Westminster Hall debate on Apprenticeship Levy - Feb 11

Richard Graham (Gloucester) (Con)

I beg to move,

That this House has considered the effectiveness of the apprenticeship levy.

It is almost exactly 10 years since I secured my first debate, which was on apprenticeships, in this very Chamber. Ten years on from the arrival of the new coalition Government, with that a huge and welcome emphasis on apprenticeships, and three years on from the introduction of the apprenticeship levy, today’s debate is a good opportunity to review how the levy was introduced, what it aimed to achieve and how the levy process has gone so far.

However, let me first go back to 2010 as a starting point. At that time, I and various colleagues, including my right hon. Friend the Member for Harlow (Robert Halfon), who is beside me today, were desperately keen to recognise the value of apprenticeships, to restore their role in our nation as a key motivator and opportunity for social mobility, to improve the opportunities for our manufacturers, and to introduce apprenticeships into many of the service sectors where they did not then exist. We were looking for a renaissance of apprenticeships, and a boosting and strengthening of them, and we did that, broadly, in the first five years of the Government that was formed in 2010. Then there was the introduction of the levy.

Kevin Brennan (Cardiff West) (Lab)

I well remember that debate in 2010, not least because it had to be postponed because the Minister did not turn up on time, and so was held later. However, as the Minister with responsibility for apprenticeships immediately prior to the 2010 election, I wonder whether the hon. Gentleman would care to acknowledge that there was a big expansion of apprenticeships up to 2010, just as I would acknowledge the increase that happened thereafter. However, is not one of the problems with the current apprenticeship levy that it is too rigid, so lots of industries, including creative industries such as the film industry, find it impossible to offer apprenticeships?

Richard Graham

The hon. Gentleman is kind to recall that first debate; in fact, I had a printer problem and so, in addition to the Minister, I myself was late—it was a promising start to a promising career.

Kevin Brennan

I left that bit out.

Richard Graham

The hon. Gentleman kindly glossed over that. Some of the points he made about the flexibility of the apprenticeship levy are important, and I promise that I will come on to them.

In that debate—I have reviewed what I said then—all of us recognised that some work on apprenticeships had been done under the Government in which the hon. Gentleman served. There was no doubt about that, but we needed to put a rocket-boost into the system, and I think the figures confirm that we did, with 2 million apprenticeships being created between 2010 and 2015. Businesses and Government organisations, together with what the Government introduced by way of funding, made a huge difference. However, let us not go over that too much, because I want to see where we are today.

I will start with what the aims of the apprenticeship levy were. It is fair to say that the Government wanted to double the investment in apprenticeships, from roughly £1.2 billion to £2.5 billion, and at the same time deliver on their commitment in the 2010 manifesto to take the number of apprenticeships from 2 million to 3 million by 2020. Right at the beginning, there was also a quality expectation—an ambition to raise the level of the apprenticeships that were being studied for and to have more higher apprentices, who in turn would contribute to some sectors where we had and still have key competitive advantages—cyber and aerospace are obvious examples. In addition, there was certainly the implication of reducing the costs to the taxpayer by getting a greater contribution from the larger employers in particular.

Stephanie Peacock (Barnsley East) (Lab)

I congratulate the hon. Gentleman on securing this debate. The points that he has just made are really important, and I share his view of apprentices—until recently, I had a living-wage apprentice in my constituency office. However, when I met representatives of Barnsley College recently, they shared his views, but one of their concerns was that the apprenticeship levy is not benefiting the school leavers it was intended to benefit and that those who do benefit often are mid-career and doing things such as extra degrees, which is of course to be welcomed but is not what the levy was set up to do. I wonder whether the hon. Gentleman has any comments on that.

Richard Graham

That is an important point, and the hon. Lady anticipates what I was coming on to. I have had my own apprentice now for nine years; they do a level 3 business administration course, and there will be other Members here who employ their own apprentices. There is a question mark about whether those at the starting levels of apprenticeships have been supported as well as they could be through the apprenticeship levy.

Interestingly, when I arranged an interview between Business West, which effectively took over the running of apprenticeships from the chamber of commerce in Gloucestershire, with the previous Minister with responsibility for apprenticeships, she said very clearly that in terms of small and medium-sized enterprises

“it has been difficult for the non-levy payers, but we are now transferring them over to a new system which we do want to be simpler for them.”

The Minister who is here in Westminster Hall—the Under-Secretary of State for Education, my hon. Friend the Member for Chippenham (Michelle Donelan)—is not formally the Minister with responsibility for apprenticeships. Indeed, I believe it is true to say that there is still a gap in the Department for Education in terms of an actual apprenticeships Minister, which I hope will be filled soon through an appointment by our new Prime Minister. Nevertheless, I hope the Minister here today will be able to say a little about the speed of transferring the non-levy payers to the new system and how that has progressed. The previous Minister with responsibility for apprenticeships made her comments in July last year, so I hope there has been some progress in that regard.

However, just to respond to the point made by the hon. Member for Barnsley East (Stephanie Peacock), it is quite true that the numbers of level 2 and level 3 apprentices have come down sharply since the introduction of the apprenticeship levy, just as it is true that the numbers of levels 4 to 7 higher apprentices have risen sharply.

Kate Green (Stretford and Urmston) (Lab)

I congratulate the hon. Gentleman on securing this debate. He is absolutely right in his analysis of the figures. Last week, I had the great pleasure of shadowing a degree apprentice from my constituency who is studying at the University of Salford while working for Russell’s Construction—it was great to see a young woman taking such a good course in the construction industry. However, I asked Russell’s Construction what opportunity there was for it to deploy the levy through its supply chain to SMEs. The company seemed to be interested in doing that, but it could not see an easy process for doing it. Does the hon. Gentleman agree that that is something the Government might like to think about?

