a broad range.

Where we then fall into some issues is that apprenticeships have their foundations in trade and professional skills, and if we broaden that and extend it up into other areas, I feel you do have a degree of branding dilution. Therefore I cannot fully agree with what Stephen was saying, but I agree that we have to ensure that we appropriately level those through and identify them in a way that people understand and give strength to the brand.

Q370 Paul Blomfield: Do you not think that sometimes we might be too ready to be satisfied with level 2? I mean, in terms of construction-you know the sector much better than I do-it is an incredibly changeable sector in terms of the demands being placed on all sorts of trades, with new products, new technologies and so on. Take retail, for example. We settle for level 2 in retail. In Germany they push for level 3, and what you have when you go into a shop is a level of expertise and product knowledge that quite often we find lacking in this country.

Ray Wilson: Yes. I agree we absolutely have to push for higher levels. However, there is no escaping the fact that those people entering the construction sector, where the predominance is around labouring-type activity, are not going to be able to attain those levels, so we have to push on both fronts. To remove it, and therefore provide no entry level into construction, would be damaging.

Stephen Uden: Just to be clear, I would not discontinue funding what is an excellent programme that helps entrylevel people with very low levels of qualification take up apprenticeships. Firstly, we should offer good progression, which is your point, which I would completely endorse. It is more to do with how we describe that. So absolutely we should fund and support it, because it does very good work, but giving it the same label-"apprenticeships"-as other programmes makes it difficult potentially to recruit people on to those. So we do not agree about how to brand and describe it, but we do both agree that they are valuable things to do.

Alex Khan: I have two points. Firstly, to respond to your question about whether I think a level 2 should be an apprenticeship, I absolutely do. The second point is that if you just look over the last few years, we have had modern apprenticeships, national traineeships, intermediate apprenticeships, advanced apprenticeships, apprenticeships at level 2-there is no wonder that parents and young people are confused by what the hell these things are. We absolutely need to lock into the apprenticeship as a brand. If we want to differentiate the levels below that, that is fine, but we need to lock into it, and that is where the marketing campaign needs to be to schools, to young people and to parents, because people are just confused by what these things are.

Q371 Mr Binley: Just on Paul’s theme, because this is really rather important, how many of the people that go into a level 2 scenario become aspirational thereafter to go further? How much is this whole process an escalator, and do you actually see that in action in your workplace?

Ray Wilson: Yes.

Alex Khan: My view is that, yes, we absolutely do, and one of the problems that we have, coming back to the previous point, is that one thing we probably do need to challenge is the sector skills councils and the awarding bodies a little bit to come up with qualifications at level 3. In the service sector, in a lot of cases you can get to level 2, but in order to progress to level 3 you need to be a manager-you need to manage people-which I know is different from the IT sector and the engineering sector, where you can go along a highlevel technical route.

Unless you manage people or take on responsibility for supervision or management, it is very difficult to progress, but actually-I think this is the model you used-you can become an absolute expert in your field. There is probably some work to do to challenge what level 3 is and what progression on to level 4 is. The last time I looked-it has probably changed-the number of level 4s was relatively small; it was eight or 10 occupational routes. So there is a piece of work to do there.

Ray Wilson: It is extremely important to provide clear progression routes for people coming into the industry, so they can have visibility of those opportunities. Certainly we have taken on some fantastic people into graduate programmes following their apprenticeships, so that is a prime example of a great route through to providing us with great people in our work force.

Justin Owens: All our level 2 apprentices, 100%, go on to level 3 and beyond. The chemical industry is one of the most highly regulated industries in the country. We have to have a measure of competence for people working in these areas, and level 2, for us, will not cut it-it has to be level 3-but I can see the benefit in other sectors of having level 2.

Alex Khan: As my chairman keeps reminding me, he was an apprentice at one point.

Q372 Paul Blomfield: Can I ask one last question? I am conscious of the time. At the end of last year the Government announced a range of measures aimed at improving the quality of apprenticeships. If you were in their position or, indeed, our position making recommendations, what measures would you recommend that the Government prioritise to improve quality?

Ray Wilson: They have already made the announcements in terms of time frame. An apprenticeship, in terms of protecting the brand again, is about having effective knowledge transfer and a competency base. If you have those and the successful outcomes, that is a great measure. The introduction of very short-term apprenticeships has done huge damage to the brand of apprenticeships. Quality, to me, does not appear to be those things.

Q373 Paul Blomfield: Would anyone else like to answer?

Alex Khan: Again, with a training provider hat on, we have Ofsted visit us on a relatively regular basis, whether for full inspection or follow-ups. We have the Framework for Excellence. We have had the training quality standard. There are a number of people that stand outside the bubble and look in and test the quality. The SFA look at our success rates. The awarding bodies come and look at how we are delivering the programmes against the standards.

Q374 Paul Blomfield: But what more might we be pushing Government to do?

Alex Khan: There are probably adequate measures within the system to review the quality of the training that is delivered.

Justin Owens: On a related point, I believe from my contacts in the Training Association that all apprentices shortly are going to have to last a minimum of 12 months for level 2. I am not sure that is necessarily the right approach. As long as they meet or exceed the framework within, say, a minimum period of six months, they should be allowed to progress, because it holds them back from progressing to a level 3 thereafter. I know we are trying to look at some of the NVQs or apprenticeships that are perhaps delivered in 12 weeks, which is far too short a period, but this 12month period is too long.

Stephen Uden: I know there is a need for Government to set rules, but when you have something that is so flexible, it is hard to be too prescriptive about the rules. Our generic programme is a 12month programme, but we have some accelerated ones that are very successful and very popular with employers, where in seven months they achieve the results, and sometimes it is somewhere in between.

It would be a perverse result to say, "We want to increase quality," which is absolutely the right goal to have, "but we are going to have these rules and you have to tick this box; it has to be this way." It needs more to look at the programme and what it is trying to achieve and whether it does achieve the results and outcomes, and judge it on the basis of that. It is harder to have a set of easy-to-tick rules around that, but the test for me is whether small employers find it valuable and it creates people who are well paid and have sustainable jobs. That should be the test of quality ultimately.

