Small and Medium Enterprises (SMEs)
17. Employers are vital to apprenticeships and
more must be brought on board to boost the number of places. So
one of our key recommendations was that all Government funding
for apprenticeship places should go straight to employers instead
of training providers. That would attract employers by putting
them, rather than a training provider or some other body, at the
centre of apprenticeship provision.
18. Unfortunately, the Government rejected this
recommendation. The Secretary of State explained: "Our judgment
is still that many smaller companies would prefer not to be taking
on all of the extra administration that goes with handling the
money directly, and prefer to work through a training provider."
(Q 13)
19. But this is an argument against employers
taking on bureaucracy rather than money. The Secretary of State
acknowledged that companies "sometimes rightly" perceive
that there is too much bureaucracy involved in taking on apprentices.
He added: "I am not yet convinced we have got on top of all
the bureaucracy that is in the system" (Q 14). We believe
that handing the money directly to employers not only provides
companies with a greater incentive to provide apprenticeships
but can also help to reduce red tape as well. Reducing the red
tape hitherto associated with setting up apprenticeship schemes
is crucial. The Secretary of State also acknowledged that the
question of how training budgets are spent "is a good question
to ask, and it is one that I have asked myself."(Q 26)
This underlines the need to reduce bureaucracy and increase transparency
in government funding of the training component of apprenticeship.
20. However, the Secretary of State did indicate
to us that there could be wage subsidies in the future. On increasing
SME provision of apprenticeships, he said "that ways to compensation,
ways to subsidies for SMEs, may be an important way in this area.
So we are contributing towards the wage costs at some point as
well as the training cost …" (Q 14) But this is
all very sketchy. A much clearer position is needed on how far
the Government intends to pay employers for taking on 16-18 year
old apprentices. Direct incentive payments are frequently found
in the rest of Europe and should be sufficient to compensate for
part of the employer's costs.
21. There appeared to be some inconsistency in
the Secretary of State's responses to us about the impact of Group
Training Associations, where a few small employers come together
to organise their training. Initially, the Secretary of State
said: "One of the reasons that we think the smaller employers
may wish to work with … Group Training Associations is that
somebody else can deal with all of that." (Q 14) So
the responsibility of setting up apprenticeship schemes would
be offloaded to other parties. But later in the meeting, when
the Secretary of State was asked why the Government preferred
Group Training Associations to commercial training providers,
he replied that employers would feel that they owned the service.
He said: "There is a sense that: 'We own this; it is going
to be responsible to our particular business, our particular culture,
our way of doing things'." (Q 27) This response suggests
that SMEs want to be involved in apprenticeships. We agree and
remain convinced that the best way to get SMEs involved is to
pay the funding to them directly.
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