Richard Graham

The hon. Lady is absolutely right in one way, but of course a lot has changed relatively recently. Levy employers can now transfer 25% of their levy to other organisations, and the obvious opportunity there is to do it through their supply chain. For example, in a briefing I received from it in November, Tesco said it contributed roughly £20 million a year to the apprenticeship levy but that it is able to spend only about 15% of it, due to the inflexibility of the system. We will come on to the inflexibility of the system, but the key thing is that there is now this opportunity for Tesco to deploy a quarter of its levy, which would be £5 million, to some of the companies in its supply chain, which are typically SMEs. That is incredibly valuable, and I hope it is something that Tesco has taken up.

As a result of the hon. Lady’s question, I hope that other levy employers out there will be more aware of this opportunity. Business West asked a very similar question of the previous Minister with responsibility for apprenticeships:

“What would you advise colleges to do in September if they have gone over their non-Levy allocation and have 16 year olds wanting to start an apprenticeship with a non-Levy employer?”

The previous Minister—the former right hon. Member for Guildford—replied:

“I would approach the larger Levy paying firms in the area…There are lots of Levy payers who have not spent their levy pots.”

That is quite true; the question is whether it is as well-known as it should be. I know of examples from Gloucestershire Engineering Training where our county council and I think another public sector employer have used part of their levy to help an SME to ensure that its apprentice receives the training they need. However, such opportunities are not as widely known about as they should be.

Paul Girvan (South Antrim) (DUP)

I welcome the opportunity to speak on the importance of apprenticeships and the benefits that they bring to our overall economy. However, in Northern Ireland we face a difficulty in that, although firms contribute to the apprenticeship levy, no one has access to it. That came from the absence of an Executive, but now that we have one up and running, I hope we can level the playing field and ensure that we get an opportunity to comment on any new scheme that is introduced.

Richard Graham

I think the hon. Member was highlighting the issues faced by some small and medium-sized enterprises. There will be great opportunities through some of the larger manufacturing companies with a turnover of more than £3 million in Northern Ireland. I am thinking particularly of companies such as Thales. They have a wonderful opportunity to use some of the levy to help SMEs. It may just be about publicising those opportunities, both among SMEs and larger employers.

Liz Saville Roberts (Dwyfor Meirionnydd) (PC)

On devolution, the four Welsh police forces give £2 million between them through the apprenticeship levy. Policing is reserved, but education and training are devolved. The Welsh Government insist that they are not responsible for the policing education qualifications framework, while the Home Office insists that apprenticeship funding is a devolved matter. There was a one-off funding package in 2018-19 to resolve that position, but it remains uncertain who will fund what sort of training in Welsh police forces, whether those forces are out of pocket, and what is expected of them from the reserved aspect in Westminster and is not being passed through from the Welsh Government. On such matters, the reserved-devolved interface really requires further discussion. There were warnings at the time that that would happen.

Richard Graham

I thank the hon. Member for her point. I think that the Welsh Assembly’s Economy, Infrastructure and Skills Committee published a report last week highlighting the fact that the levy was introduced without the Assembly being consulted. I have no doubt that the Minister will respond on that issue.

Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)

My hon. Friend is making a well-informed and excellent speech. He spoke about the potential benefit to SMEs from the changes to the apprenticeship levy. However, I am sure that he recognises that there is sometimes quite a challenging relationship between the different parts of the supply chain in agriculture. The introduction of agricultural apprenticeships has not always been very successful. What would be a good way to address that problem, and what advice would my hon. Friend give the Minister and the Government?

Richard Graham

I intended to raise that issue in relation to the timber industry, but perhaps I will do it now. The timber industry has certain similarities with the agricultural sectors to which my hon. Friend alluded, because it too has found enormous difficulty in creating standards and courses that are applicable to a sector that employs some 75,000 people. The Timber Research and Development Association, TRADA, which is the national body, still does not have accredited apprenticeships. It has been unable to get a course accredited—it believes accreditation takes 12 to 18 months—and is deeply frustrated.

There have been similar comments from other sectors. My hon. Friend mentioned agriculture. The Minister will know that there are significant pockets of huge dissatisfaction. TRADA states that the

“Institute of Apprenticeships are trialling the concept of a face to face interview panel…But we are not being offered this interview as things stand.”

It also states that the institute has been interested in creating a course for a “timber product technician”, but that term is apparently not actually used in the timber industry.

There are detailed frustrations about how to get the right standards and courses accredited. I hope the Minister will be able to offer us reassurance that for any sector, or indeed any significant levy payer, somebody from the Institute for Apprenticeships will be available to have a face-to-face meeting to try to resolve these issues, giving us all the confidence that it will not take 12 to 18 months to set up a course, during which time employers are contributing to the apprenticeship levy, but it is not being used for their own employees.

That, of course gives rise to one of the big issues with the way in which the apprenticeship levy was structured—namely, that it is seen by many people as a tax. The principal of South Gloucestershire and Stroud College said that many major companies now contributing to the levy see it as such. They are unable to spend their levy, and

“rather than transferring this money to the restricted non-levy pot, which benefits smaller employers…the money is being held back by Treasury”

and not reinvested into training and skills for the younger generation.

As I said earlier, I do think that, to some extent, the emphasis is on levy employers to understand what the offer is and how they can use the pot more creatively. There will be individual cases where companies are not investing enough in training and skills, and should be proactively doing more to engage with the Institute for Apprenticeships to design courses, and so on. None the less, the perception that the levy is a tax is large enough that it would be helpful for the Minister to clarify whether it was always intended that there would be an element of tax contribution to the levy, and whether the £2.5 billion that I believe is being invested this year in apprenticeships by taxpayers, via the Government, is a gross or a net figure? That is to say, to what extent is the apprenticeship levy used to reduce the total cost, or is it a net figure, regardless of what comes into the apprenticeship levy?