Ray Wilson: I would agree with that, but I feel that in terms of short-duration apprenticeships, it does lead to questions as to whether some of those are really more upskilling and reskilling rather than what you could classify as an apprenticeship.

Chair: Thank you. I have allowed the session to run on slightly because you had an awful lot to offer in terms of insight into how it works on the ground. I thank you for your contribution today. If there is an answer to a question that we have not asked that you would like to give, please feel free to submit further evidence to us; that would be very useful. Similarly, of course, if in retrospect we feel that there is a question that we should have asked but did not, we may do the same to you and would be grateful for any further information you could give us. But this has been enormously helpful. Thank you very much for your contribution today.

Examination of Witnesses

Witnesses: Norman Pickavance, Group HR Director, Wm Morrison Supermarkets plc, and Ged Syddall, Founder and Chief Executive Officer, Elmfield Training Ltd, gave evidence.

Q375 Chair: Good morning and welcome to the Committee hearing. Thank you for agreeing to contribute to it. Could you introduce yourselves for voice transcription purposes?

Ged Syddall: My name is Ged Syddall. I am the CEO of Elmfield.

Norman Pickavance: Norman Pickavance. I am the Group HR Director, Morrisons.

Chair: Thanks very much. I will repeat what I say to all panels, which is that there is no need for you both to answer every question if you feel that you have not got anything to add to or subtract from the response that we have already heard. Some questions, of course, will be personspecific.

Q376 Rebecca Harris: I know Morrisons have become very active in the apprenticeship field; I have been introduced to a few in my own area. I wonder if you could talk us through what a Morrisons apprenticeship looks like.

Norman Pickavance: Thank you. We have two types of apprenticeship in operation at the moment, and we will be introducing a third later this year. Our apprenticeships provide a general introduction to retailing, a generalist apprenticeship, which is broadly targeted at individuals who come into our business with no qualifications; 65% of the people who come on to our entry-level programme come to us with no qualifications, and 85% of those people come to us with very limited numerical and verbal skills. We have an entry-level apprenticeship scheme that gets everybody on the first rung of the ladder, and then we have a craft scheme, which takes people to the traditional craft skill areas-butchery, bakery, and so on. Two levels: one is a general mass apprenticeship, and the second one is a craft apprenticeship.

Q377 Rebecca Harris: Where do you recruit your apprentices?

Norman Pickavance: We try to work in partnership with our communities. Perhaps it is best illustrated if I talk about a recent example. We opened a store in Salford just before Christmas. We started working with the Ordsall community nine months prior to opening the store. The Ordsall community is one of the most deprived areas in the UK, third generation unemployed, and they asked us if we could work with them to see if we could reach their target of giving 50% of the jobs to local people. So one of the things we try to do is work in partnership to create employment opportunities for people from the immediate area, so that we are very much part of the community.

As a consequence of doing that, it is not therefore about advertising the jobs. We tend to be absolutely in partnership with people, helping them progress to a stage where they stand a really good chance of getting one of those jobs with us and then we take them on the next leg of the journey. Often people in those preemployment stages are really not work-ready. We get them, hopefully, through some great preemployment training. Then we pick them up, give them a basic qualification, QCF level 2, and then people go on from there. Last year, we put 28,000 people through that basiclevel apprenticeship programme, and 10% of those went on to develop their careers in the business.

A question that was raised earlier on was whether it is an escalator. Absolutely. It is a really good start for people, because many of them would not think that they had the chance of a career and many of them would not think that they could go on to develop within the organisation, and the chance of a qualification with us provides that start. So 10% of the people who come through the programme then go on into junior management positions within the organisation, and we have a great track record of taking them from there to build really successful careers in the business.

Q378 Rebecca Harris: Where does that preemployment training take place?

Norman Pickavance: In the local community. We work very closely with the voluntary third sector and further education colleges to provide interventions that help people who are perhaps the furthest away from employment to get to a place where they can access employment with us. It is interesting to note the recently published ACEVO report; many apprenticeships are actually out of reach for a number of the young people that we work with. They are out of reach for two reasons: first, because people do not have the basic qualification standard to get on to an apprenticeship programme; and secondly, because lots of apprenticeship schemes do not pay a basic wage. The apprenticeship rate, at £2.60 an hour, is not enough to live on, and we pay everybody who comes to work with us a full rate from day one, not a training rate, and that is a key element of them taking employment with us. So we have pulled together collections of voluntary third sector social enterprises and the further education sector to help to provide that preemployment work that is so critical to getting people involved.

Q379 Rebecca Harris: Typically, when an apprentice is working with you, how much time would they spend on offsite training, say, with your training provider?

Norman Pickavance: One of the things about the largescale apprenticeships is that the young people in them do not want to go back to college. They have had 12 years in school, where they have been failed by the education system and come out with no qualifications, and the last thing those people want to do is go back to college. It is really important for this Committee to understand that the last thing those young people want to do is go and spend more time in a classroom.

We are trying to reengage with those young people and say that getting a qualification is something that they can aspire to and is something for a person like them. Persuading them that there is nothing to fear in the programme that we put together is one of the most important things that we do. We have invested a huge amount of money in coaching people. Last year we put 5,500 managers through coaching skills development so that they could work with young people much more effectively and encourage and nurture them, and to say, "Yes you can." Getting them to a stage where they have a qualification and we are saying, "This is a nationally recognised certificate, and a passport to a career with us but also to a career elsewhere if that is what you want," gives them a huge boost of confidence and a sense that things they may have thought were out of reach are things they can aspire to, and that is hugely important. We think the entry-level programme that we run is hugely important in getting people engaged.

Q380 Rebecca Harris: In your written submission to the Committee you recommended something of a rebrand for the apprenticeship scheme. How do you think the definition of apprenticeships ought to be changed?