That is important because for as long as employers view the levy as a tax and not as something that can benefit them and their supply chain it is less likely that we will have their complete buy-in. I cannot help wondering whether part of the solution might be to increase again the figure of 25% that can be passed on or traded, like carbon emissions, to SMEs. I cannot help but feel that that would increase the number of apprenticeships, which is clearly where the problem has been in delivery, and reassure businesses that the Government really do want the levy to work, maximising opportunities for both big and small employers.

I do not feel that today’s debate should be about trying to beat up the Government, either for their failure to deliver 3 million apprenticeships or for some of the complexities of the apprenticeship levy. The scheme remains relatively young, and the direction of travel should be to reform rather than scrap it. I think that that is also the view of the Chartered Management Institute and other employers’ groups. None the less, we have to recognise some of the challenges.

On the positives, the increase in higher apprenticeships has undoubtedly paid off, particularly in sectors such as those in the constituency of my hon. Friend the Member for Filton and Bradley Stoke (Jack Lopresti), where aerospace is a huge driver of employment, growth and exports for the nation at large. We have doubled the number of higher apprenticeships over the past three years, from 36,000 to 75,000. There are literally thousands of employees through some of the larger companies, such as Channel 4, Royal Mail and Lloyds Banking Group, as well as the NHS and our armed forces in the public sector. They are very comfortable, by and large, with what has been introduced, and just raise very specific implementation issues, which I will touch on.

The challenges are the fall in the number of apprentices and the complexity of some of the bureaucracy around the levy. According to the University of Gloucestershire, there have been further Institute for Apprenticeships and Technical Education delays to approvals of standards through each stage. The university gave the example of the senior leader master’s degree apprenticeships, noting that

“the standard did not achieve full approval (i.e. was not ready to be delivered)”

until several months after the launch. The university also stated:

“There is a significant administrative burden as the funding claims process is not straight forward, and subject to frequent policy and regulation changes.”

During the debate on the health Bill in the House the other day, I raised the issue of the complexity created by nursing apprentices, who must be supernumerary because the Nursing and Midwifery Council has ruled so. That makes nursing degree apprentices unaffordable for many local NHS trusts, so that issue has to be resolved.

I have been told by an intermediary business that works with large employers all over the country that

“the bulk have millions of unspent levy funds”

and that this particular company has

“attempted to introduce leadership training for which the levy would be used”,

but that there are

“so many hoops to jump through in order to get something up and running”

that it has given up. I was also emailed by the owner of a small business that employs one apprentice, who said that employing an apprentice is

“far greater a challenge than anticipated. Support in numbers, time or financial resource is limited.”

Of course—this has been said previously—one reason for employing my own apprentice was to find out precisely how complicated the process is. I do not think it needs to be that complicated, but clearly, the message from some SMEs is that it is that complicated. I hope that a change of direction to make the process simpler has taken place, and that the Federation of Small Businesses is completely behind it.

I am conscious that time is moving on, so I will just touch on a handful of key points I hope the Minister will be able to respond to. First, a number of colleagues have mentioned complexity, so any news about how the levy can be made less complex would be welcome. Some Members have also touched on the issue of inflexibility; there is a constant question mark about whether the apprenticeship levy has to be spent on only those courses that are accredited by IFATE. I understand the reasons why that might be the case, but it puts the onus of responsibility on IFATE to approve these courses—agriculture, timber, or whatever—much faster, so that people can get on them. I welcome the reduction in the amount that non-levy payers contribute to the cost of apprenticeships; it has been halved from 10% to 5%. I wonder whether that contribution is financially important, or whether it is symbolically important.

By implication, Members also mentioned the current restriction whereby at least 20% of apprentices’ time has to be spent training off-site. That is a real issue for many employers, particularly smaller ones, so I ask whether that can be either waived or improved. As has been touched on, there is a question mark about the amount of knowledge in the supply chain regarding the transferability of the apprenticeship levy, so anything the Minister could say about being able to increase that would be welcome.

Ultimately, this programme was introduced as part of the Government’s commitment to improving an apprenticeship programme in order to deliver the skilled workforce that employers need. We know that employers need more skills and more apprentices, so we need those numbers to rise, as well as the percentage of higher apprentices. A more transparent breakdown of the levy, and whether it is a net or gross contribution to apprenticeships by the Government, would be welcome. I hope that by the end of all this, IFATE and the Government will be listening more to business, so that there will be more voices out there strongly supporting the apprenticeship levy and encouraging other employers to make as much use of their levy as possible. I also hope that a new apprenticeships Minister can be appointed who will listen, oversee, champion and communicate what should be a really good, positive story for Government, business and the country as a whole.

Several hon. Members rose—

Caroline Nokes (in the Chair)

Order. I have five Members indicating that they wish to speak and we have about 35 or 40 minutes, so there need not be a time limit.

2.54 pm

Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)

It is a pleasure to serve under your chairmanship, Ms Nokes, and I congratulate the hon. Member for Gloucester (Richard Graham) on having secured this debate. I will drill a little bit further into the issue raised by the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts).

Apprenticeships are a devolved issue in Wales. Although I praise the Welsh Labour Government for doing what they can to make the levy work and to ensure that apprenticeships are delivered according to the needs of communities and of the Welsh economy, funding for apprenticeships and graduate training is an ongoing issue for Welsh police forces. The UK Government need to provide clarity and to resolve this issue, because for over two years Welsh police forces have been forced to use their own budgets to fund those apprenticeships.

Although training and apprenticeships are devolved to the Welsh Government, policing remains a reserved area. As such, if the Government apply their apprenticeship levy policy to Wales and to all employers with a wage bill of £3 million or more, including police forces, they must also commit to provide the funding for it, not just pass the buck and shirk their responsibilities. My constituency of Merthyr Tydfil and Rhymney crosses two police force areas—namely, those of South Wales police and Gwent police. Gwent police have paid some £400,000 into the apprenticeship levy every year, while the figure for South Wales police is closer to £1 million. Collectively, the four Welsh police forces pay over £2 million a year into the levy, but they do not receive that money back from the UK Government.

Liz Saville Roberts

Does the hon. Gentleman agree with the report of the Commission on Justice in Wales, chaired by former Lord Chief Justice Thomas and commissioned by the hon. Gentleman’s Welsh Labour Government, that now is the time to demand that policing in its entirety be devolved to Wales? That would bring us clarity on exactly this matter.

Gerald Jones

I thank the right hon. Lady for that intervention. That is a wider issue, one that is probably too large for this debate, but it should certainly be considered going forward.

In England, the money that police forces have contributed to the levy fund has been reimbursed—they have had their fair share of the funding back—but that is not the case in Wales. This is another example of the Government dodging responsibility on funding and trying to shift the blame, based on a technicality of devolved and reserved powers. The Government must devolve the money required to go alongside their policies, including the apprenticeship levy, not just devolve the policies themselves. At a time of rising crime levels, when we need to be investing heavily in our police and providing them with the support they need to keep our communities safe, the Government should provide the money that Welsh police forces need and deserve so that they can fund those critical apprenticeships.

Jeff Cuthbert and Alun Michael, respectively the police and crime commissioners for Gwent police and for South Wales police, have repeatedly called on the UK Government to provide the funds for those apprenticeships. The Home Office previously advised Welsh forces that from 2019 onwards they would be provided with their fair share of the levy. It is now 2020, more than a year on, and that has still not happened. Welsh police forces have still not received a penny of that funding. With apprenticeships providing an established way for police recruits in Wales to enter the force without a degree, it is crucial that police forces in Wales receive their fair share of the funding as soon as possible.

We know that once the Government’s planned police recruitment drive is complete, whenever that might be, overall police numbers will still be lower than those inherited from the last Labour Government in 2010, as will police numbers in both of the police areas in my constituency. If the Government will not commit to providing the funding for apprenticeships lost through the apprenticeship levy, there will be even fewer police officers on the streets of Wales. This issue has gone on for a very long time and that funding is needed to support police forces across Wales, so I hope the Minister can provide clarity and reassurance.

2.58 pm

Robert Halfon (Harlow) (Con)

It is an honour to serve under you, Ms Nokes, and to be sat next to my hon. Friend the Member for Gloucester (Richard Graham), who has done so much to support apprentices. Like me, he understands the importance of promoting the prestige of apprentices, which is why he employs one. My own apprentice, Dan Swords, is present in the Public Gallery. That prestige is incredibly important.

I will make a general point before talking about the levy specifically. The solutions proposed by my hon. Friend are very important, but a number of other things need to be considered. We can tune the apprenticeship levy as much as we want, but we have to address prestige and careers as well; otherwise the levy, however good or bad, will not succeed in the way we would like. Prestige is important. The fact that Mr Speaker is going to employ an apprentice in his office sends an important signal to millions of people across the country about how prestigious apprenticeships are. More parliamentarians should employ apprentices.

One of our biggest problems in terms of the prestige of apprenticeships and the number of people who want to do them comes from the fact that apprenticeship careers are so poor. One of the last things I did as Skills Minister in 2017 was to introduce the Baker clause, which compels schools to invite apprentices, apprenticeship organisations and further education colleges into schools, but that is not happening as it should be. I strongly welcome the letter that Lord Agnew is sending to schools, but a letter is not enough. The Ofsted guidelines must be much tougher and look at the outcomes. How many children in those schools are going on to apprenticeships, further education qualifications, or technical education as that comes through the system? We will not change the attitudes of parents and families unless we transform careers.

There is an incredible duplication of careers organisations from the Departments for Education and for Work and Pensions. I would like there to be one organisation—a national skills network—and a UCAS-type system for further education, skills and apprenticeships, which would also include universities. Rather than having separate education systems, there should be a one-stop shop for students or apprentices to get advice on the best FE college or kind of apprenticeship. That is the way to promote parity of esteem, not by having separate systems. We have talked for a long time about a UCAS-type system for FE, skills and apprenticeships, but it has still not happened.

Unfortunately, there has been gaming of the levy system. The Times Educational Supplement has published a report today saying that more than £100 million of apprenticeship levy funds have been spent on masters degrees for managers. New polling by YouGov for the Centre for Social Justice shows that in the last 12 months almost one in five businesses has used the levy to accredit skills that their workers already have. We need to reform the apprenticeship levy so that funds are used more productively. The Government could do that by restricting funds for employees who are already qualified to degree level, or by allowing employers more generous terms when they create apprenticeships for low-skilled workers. In other words, if employers used their levy for gaming the system, they would use a tiny part of it, but if they used it to get more young people, more 16-year-olds, doing apprenticeships that meet our skills needs, they would use much more of it. We need to look at the levy in that way.

We also need to do more to ensure that the disadvantaged have access to degree apprenticeships, which are my two favourite words in the English language, as those who know me know. I am not talking about the gaming of the system for masters degrees, but degree apprenticeships in law and engineering. Last week, during National Apprenticeship Week, I went to the TUI holiday store in my constituency of Harlow and met a degree apprentice who is doing law for TUI. She is an outstanding individual who wanted to earn while she learned, so she has no debt at all. She is virtually guaranteed to get a job with TUI at the end, so her career is made.

We should be doing more. We should have an ambition that at least 50% of our students do degree apprenticeships. We need to increase and ring-fence funds from the apprenticeship levy. We could do that by broadening its remit so that employers with a salary roll of £2 million qualify.

We have to be more imaginative in removing the bureaucracy, as my hon. Friend the Member for Gloucester has said. He touched on nursing degree apprenticeships, on which the Education Committee did an inquiry. There could be many more if the bureaucracy, the rules and regulations, and the apprenticeship levy were more flexible in all sorts of ways. We are missing an opportunity. We had an argument about the bursary—I am glad it has come back in one form or another—but it would be better if the vast majority were doing nursing degree apprenticeships, and if the Institute for Apprenticeships and Technical Education and the Department had the vision and provided strategic guidance and a more flexible levy and rules. There has to be flexibility.