Norman Pickavance: I would like to take one step back from that question, if that is okay. There is a terrible problem that we have in salami slicing the way we look at solutions to skills development exclusion issues. There are a plethora of initiatives in the UK at this point in time for dealing with all kinds of issues, from chronic exclusion, lack of basic skills and skills progression, to social mobility. We are talking about 16 to 24yearolds and trying to parcel them up into discrete boxes. My view is that there is a lack of confidence in the system because we do not articulate a journey for young people-that they can progress from 16 to 24, build skills, build confidence and build careers. We do not do that any longer, and consequently the role of apprenticeships in upskilling people is a critical phase of that journey, because it does not just stop when you finish an apprenticeship. That is just a leg of the journey. For many people it has to start before apprenticeships. It has to start with the other work I have mentioned: preemployment interventions.

Apprenticeships, I feel, are part of a much longer pathway, which goes on beyond apprenticeships in our organisation through investment in junior and senior management training. We have a huge success rate in taking people all the way through our organisation. Apprenticeships spanning those early years in our business are a great way of describing the development of vocational skills, of getting vocational qualifications, of getting a great start in a career. It is a great way of articulating all that activity, but it is only one part of a pathway. The more the Government try to parcel these things up and say, "Apprenticeships do this, another thing does that and there is a youth contract over here that does something else," the more the British public are confused about what is going on, because they cannot see what the pathways are or how the schemes join up. I would strongly recommend that more work be done to connect these different reviews of the challenges that we face about employment in the UK.

Q381 Chair: What percentage of your total number of apprentices is in the 16 to 18yearold age group?

Ged Syddall: Sixteen to 18? About 8%. I will clarify that information, but it is round about 8%.

Chair: If necessary, could you send us the figures?

Ged Syddall: I will do, yes.

Q382 Chair: How many of those would you say go on to fulltime employment within Morrisons?

Ged Syddall: They are all fulltime.

Norman Pickavance: Yes. One of the things that has not been much publicised is that all the apprenticeships at Morrisons are fulltime, fullwaged individuals.

Q383 Chair: Yes, but a high percentage are already employees, aren’t they?

Norman Pickavance: Well, from day one, when we recruit a person, we recruit them on a full wage, and we guarantee them the job and the training and that they will have access to getting a qualification. So we provide those guarantees up front rather than going on a scheme that may or may not be a passport to a job. We guarantee the job and commit to deliver the training. That is a huge commitment from us as an organisation.

Q384 Chair: It is. In fact, if you are taking some hard-to-reach 16 to 18yearolds and making these guarantees, have you had to ever get rid of any, because you would reasonably expect, given the cohort that you are taking on, that some just would not come up to scratch?

Norman Pickavance: It is a very small number. We do a very good job, as I mentioned earlier, of coaching individuals through the programme.

Ged Syddall: I have some data around that that might be useful for the Committee. There is a misconception that a lot of what we have been doing within the programme has been purely based around the incumbent work force. Since we started the programme in 2009, approximately 50,000 people have joined Morrisons, and every single one of those individuals has been offered the opportunity either to do a QCF level 2 qualification, and for many of these people it would be their first level 2 qualification, or to go on and do a full apprenticeship.

The other thing we need to bear in mind with the people who opt to take on the apprenticeship is that for a lot of them it is about tackling issues that are real road blocks to their development, particularly around numeracy and literacy. So out of the 100,000 people that have signed up over the last three years to undertake the qualification, 40,000 have made the conscious decision to tackle those issues, because 84% of those people have numeracy and literacy issues. It is about addressing system failure as much as anything else.

The other key fact is that, of the 50,000odd people that have joined Morrisons, 53% of those people were unemployed and 58% of those people were 1624.

Q385 Chair: Sorry, how many were 1624?

Ged Syddall: Fifty-eight per cent of the people who joined Morrisons were 1624, and the success rate for the programme for apprentices is 83%. Our success rate in taking on people who have issues to overcome in terms of reaching full competence within the framework has been very high, and that is because of the way we have structured the partnership with Morrisons.

Q386 Mr Binley: Some of your contractors have rather derisively dismissed what you are doing as a way of getting cheap labour and badging them without really doing anything. In other words, giving qualifications to shelf stackers. Is that an unfair view of what you do?

Norman Pickavance: It is a very disappointing view. First of all, it is not cheap labour. We pay very competitively in the UK retail sector; we are one of the best payers, in fact, in UK retail, so it is not cheap labour. Secondly, we have a chronic issue in the UK of people who come from excluded backgrounds ending up with jobs that have limited opportunities. The thing that retail at Morrisons provides is an opportunity to build a career from wherever you start, and 2,500 people were promoted off the back of this scheme just last year alone into junior management positions.

That is not where it stops: 95% of the people in our business who are senior managers-store managers and above-started on the shop floor. Our ability to provide that career ladder is something that is sadly lacking in many parts of British industry. So we are very proud of our ability to take people from all backgrounds and build realistic careers for them, and it is something that we are keen to get across. Putting people into jobs but not giving them qualifications or access is an absolutely surefire way of ensuring that they continue to be excluded or poorly paid.

Q387 Mr Binley: I am grateful for that, because I am a secondary modern schoolboy who left school at 15, so maybe I would have been one of your store managers.

Norman Pickavance: Well, given that two of our current board members started at 17, having not been to university, and were promoted to the board in the last two years, that is absolutely what we are about.

Q388 Mr Binley: I am delighted to hear it. Can I go on? Your Chief Executive, Mr Philips, recently said about the apprenticeship scheme that "it is a big investment that we believe that we will get a great return on from growing our own people", which is, in essence, what you have said. How much of the training your apprentices receive would have been given to your staff anyway without public grant? How much, in other words, have you done it because there is public grant and was that a motivator? Secondly, if it had not been there, would you have done it anyway?

Norman Pickavance: We would have done it anyway. What we would not have been able to do is to ensure that people got nationally accredited qualifications as a result of the training that we provided. We do not receive any money from the Government purse for the training that we provide. All the training that we deliver is at Morrisons’ cost, and so it should be. We use the Government money through a third-party provider, because we are not experts in accrediting people and we are not experts in national standards.