Better-off families are two and a half times more likely than their disadvantaged peers to know about degree apprenticeships, and that is linked to careers advice. The Government should hardwire apprenticeships into all careers advice and we should enforce the Baker clause more stringently. In my previous job as a Minister, and in my current job as Chair of the Select Committee, I have gone around the country visiting incredible providers—private providers and FE providers—but in 2018-19 only 56% of providers inspected were rated good or outstanding. The Government should strengthen Ofsted’s capacity to carry out monitoring visits much earlier for new market entrants and across a large part of the market.

Let us think imaginatively. We have a research and development tax credit. Why on earth do we not have a skills credit to help companies that are doing the right thing, such as smaller companies employing apprentices? We need to look at wider issues, such as whether we should extend the levy across the board, as proposed by the Association of Employment and Learning Providers, whose representatives are also in the Gallery, and get rid of the training costs for employers.

Jack Lopresti (Filton and Bradley Stoke) (Con)

Could university technical colleges play a bigger role?

Robert Halfon

I support university technical colleges, and I think that the entry age should start at 16. My dream would be to have a technical school in every town in the country, because they have good outcomes, but they need to be reformed.

My hon. Friend the Member for Gloucester mentioned that from 2020 we have a £2.5 billion budget. We need to know what the apprenticeships budget will be over the next five years. If the Minister cannot provide that information today, I hope we will find out in the Budget.

3.07 pm

Jim Shannon (Strangford) (DUP)

I thank the hon. Member for Gloucester (Richard Graham) for setting the scene. It is a pleasure to follow the right hon. Member for Harlow (Robert Halfon) and to participate in this debate.

I have always been a great believer in education in its many equally important forms. Some people excel in academic subjects, such as science, mathematics, literary subjects, medicine and languages. We need people who excel in all those things, but we equally need people who excel with their hands and understand how a car works, how to make electrics safe, how to build and how to create. Society cannot function without all sorts. That is what the debate is about, as apprenticeships cover many different aspects of life, and that is why I was thankful that the Government recognised the need to push apprenticeships.

One of my constituents, a mother, came to see me about a different issue and told me an interesting story. She said that she tried to save half her daughter’s child benefit each month in an individual savings account. Her reason for doing so was simple. She and her husband both worked, so their children would never be entitled to grant aid, but their wages were not high enough to allow them to put aside much money. Her endgame has stuck with me for the five years since she came to see me: “I need to save as much of my daughter’s child benefit as I can to help her with university or to buy her the tools of whatever trade she goes into. Whatever job she gets, she will have help to be the best at it.” That mother understood the importance not just of academia, but of ensuring that her child would have help to get into a trade if academia was not her calling. Today everyone, male or female, has or should have equal opportunity for an apprenticeship. If mothers are making sacrifices so that they can invest in their sons’ and daughters’ futures in trades, should we likewise invest more? I look to the Minister to address that.

On 6 April 2017 the apprenticeship levy came into effect, with all UK employers with a pay bill of more than £3 million per year paying the levy. The levy is set at 0.5% of the value of the employer’s pay bill, minus an apprenticeship levy allowance of £15,000 per financial year. The levy is paid into an apprenticeship service account, and funds in the account have to be spent on apprenticeship training and assessment. The Library briefing states that since the changes in 2017

“there has been a large fall in the number of apprenticeship starts, leading to criticism of the levy and other reforms that have been put in place.”

The hon. Member for Gloucester referred to that. In 2016-17, before the changes, there were 900,000 new starts. That system worked. Perhaps the Minister will outline why we cannot revert to a system that seemed to work.

I have read statements that indicate that the quality of training is better under the new system, and I understand the logic behind that. In Northern Ireland, where big companies are scarce, it is imperative that apprenticeships are available in SMEs as well. The hon. Member for Gloucester referred to apprenticeships and SMEs in his introduction. He understands the issue clearly, and I hope we will come to a better understanding.

Apprenticeships are vital for the construction sector in my constituency. I met someone there a few weeks ago and was impressed by what they were doing. The apprenticeship levy that they pay enables them to make a long-term commitment to those they bring on board. Bombardier, part of which was recently bought by Spirit, is committed to apprenticeships. It had some events here at the House of Commons, and its commitment to giving boys and girls opportunities in engineering was great. I was encouraged to meet some of the apprentices.

We now have a Northern Ireland Assembly that is up and running. It is good to see it working, and we look forward to what it can deliver. Whether the responsibility for this matter lies with the Department for the Economy or with the Department of Education, my hon. Friend the Member for South Antrim (Paul Girvan) and I will be in touch with the Minister responsible to push for apprenticeships in Northern Ireland.

In Northern Ireland, 16 to 24-year-olds made up some 89% of participants starting in the academic year 2018-19, and level 3 apprenticeships accounted for some 47% of all participants starting in that academic year. Electrotechnical, engineering and food manufacturing were the most popular frameworks. Males accounted for 71% of all participants, and the proportion of male participants was highest in the level 2 and 3 apprenticeship group at 91%. More than three fifths—62%—of those who left level 2 apprenticeships in 2018-19, up to April 2019, achieved a level 2 framework. More than three fifths—61%—of those who left level 3 apprenticeships achieved a level 3 framework.

I understand that others wish to speak, so I will finish up now. I am convinced that apprenticeships work, but we must make them accessible and attractive to providers. Complicated frameworks and buy-ins are not the way to do it. Sufficient time has passed to make such a judgment, and we must review the funding mechanism. Although this is a devolved matter—the Minister does not have responsibility for Northern Ireland—the ball must start rolling on the review in this place for the sake of those who are labelled as underachieving males, but who in reality need to be given a chance to find their niche and their chance to excel. I hope the Minister will take the opportunity to talk it over with the Minister in the Department for the Economy or the Department of Education in Northern Ireland. It is important that we have uniform rules and regulations in a system that takes in all the devolved Governments in Scotland, Wales and Northern Ireland.

3.14 pm

Damian Hinds (East Hampshire) (Con)

It is a great pleasure to speak in this debate. I congratulate my hon. Friend the Member for Gloucester (Richard Graham), who, along with my right hon. Friend the Member for Harlow (Robert Halfon), has done so much to promote apprenticeships and to ensure they are a regular subject of debate here in Parliament. There have always been very high quality apprenticeships in this country. Multinational companies in engineering and automotive have long offered apprenticeships that compete and are comparable with the very best in the world, but not all apprenticeships have been very high quality. Within sectors there have always been companies that have seen it as part of their duty, responsibility or mission to invest in the next generation coming through, but there have also always been companies that have not seen that imperative and benefit instead from the training provided by competitors.

The levy must be seen in the context of a package of measures introduced in the 2015 summer Budget and autumn statement, which included the reductions in corporation tax and included the national living wage and this third arm, the apprenticeship levy. With that package, the Government effectively said to companies, “We will give you a very competitive corporation tax regime, which will lower the hurdle for investment. It will mean that businesses can grow, but we need to make sure that people are paid properly and fairly, and we need to ensure that everybody invests in the next generation of talent coming through.”

There have been some difficulties with the levy, some of which have been referred to. One is the speed of approval of certain standards, which has got better over time but needs to carry on getting better. Fundamentally, there has been a great quality uplift in apprenticeships. Thanks to the levy, the amount of cash in apprenticeships has doubled over the decade in cash terms. We have seen a move to longer, higher level apprenticeships, and the move from so-called frameworks to standards. That is all a bit jargonistic, but it basically means that there is a more exacting standard for the apprenticeship, with a greater degree of employer approval. Effectively, business has voted for a higher standard of apprenticeship, which creates some tension against a numerical target.

I want to talk briefly about each of the three main objections to the apprenticeship levy: first, it is just a tax; secondly, it is too inflexible; and thirdly, “I can’t manage to use the whole amount.” On the first point, the apprenticeship levy is a non-optional deduction levied by Government, so it does bear some tax-like features, but it is not exactly the same as a tax. Of course, money is extracted from business as part of the overall Exchequer requirement.

Something that I discovered when I worked at the Treasury was that for every tax, there is a really good argument against it. Corporation tax? Too many companies avoid it. Business rates are a fixed cost, as we all know, and that can be difficult for certain companies. National insurance is a tax on employment. Sales tax, or VAT, may apply at an early stage of development. Even excise duty, which is based on volume, inevitably involves problems with whatever system is set up and whatever threshold is set.

It is right that we rebalance the approach over time and right that we look again at business rates and introducing a digital sales tax, because there are concerns about some companies being able to avoid corporation tax, and, conversely, there is the strain on some of our shops on the high street and elsewhere,. Fundamentally, in that suite of taxes and ways of getting money out of business, the levy solves the free rider problem when it comes to investment in skills and, relatively speaking, rewards the companies that make a greater investment. I suggest that, as part of a suite of approaches, it has an important role to play.

The second big argument is that the levy is too inflexible. As my right hon. Friend the Member for Harlow mentioned, there is always a question of re-tagging: of training that would happen anyway, or re-accrediting skills that exist already, and it is always a strain. The apprenticeship levy already covers quite a lot. Let us compare what the apprenticeship levy in the UK covers compared with the German apprenticeship system, which is commonly regarded as the gold standard in apprenticeships. The minimum specification for our apprenticeships is lower in terms of duration; the age range that it covers is considerably wider than is common practice in Germany and some other countries; and, as has been alluded to, it covers apprenticeships at numerous different levels.

We can argue legitimately that there are more things that it should be possible to use levy money for, such as pre-apprenticeship programmes, and so on, but the mathematical reality is that if we were to do that, other things being equal, we would need a higher levy or we would need to take something else out of eligibility for levy spend.

Finally, there is the objection, “I cannot spend it all.” It is worth bearing in mind, of course, that some companies do spend it all, or almost all of it. It is also true, and relevant, that sectors vary. In the engineering sector, for example, there is typically a very high apprenticeship spend. In retail and hospitality, it is typically lower. Again, we need to recognise the mathematical reality, which is that the levy is designed so that levy payers cover the apprenticeships in their own companies but also cover the cost of apprenticeships for non-levy payers. To change the system, it would be necessary to extend the scope of the levy or raise its level.

I think it is right at this point to review and reform the levy. It is legitimate to look at such things as coverage of MBAs, although it turns out that it is hard to define where the line should be drawn on post-level 6 qualifications. I think we could look more at tailoring the specifications of difference to different age groups and sectors, and I think there is an argument around pre-apprenticeships and that particular social justice agenda. The overall principle, however, is good. It has increased the amount of money and investment available for apprenticeships and skills and protected it, and it solves the free rider problem. I would say that, along with T-levels, higher level technical qualifications and our school reforms, apprenticeships are key to reforming productivity, and they deserve our support.

Caroline Nokes (in the Chair)

I now call John Howell. Please can comments be kept to four minutes, so that the Minister and Front-Bench spokesmen have time?

3.21 pm

John Howell (Henley) (Con)

I shall do my best, Ms Nokes.

I want to draw Members’ attention to a new apprenticeship training centre in my constituency at the Culham science centre, to illustrate some of the points that have been raised and to make the point that we should not throw the baby out with the bathwater. The apprenticeship centre is in a new purpose-built building that has been paid for by the Government. It is a partnership between the UK Atomic Energy Authority, the Science and Technology Facilities Council and the Manufacturing Technology Centre as the training provider. It offers very good apprenticeships in engineering for many high-tech industries—high-tech individual businesses in the Thames valley.