Q389 Chair: So what you are saying is Elmfield gets the Government money.

Norman Pickavance: Elmfield gets the Government money, but we do our training in job skills, and we have always done that. We have always operated to a very high level in that regard. We have focused the funding on getting people to a nationally recognised qualification, something that, as I said earlier, most of them do not have when they come to us. It is that qualification piece, I believe, that lights a fire in people that says, "Actually, I can. I am cut out for a career. This is something I can do." That qualification means a huge amount to people, and it should not be underestimated.

Bear in mind we do not receive, or Elmfield do not receive, the full amount of Government funding for providing that. It is a much smaller amount, which I am sure Ged can comment on. It is a small amount because it is only for the last leg of the journey-the accreditation piece. The other piece that it also helps with, I should add, is numeracy and literacy skills development, which again you would not describe as being something of a core activity for a retailer, and that has helped with work in remedial skills development areas.

Mr Binley: You can throw a few jokes in, because we have just lost half of our audience.

Norman Pickavance: I know, I know. Was it something I said?

Ged Syddall: One of the things there is a lot of confusion about is what the public purse is actually paying for in this: what is the contribution that is coming from the public purse in these kind of programmes? There are two things that you need to look at. When an employer makes a conscious decision that it is going to train and develop its staff to a nationally accredited standard, there are certain things that have to wrap around that to ensure that the standard is met. For instance, within the training that was delivered in Morrisons, there were gaps. There were gaps in the knowledge that needed to be delivered. There were gaps in that Morrisons did not do numeracy and literacy training.

You then have the situation where the people who are going through the programme are actually working to a nationally recognised standard, and their work towards achieving that nationally recognised standard is achieved through coaching and mentoring them to operate against the standard. Finally, you get to the point where you can start to make assessments against people’s competence, which builds their confidence and ultimately ends up with those individuals receiving a qualification. The other thing you need to put around it is that the whole process needs to be quality assured. So there is a significant infrastructure of quality assurance that needs to go around the programme to ensure that the standard is being met.

The other thing then is that if you are using Government support to underpin, in effect, either entitlement or system failure, there is a whole raft, unfortunately, of bureaucracy that goes with that in order to demonstrate that the use of public funds is appropriate. On the train on the way down I was looking at a tender spec from another employer that has looked at us to tender. I will submit what I have scribbled down, but to give you an idea of what a provider does and the services that it provides, and some sort of contextualised-

Chair: Could you do so very briefly? I am conscious of the time.

Ged Syddall: Okay. Initially we need to design the programme. We need to pilot it and test it to see if it would work. We would then need to go and deliver preemployment for a lot of our customers-go out there and find people and prepare them from a preemployment perspective. We then need to recruit them. We need to give advice and guidance. We need to do initial assessment. We need to develop materials online and offline. We need to be coaching to standard. We need to assess. We need to support numeracy and literacy. We need to do numeracy and literacy testing. We need to quality assure from an Ofsted perspective. We need to quality assure from a curriculum perspective. We need to accredit. We need to certificate. We need to do SFA administration, SFA controls, management information and contract management. I could go on and on.

Interestingly, one of the questions that was asked in one of the previous sessions was about the amount of money that a training organisation would put into front-line delivery, and I do not think anybody seemed to know the answer at the time, but I will tell you. It is roughly 50%-50% goes into front-line delivery.

Chair: Okay. I am conscious of time.

Q390 Mr Binley: Mr Pickavance, how many of your apprentices were on a Train to Gain scheme?

Norman Pickavance: I am not sure I could answer that immediately.

Q391 Mr Binley: Could you come back to us with the information?

Norman Pickavance: Yes.

Mr Binley: Thank you.

Q392 Ann McKechin: I wonder if you could just clarify a question that you answered about the number of 16 to 18yearolds employed in the company. I take it that is not the same as the number of people who have then gone on to the apprenticeship system. Could you tell me how many 1618s of that number have actually gone on to the apprenticeship system?

Ged Syddall: Can I come back to you with that number?

Ann McKechin: Could you give us written clarification?

Ged Syddall: Yes.

Q393 Ann McKechin: Thank you very much. Mr Pickavance, I note in the submission that you made to the Committee that you said in 2012 you are going to train 15,000 new apprentices, which I calculate, from the basis of 132,000 employees, is about 11% of your total employees. Just for comparison purposes for the Committee-it would be very helpful for us to contrast-what percentage of employees in your Scottish shops are going through an apprenticeship system that has been approved by the Scottish Qualification Authority?

Norman Pickavance: We apply this system across the board, so it will be very similar.

Ged Syddall: So it is Scotland, Wales and England.

Q394 Ann McKechin: I take it that Elmfield is registered with the Scottish Qualification Authority.

Ged Syddall: Yes.

Q395 Ann McKechin: Right, okay. Do you then provide what would be called an apprenticeship as certified by the SQA, which is generally to a higher standard? Is that right?

Ged Syddall: Yes it is.

Q396 Ann McKechin: Do you receive Government funding from the Scottish Government for that scheme?

Ged Syddall: We do, from SDS, yes.

Q397 Ann McKechin: Can you provide us with figures of how much money you are provided, so that we can see the number of people that go through and which qualifications they receive?

Ged Syddall: Yes, no problem at all.

Ann McKechin: That would be very helpful to the Committee.

Ged Syddall: We only receive funding for people, I think, up to the age of 19, but there are a significant number of other people either doing QCF qualifications-

Q398 Ann McKechin: It would be helpful if you could break that down by age categories, 1618, 1924 and 25plus, in the same way as we have, and how much money you receive from the Scottish Government for each of those.

Ged Syddall: Yes, that is fine.

Ann McKechin: That would be very helpful. Thank you very much.

Q399 Julie Elliott: Mr Syddall, what proportion of the Government funding that you receive goes directly into training as opposed to your overheads, costs, etc?

Ged Syddall: About 50%. It depends really on the contract and it depends on your definition of what "front line" is.

Julie Elliott: I did not mention "front line"; I said "into training".

Ged Syddall: Yes, about 50%.

Q400 Julie Elliott: Last year, Elmfield made pretax profits of £12 million. How much of your income is from the Government as opposed to from your employers?

Ged Syddall: It was all Government money.

Q401 Chair: I believe it amounted to 36%, your profit level.

Ged Syddall: Yes, in 2009-10. Could I expand on that?

Q402 Chair: Have you any indication of what subsequent years are going to be?

Ged Syddall: This year’s operating margin is 13.8%. Can I explain why?

Chair: Yes, that was the reason for asking.

Ged Syddall: Right, okay. Elmfield exclusively deals with large employers. That is our business model. We support a number of the UK’s largest employers, delivering apprenticeship programmes, workbased learning programmes and preemployment programmes. There are natural efficiencies in dealing with large employers. The easiest example probably to illustrate this is that if you looked at a similar size of provider to ourselves, they normally would have an estate of around about 50, 60, 70 offices where their staff would be accommodated and where they would deliver the training. Because of the way that our model operates, our front-line staff are accommodated within the organisations that we work with and we use their premises to deliver the training. So we have six offices from which we operate, which is mainly our back office and management staff. If you look at the efficiencies just within our estate model, that would amount to several million pounds a year just in the lack of need for offices.

We have an incredibly close relationship with both the NAS and the SFA, and we have been working either as a subcontracting partner or directly with the organisations for a long time. We knew that they were looking at what was a fair and appropriate rate to underpin this kind of delivery, so we are working very closely, very transparently and, as a result of that, in 2010-11 rates were reduced for large employers by 25%. In effect, I suppose that is 25% off our top line, which translated down to a reduction in our operating surplus that year. So for 2010-11 our numbers were 13.8% operating margin, and it will be something very similar this year. From our point of view, ultimately that reduction in large employer rates multiplied across the entire provision that the SFA underpins over the next few years will save several hundred million pounds. It is organisations like us developing models and working effectively with our partners that has demonstrated that.

Q403 Chair: I am trying to work out the thrust of your argument. What you are saying is that you have made large profits because of your high level of efficiency and productivity and so forth.

Ged Syddall: In 2009-10.

Q404 Chair: Now you are claiming that you are effectively passing on the benefits of that in either reduced profits or reduced charges. Is that correct?

Ged Syddall: The rates have been reduced across-

Q405 Chair: The rates of what?

Ged Syddall: The SFA and the NAS have reduced by 25% the rates for large employer apprenticeship delivery in 2010-11 as a result-or partially, I think-of the efficiencies we were able to demonstrate. So we get paid 25% less now than we did in 2009-10.

Q406 Chair: But you are still making 13%?

Ged Syddall: It is 13.8%.

Q407 Chair: How does that compare with other companies in the same area?

Ged Syddall: It is normalised. So I think it is roughly similar for Alex, who was sitting here before.

Q408 Katy Clark: You will appreciate that as a Committee we are very concerned about executive pay, particularly when there might be public money involved. We have been told that you have received £3 million in dividends from Elmfield. Is that true?

Ged Syddall: Over the last four years we have declared one dividend, which was £3 million, which equated to about 15% of the distributable profits, if you like, that we could have done. There are three things that I do when we look at the business. One of the problems I have is that I own the business. If this was a business like Babcock that was a PLC or that had hundreds of shareholders-

Chair: I have to say, it sounds a very happy problem to have.

Ged Syddall: I set the business up from nothing; we now employ 750 people. The other thing that we have done is over the last three years put 40% of our posttax profits into what we call our social impact programmes, which have helped thousands of young people back into employment. So, yes, we are entrepreneurial. Yes, I set the business up. From my point of view, from a conscience perspective, for every £1 I have taken out over the last three or four years I have put £2 back into helping other people who have not been as lucky as me.

Q409 Katy Clark: For example, do you get a salary? Is that in the public domain? Are those figures in the public domain?

Ged Syddall: My salary is £75,000-I think. Yes, £75,000 is my basic salary.

Q410 Mr Binley: Mr Syddall, I have set up two companies. They now employ collectively 260 people. I have never got anywhere near the profit levels that you are talking about and, if I am perfectly honest, I would be very concerned if I did get that much profit. It sounds to me like you became concerned about that too. Is that the case? Because, quite frankly, that much money made out of a business of your kind is a rip-off. How do you answer that?

Ged Syddall: Are we talking about the profits-

Q411 Mr Binley: I am talking about the amount of money made for the service you provide. It is a very simple question. I employ, as I say, 260 people-not quite the number you do but quite a few-and I do not see, when you are a large employer of people, how you can make that sort of money. I understand how the City does, because it deals in massive sums of money, but you do not. I want to know how you make that sort of money.

Ged Syddall: With all due respect, at the end of the day, the year we are talking about, where that profit level was made, was 2009-10. We did not set the rates.

Q412 Mr Binley: So you overcharged?

Ged Syddall: No. We did not set the rates. The rates were standardised.

Q413 Chair: You were overpaid.

Ged Syddall: Or the state was paying too much money-

Chair: That is what I meant.

Ged Syddall: -because it did not recognise that there were efficiencies in this kind of delivery model. From our point of view, I do not think there are many businesses out there that have put £6.5 million of their own money over the last three years into supporting programmes that have helped thousands of young people.

Q414 Mr Binley: That is great, but I do not think there are many businesses out there making the bottom line that you are making.

Ged Syddall: Well, moving forward now at 13.8%, that is normalised for the sector.

Q415 Mr Binley: You can understand why people are suspicious though, can’t you?

Norman Pickavance: Can I make an observation?

Mr Binley: Yes, please do-help him out.