The reason that the levy comes into it is that it pays for the entire running of the centre. It also, particularly, goes to try to achieve what I think the levy was initially designed to achieve, which is social mobility. A key part of the levy has been the attempt to allow individuals to achieve the best, and to be the best that they can be. I was therefore disappointed when the Social Mobility Commission warned that we were pretty close to a two-tier system that was emerging, based on background. That is not the case in the centre in my constituency, which takes a lot of people from varied backgrounds.

It appears that since its introduction, the levy has shifted provision away from the lower-level apprenticeships that can serve as a ladder of opportunity for young people, and towards the rebadging of existing training for already highly skilled, highly paid employees. That has been described as the gaming of the system. At the same time, people from deprived communities are being squeezed out of higher-level apprenticeships. In 2015-16, before the introduction of the levy, the most deprived 20% of the population accounted for 21.9% of apprenticeship starts at level 4 or higher. By 2018-19 that figure had dropped to 16.4%. We need people who have the confidence to navigate the system and the ability to lead, so apprenticeships lead on to good jobs with progression opportunities. I think that the science centre at Culham provides that.

We have talked about a number of issues, in relation to flexibility and such things, but I will leave it at that with my remarks on social mobility. I was taught, “If you have a good point, make it and sit down,” and that is precisely what I am going to do.

3.24 pm

Jo Gideon (Stoke-on-Trent Central) (Con)

It is a pleasure to speak today, and I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on securing this hugely important debate. Given our manifesto commitment to investigate how the levy can be improved, I know that Ministers will have listened to his excellent speech carefully. I am certainly pleased to follow in my hon. Friend’s wake. I share his concern for SMEs and challenger firms looking to provide apprenticeships. I also wish to stress the challenges faced by further and higher education providers in delivering their vital role.

In particular, I want to set out the work of Staffordshire University, which is based in my constituency and with which I had a meeting last week to discuss National Apprenticeship Week. I look forward to further meetings with the university in the near future, especially after the lessons of this stimulating debate. There are 750 apprentices studying at Staffordshire University, and more than 450 of them are based with an employer. The apprenticeship programme is a major local asset, with more than 150 employers engaging with the university on it. Of course, apprenticeships are not just about numbers; they must also be about quality. The standards at Staffordshire University are high and meaningful. Engagement with best practice providers will be the key to improving and reforming the levy, and I hope the Department will be as keen as I am to meet with Staffordshire University for further discussions.

I am told that an estimated 300 potential apprenticeships have been lost because of drawbacks in the current system, with the non-levy allocation making it particularly challenging to work optimally. Only three applications are allowed per SME, and I would like improving that to be a key focus of the policy process. The promise was that employers would be put at the centre of the system. That needs to include smaller employers with apprenticeship needs.

It also means making sure that all employers understand how the system works. I understand that opportunities are currently being missed because the digital application service is not sufficiently well known or embedded in business practice. I would be interested to hear, for example, how the Department is engaging with local chambers of commerce on that. That is particularly important because I am told by Staffordshire University that the rule changes of the past few weeks are making a positive difference, as non-levy payers can now use the digital system. I hope that there are measures in place to ensure that no business misses an opportunity that could benefit the economy as a whole.

Staffordshire University is certainly playing its part, offering courses, advice and support around enterprise, continuing professional development certification and skills for those not yet ready to take on apprentices. That is extremely important. I know from having set up my own business that it is always daunting—exciting but daunting—to try something new, and taking on a first apprentice will be a key step in a business’s development. The most daunting word is always “compliance”, and I hope Ministers agree that support must be on offer so that businesses are not put off by concerns about compliance.

At Staffordshire University, there will soon be a £40 million new university building called Catalyst. It will focus on digital skills, include an incubation centre and act as a base for apprenticeships, with the aim of having 6,500 apprentices in place by 2030. I cannot stress enough how important that will be to the continuing efforts to level up skills levels in Stoke-on-Trent and retain talent within the city. While apprenticeships must be about quality, not quantity, we need to look at how to address the gender imbalance in apprenticeships, which is something we should not ignore.

In conclusion, apprenticeships are vital to levelling up skills, but the levy must work to deliver the right quality of programme, with the right portable qualifications and the optimal level of awareness among employers of all sizes.

3.29 pm

Carol Monaghan (Glasgow North West) (SNP)

It is a pleasure to speak in this afternoon’s debate, Ms Nokes, and I congratulate the hon. Member for Gloucester (Richard Graham) on securing it. It is a strange one for a Scottish MP to be speaking in, because it is one of those that crosses the boundary between reserved and devolved matters—that point was clearly made by the hon. Members for Merthyr Tydfil and Rhymney (Gerald Jones) and for Dwyfor Meirionnydd (Liz Saville Roberts). There are challenges for us in Scotland as well. In Scotland, our businesses must pay the apprenticeship levy, but they are not tied to the same restrictions in terms of how apprenticeships are delivered.

A strong economy with growing, competitive and innovative businesses is essential to supporting jobs and our quality of life. To achieve that, we must prioritise education, from early years into employment. There is a real need for young people to train for work, be that through further education, higher education or apprenticeships. The hon. Member for Strangford (Jim Shannon) set out clearly the importance of that education process, whatever it may be. The best situation is one where all the options have equal status. The hon. Member for Gloucester talked about the importance and value of apprenticeships, with which all of us here this afternoon would agree. Unfortunately, in many circles, apprenticeships are still considered second best.

The right hon. Member for Harlow (Robert Halfon) talked about the possibility of a further education UCAS option, which deserves further investigation. The hon. Member for Stoke-on-Trent Central (Jo Gideon) talked about the great work done in Staffordshire University with apprenticeship programmes. Although many still prioritise the number of young people accessing university, other life choices are not given the place they deserve. We should not be talking about the route that our young people take, but about their positive destinations. The hon. Member for Henley (John Howell) talked about social mobility, which sums it up nicely. How do we make our young people mobile? Not everyone takes the same route.