Norman Pickavance: I am not going to help him out too much, because he is working with us for a couple of reasons. First of all, we started to look at this in 2007; we started to look at the ease to business of getting qualifications for young people in 2007. Under the then Labour administration, following the Leitch report, which identified that the UK was a third division country in world league tables as far as skills were concerned, the vast majority of people coming into the work force had no qualifications.

Mr Binley: I understand that.

Norman Pickavance: This is really important, because the then Prime Minister, Gordon Brown, came to Morrisons and applauded the work that we were doing in our attempt to get 100,000 people to a basic qualification, which they had left school without. So we set that goal. We then went to the further education sector in the UK and said, "Can you help us to deliver this objective?" I did not go to the private sector first; I went to the FE sector, and not one single organisation in the FE sector was able to deliver against the scale and the national standard that we were looking for. It was only in extremis, in those adverse conditions, that we then went to the private sector and said, "Can you help us?" We went through a bidding process, and Elmfield won that bid, so as an organisation, we have not touched the contracting process.

Q416 Mr Binley: I have no concerns, Mr Pickavance, with Morrisons and what you are doing-none whatsoever. But you would be pretty surprised if you saw that sort of percentage bottom line with your business, wouldn’t you?

Norman Pickavance: A wider observation I would make to the Committee is that yesterday I was speaking to the Inclusion Forum across the UK, with 250 people in the audience, addressed by the Minister-

Chair: Could you focus your remarks, please?

Norman Pickavance: The point is that there is a whole industry out there, Chairman, directed at the garnering of Government funds for the provision of training for people who are excluded from the work force. There is a huge market because of the lack of capability in the further education sector for delivering this work. If it was capable of delivering this work, we would use them, but there is a huge market, led by the G4Ss and Sercos of this world, doing this work. The reason we have worked with Elmfield is that they have done this work better than other people, purely and simply.

Chair: We quite understand the position Morrisons are in. This is not a criticism of Morrisons. Indeed, we applaud your motive.

Q417 Katy Clark: It may be that you have already dealt with this, but as a Committee we are concerned about how Government money is spent and about executive pay. If you could provide as much information as possible about that to the Committee in writing afterwards, that would be appreciated as part of our wider look at this issue. We need to ensure that taxpayers’ money is wisely spent. It is not about whether Morrisons feel they are getting a good service or not. That is a different issue. We are concerned about the wider issues.

Norman Pickavance: There are two other points if I may just add to this. The Minister is trying to set up a competitive market, and he reiterated that point yesterday. That is the way the Government apparently wants this market to operate. That is the first point.

The second point is about results, isn’t it? It is about results-payment for results. Last year, we took 1,000 NEETs, as so defined, and gave them permanent employment and training. That number, I understand, would equate to £56 million-worth of taxpayers’ benefit, because they are not being paid benefits through the JSA system.

Chair: These were points that you made in your slides, so we will have seen them.

Q418 Julie Elliott: Moving on to a slightly different area, Mr Syddall, it has been reported that you have also founded your own awarding body, Skillsfirst Awards Limited. How do you respond to those who may say that there is a conflict of interest arising from owning both a training provider and its awarding body?

Ged Syddall: It is no different, for instance, from City & Guilds and City & Guilds for Business, who deliver Asda. It is no different from Edexcel and Pearson in Practice. It is no different from Walsall College, who I believe have an awarding body, and Norwich College, who have an awarding body, and there are other organisations. We were encouraged, and certainly there was a movement to encouragement, to broaden the awarding body market a few years ago.

Q419 Julie Elliott: By whom?

Ged Syddall: By the Government, to bring more competition into the market. I set Skillsfirst up because I thought there was a gap in the market for a good, customercentric, employeefocused awarding body. As a result, that is now a very successful awarding body. It deals with 30 organisations, including us, so it is a competitive, out-in-the-market business. There are no rules from Ofqual to say you cannot do it. There are very robust and rigorous conflict of interest policies that we adhere to. If the rule is "Well, you cannot," then we cannot. The other thing is that from a competition perspective, I have to compete in the open market against City & Guilds and Pearson, etc. The breadth of service that organisations under common ownership can offer to our customers gives us at least a competitive level playing field against those other organisations. That is why we have done it.

Q420 Julie Elliott: You have answered part of my next question. Yes, you are quite right: there are other providers doing this in the marketplace, but you set this up very early on after your company set up.

Ged Syddall: No, no, I did not, I am sorry.

Q421 Julie Elliott: It was quite early.

Ged Syddall: No, the company has been going for the best part of 10 years and Skillsfirst was set up about three years ago, so it was seven years in.

Q422 Julie Elliott: I would say that was quite early on.

Ged Syddall: Not when you’ve been running it for 10 years, it’s not.

Q423 Julie Elliott: Right. Well, why did you feel it was really important? Was it just that there weren’t companies doing what you needed or was there a gap?

Ged Syddall: As an entrepreneur, I thought there was a niche in the market to create a business.

Q424 Julie Elliott: You felt you could make money out of setting up this company.

Ged Syddall: Yes.

Q425 Julie Elliott: Does Elmfield work with any awarding body other than Skillsfirst Awards Limited?

Ged Syddall: We do work with Edexcel.

Q426 Julie Elliott: What kind of percentage of your work is with Edexcel?

Ged Syddall: I will not quote exactly, but it is quite a lot of work with Edexcel at the moment. I will let you know exactly, but it is a reasonably significant percentage.

Julie Elliott: Could you forward us that information in writing?

Ged Syddall: Yes, no problem.

Julie Elliott: Okay. Thank you very much.

Q427 Chair: As Elmfield, you own Elmfield. Presumably you contract with Skillsfirst to do the accreditation. What is the size of the contract?

Ged Syddall: We will probably spend about-again I will get you the exact figure if you want-£2 million a year.

Q428 Chair: So one company pays £2 million to the other company and you own both.

Ged Syddall: But it is no different than City & Guilds or Edexcel.

Chair: I agree that there are other parallels within the industry, yes.

Q429 Ann McKechin: I have a point to clarify with you, Mr Syddall. I understand that your initial allocation from the Skills Funding Agency was some £20 million and this was increased to £40 million halfway through the financial year. Can I ask why the SFA doubled its allocation to your company?

Ged Syddall: Because of the volume of learners that we were putting through.

Q430 Ann McKechin: So it was based on the volume rather than the actual time period in which you were passing them through?

Ged Syddall: No, it was volume. It was because of the volume.

Q431 Ann McKechin: The volume?

Ged Syddall: Yes.

Ann McKechin: Okay. That is fine, thank you very much.

Q432 Chair: Mr Pickavance, to get some points of clarity, it has been agreed that the vast majority of your apprenticeships are in the 25plus age group. This is only partially funded by the Government, or did you say that you provided all the funding and that you did not take anything from the Government?

Norman Pickavance: Yes. The way it operates is we deliver the training, and the cost of the accreditation and coaching through to the receiving of a certificate is provided by the Government to Elmfield. That is how it works.

Can I just add to the point on the cost? We fund all of our craft apprenticeships directly. We have no funding from the Government for that activity. We fund debtfree degrees, which we get no funding from the Government for. We fund many MBAs, which we get no funding from the Government for. We run the largest coaching programme in the UK, which we get no funding from the Government for.

Q433 Chair: Tangentially, the National Audit Office has said that the Skills Funding Agency has been trying to assign a cash value to in-kind contributions by companies. Obviously yours goes far beyond that. How would you recommend that the Agency should quantify and audit these contributions, from your experience?

Norman Pickavance: If you consider that we do not pay a training rate, that would be a factor, so what contribution we are making in terms of full salaries versus training salaries; the cost of the people who do the training in departments in the workplace; the cost of the coaches that we have. It is difficult to put a cost on all that, but we estimate that for our basic apprenticeships it is about £1,000 a person.

Q434 Chair: Mr Syddall, Ofsted recently graded Elmfield with an overall score of three out of four, where four is the worst score possible. Given that you are now in receipt of more than £40 million of public money, are you satisfied with Ofsted’s assessment of your training?

Ged Syddall: What you have to do there is put that in the context of where we were in our relationship and the programmes that we were delivering directly with the SFA. At the point of inspection we were 18 months into the programmes we were delivering through the SFA funding provision, and there is a cycle to reach maturity and the point where your provision becomes good or outstanding. At the point when we were inspected, we expected ourselves to be at the satisfactory standard, with a view that the contributory grade around capacity to improve would be good, and that is, in effect, what the inspection came out at. So it was fit-for-purpose provision and with good capacity to improve that provision.

I would like to point out as well, though, that we have also been involved in a further five Oftsed inspections over the last four years where we have been the lead provider. So it is exactly the same type of provision, in effect, as we do in this, apart from that we have been holding the contract. Because those contracts were mature and had had longer to develop, they were all graded good. Of the grades that we have received from an Ofsted perspective, if you amalgamate them all together, we have had four satisfactory grades, 20odd good grades and four outstanding grades.

Q435 Chair: Yes, that again was in the slides you presented. What proportion of your total contractual base is the contract with Morrisons?

Ged Syddall: Probably this year I would say it will end up being about 50%.

Q436 Chair: About 50%. So, if you like, the more satisfactory grades of the others is for the other 50%, by and large.

Ged Syddall: The good grades for the others, yes.

Norman Pickavance: Can I just chip in with one small point on that?

Q437 Chair: Yes, I was going to come to you in a moment. I was going to ask you what factors you consider when choosing a training provider and what your reaction was to this relatively low score from Ofsted. You may well have been going to cover those points, but I am just getting the questions in first.

Norman Pickavance: You have to look at the scale of what we are doing. We are providing Ofstedaccredited training to a satisfactory level across 100,000 people over approximately 500 sites. That is the biggest, most complex training provision in the UK. We have been at that for 18 months. We have reached a satisfactory standard; we will get better. If other people were to provide what we do on this scale, we would not have the skills crisis in the UK that we are suffering.

Q438 Chair: What will you do if in future inspections Ofsted does not rate them higher? You said that it will get better.

Norman Pickavance: We have noted all the points that were made in the first Ofsted report and, again, for a large company to be involved and open itself up to Ofsted accreditation is a great step; it demonstrates the openness of what we are doing and our recognition of the value of scrutiny. We are working to improve that and I think we will.

Q439 Mr Binley: I really do want to make sure that the taxpayer, which is you as well, is getting real value for money. When I look at your P&L for the year ending 30 September, I notice you have pretax profit of 33%, £12.3 million, and I notice that £6.5 million went in taxation and dividends. What was the percentage split between taxation and dividends?

Ged Syddall: It will be the standard rates.

Q440 Mr Binley: Well then, tell me what the percentage split was.

Ged Syddall: There will be corporation tax. It was £3 million. The dividend was £3 million. Is that what you mean?

Q441 Mr Binley: So about £3.5 million went in dividends.

Ged Syddall: No, £3 million went in dividends.

Q442 Mr Binley: Three million went in dividends. How many shareholders do you have?

Ged Syddall: Four.

Q443 Mr Binley: Four. Can I just ask your shareholding?

Ged Syddall: It is 95%.

Mr Binley: Thank you.

Chair: Brian, you were going to ask some further questions on Elmfield and Barclaycard.

Q444 Mr Binley: Thank you very much. Just to finish up, Mr Chairman, I think it is right and proper to get that as evidence, because it does give us an idea about whether the taxpayer is getting value for money. Whilst I understand your side of it, I want to explain that there is a doubt in terms of the amount of money you made in that year.

Right, let me go on to talk about Elmfield. I think I am on question 17, am I, Chairman? Oh, question 20. We are further on. We recently spoke to one of your clients, Barclaycard, and they told us that their apprenticeship scheme was not open to existing employees. Is it better for apprenticeship schemes to create jobs or to upskill existing staff?

Ged Syddall: They have equal merit. Particularly where there has been system failure, and somebody is in a job but the education system has let them down, they have numeracy and literacy problems, and they might not have any formal recognised qualifications, it is equally important those people get the chance to get that qualification, which is a passport for social mobility. Obviously, in these times, when there are pushing 1.5 million young kids on the unemployment register, it is great that we are creating opportunities with Barclays.

Mr Binley: I agree with you.

Ged Syddall: We are incredibly proud and pleased to be supporting that programme: 1,000 unemployed kids are going to get the chance of a good job, a good wage with Barclays, so we are over the moon with that, and it is fairly similar to a lot of other programmes that we have supported out of our surpluses. I believe we have done one with Sandwell Community Caring Trust in the Chairman’s constituency. We have similarly taken young unemployed people, given them a job and helped them to progress into permanent employment. The business is massively committed, both in terms of the funding that we receive, in terms of the prioritisation of that funding, and also its surpluses; as I said, £6.5 million of our surpluses over the last three years has gone into underpinning this kind of activity.

Q445 Mr Binley: We have had some evidence that tells us today’s school leavers may not be as employable as many employers would like them to be. Can you tell us your experience in that respect?

Ged Syddall: Yes. We opened nine contact centre academies, where we took young people on and gave them a job for six months to prepare them, in a sympathetic working environment, for the world of work. We have interviewed tens of thousands of kids over the last couple of years, and the distance that some of these kids have to travel to change from being, unfortunately, unemployable young people to employable adults is fairly significant. What we need to do is look at developing programmes and solutions that provide people with a framework to transition them to employable individuals. My opinion is that the best way to do that for a lot of these unemployed individuals is to prepare them for employment by employing them. The models that we delivered were fairly similar to the Future Jobs models for 16 to 18yearolds. There is a significant problem for a lot of these kids.

Q446 Mr Binley: I understand that. Did you say that you were training them in contact centres? What does that mean-telephone marketing contact centres?

Ged Syddall: Yes.

Q447 Mr Binley: Okay, fine. It is part of my business; I am perfectly happy with that. Specifically in that regard, because it is vital that the information they receive is relayed on to a computer very accurately-with reasonable spelling, for instance-can I ask what you have found in terms of numeracy and literacy skills?

Ged Syddall: They are typical. About 80% of people who come to us have deficiencies in either numeracy or literacy at level 1, and a significant percentile have very significant numeracy and literacy issues. A lot of what we do, for instance about a quarter of the work that we have done in Morrisons, is underpinning support in numeracy and literacy. A lot of the work that we did and are doing in our academies is around supporting numeracy and literacy. It is a problem and it is probably one of the biggest road blocks.

What we have found is that you can transition these young people very effectively and fairly quickly. It is all about confidence; it is about resocialising and it is about turning up on time. Somebody was talking earlier about school leavers in the old days, when they had become un-socialised. It is having that arm round them. The kids used to go to factories and down a pit or into a mill or whatever, and the person next to them would put their arm around them and they would be the mentor, they would be the buddy-the person who knocked the rough edges off them. The kind of environment that we have created in our contact centre academies facilitates that.

Q448 Mr Binley: So social skills are equally as important.

Ged Syddall: Yes, attitude, behaviour. Skills are only one bit, and that needs to be factored in.

The other point I would like to make is that it is equally pertinent, certainly for kids up to the early 20s, where there is not a huge difference. Some of those kids, particularly in the conurbations that we are operating in, are fairly tough and a lot of them have a lot of problems at home, etc. You create an environment where you can nurture them, support them, and make them feel valued.

Q449 Mr Binley: What is your average age scenario in terms of the people you employ in the contact centres?

<?oasys [pc10p0] ?>Ged Syddall: Fundamentally, the Future Jobs ones are obviously Future Jobs posts, but they are 1618.

Q450 Chair: I want to conclude with a couple of groups of questions. Earlier, you outlined the levels of profitability from Elmfield and the relative distribution in terms of tax and dividends. Could you do the same for your Skillsfirst company?

Ged Syddall: Yes, with pleasure.

Q451 Chair: Have you got the information to hand?

Ged Syddall: No. I know that in the last set of audited accounts we have, Skillsfirst made a loss.

Q452 Chair: Have you any idea what the projections are now?

Ged Syddall: About a couple of million turnover.

Q453 Chair: What about profit?

Ged Syddall: I am not sure of the profit. About a million profit.

Q454 Chair: About a million profit. Who are the shareholders?

Ged Syddall: It is me.

Q455 Chair: You, thank you. Secondly, I would just like to ask you about your contractual relationship with the Sandwell Community Caring Trust. What level of public funding do you get for that?

Ged Syddall: Basically, it was a partnership where Sandwell Community Caring Trust was the lead bidder in a Future Jobs Fundrelated programme that was cosupported by Sandwell Council. The programmes basically draw down SFA support, which was about £2 million, but we underpinned it to the tune of several hundred thousand pounds, because these things are not sustainable. It is very expensive to do this work.

Q456 Chair: Yes, I understand that. So, in effect, there is £2 million of funding from the SFA. How much from the Council?

Ged Syddall: There is £200,000 from the Council.

Q457 Chair: How much from you?

Ged Syddall: We underpinned it. I will get the exact number, but it was several hundred thousand pounds.

Q458 Chair: How many young people do you think you have helped here?

Ged Syddall: About 550.

Q459 Chair: Have they all got jobs in caring, do you know?

Ged Syddall: The vast majority are going into fulltime employment.

Q460 Chair: Would you be able to give us the exact figures?

Ged Syddall: Yes, I can get you the figures. Yes, that is fine.

Chair: Okay. That concludes my questions. Thank you very much. That was very helpful. Obviously there are some questions for which you understandably could not give a full answer. If you could send us the written information, we would be very grateful. If we feel that there are some questions that we did not ask that we need to ask, then we will be sending them to you. Similarly if you feel that there is any additional information that was not covered by the scope of our questions that you want to give us, we would be grateful to receive it. Thanks very much.

Prepared 5th November 2012