It is important that we recognise what apprenticeships should and should not be. The right hon. Member for East Hampshire (Damian Hinds) talked about some responsible employers and the excellent programmes they provide for the apprentices in their care, but that is not always the case. Apprenticeships should not be used by employers to attract funding without producing positive outcomes. They should not be used to plug temporary employment gaps. They should be used when the apprenticeship can lead to a full-time position, and apprenticeships should always be matched to skill shortages.

Since the introduction of the apprenticeship levy, we have seen a drop in the number of apprenticeships in England. The hon. Member for Gloucester talked about the levy as a tax. One third of businesses reportedly view the apprenticeship levy primarily as a tax, without training benefits. The British Retail Consortium has said that the levy is “failing retailers”. It appears that it is a clumsy tool that is not doing everything it should be.

Despite that, we in Scotland are making excellent progress to ensure that young people have the skills that they need to exploit current and future opportunities. We have had discussions with key stakeholders and have established a national retraining partnership, with the aim of helping workers and businesses prepare for future changes in their markets by enabling the workforce to upskill and retrain where necessary. The commitment to skills is ambitious, building on a number of initiatives already in place to boost employment and create positive pathways for young people.

Of course, the UK Government are stepping on a devolved responsibility here. We pay the levy, but the training is devolved. The Scottish Government have worked with employers to mitigate this unwelcome tax. They have extended the £10 million flexible workforce development fund to continue to support investment in skills and training. Employers have been encouraged to link with colleges to learn more about the opportunities available to them. All that work is paying dividends. The Scottish Government have exceeded their apprenticeship target every year for the last eight years. Skills Development Scotland statistics also show that the Scottish Government’s commitment to increasing apprenticeships to 30,000 by 2020 is on course to be met.

The right hon. Member for Harlow talked about degree apprenticeships. The apprenticeships currently on offer in Scotland include, this year, around 900 graduate opportunities, up from only 278 in the previous year. Massive steps have been made in that area. Some 93% of Scotland’s young people now go on to positive destinations—that is the highest of anywhere in the UK. We will continue to enhance the apprenticeship opportunities available to provide the right balance of skills to meet the needs of employers, including prioritising higher skilled apprenticeships and STEM—science, technology, engineering and maths—occupations.

As an example, an Edinburgh school is teaching construction skills. The infrastructure company Balfour Beatty is co-funding that project with the University of Edinburgh. It aims to inspire the next generation of specialists in engineering and the built environment. Pupils at Castlebrae Community High School in Craigmillar take subjects including maths, science and technology, while learning about the latest practices demanded in construction. The pupils acquire real-world, practical experience and employability skills as part of the course, which brings industry professionals into the classroom to support teachers.

Young people have to know that there is no wrong path, and #NoWrongPath trends every year roundabout exam results time, to show young people that there are many routes into employment and on to a positive destination. We all need to ask ourselves whether we would be happy for our own children to take each of the different routes into employment. If the answer is no, we have to question why we are here.

3.37 pm

Emma Hardy (Kingston upon Hull West and Hessle) (Lab)

It is a genuine pleasure to sum up on behalf of the Opposition, and I thank the hon. Member for Gloucester (Richard Graham) for securing the debate. He gave a thoughtful and considered overview of concerns about apprenticeships. I was particularly interested in his points about the concerns of small and medium-sized enterprises and that businesses paid the levy before many of the standards had been developed and they were able to use their money efficiently.

My hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones) made a clear and convincing argument about why policing needs to be funded effectively in Wales. I hope the Minister will address those specific concerns about the apprenticeship levy in in Wales.

I am delighted that my right hon. Friend the hon. Member for Harlow (Robert Halfon) is back as Chair of the Select Committee on Education. I pay tribute to him for the work he has done. His protégés are here in this Chamber. He is passionate about apprenticeships, and the Education Committee has been committed to using them as a tool for social mobility. He made many interesting points. I hope the Committee will delve into the concerns about the apprenticeship levy and investigate them further.

The hon. Member for Strangford (Jim Shannon) made an important point about the diversity of skills and equality of access to apprenticeship opportunities. He also made an interesting point about SMEs. Northern Ireland does not have many large industries, so how can companies there benefit most effectively from the levy? Will the Minister comment on regional differences and how they impact on the levy’s effectiveness?

The right hon. Member for East Hampshire (Damian Hinds) was marking his own homework by commenting on the apprenticeship levy, but he made some excellent points. I agree that the levy should not be seen as a tax. Using the levy as a way of dealing with the free rider problem is an excellent incentive. I also agree that we need to examine the flexibility. Given that it has been running for three years, it is time for a general review of the apprenticeship levy. I echo his calls for review and reform.

The hon. Member for Henley (John Howell) spoke passionately about social mobility, which many Members have addressed, and about the importance of engineering apprenticeships and how the levy has been used in a more imaginative way in his constituency. I wish all the apprentices well on their route forward. The hon. Member for Stoke-on-Trent Central (Jo Gideon) paid credit to the fantastic Staffordshire University, which sounds like it deserves a visit from our Front Benchers.

If they are done well, apprenticeships can provide employees with the skills, knowledge and behaviours required to survive in today’s workplace. They create new pathways for employment and can be a lightning rod for social mobility, but data from the Office of National Statistics show that our country currently has a huge productivity gap—productivity is 30% higher in France and 35% higher in Germany. The widening gap cannot be ignored as we stand as an independent nation and try to obtain the easy post-Brexit deals promised by the Government.

Given that the Government’s own skills adviser, Alison Wolf, who is hugely respected across the sector, stated to the Education Committee in June 2016 that she “suspected” the decision to make the levy applicable only to large businesses with £3 billion of staff costs was

“one of the things that was decided the night before”,

it is fair to say that the Government’s rushed implementation of the apprenticeship levy has resulted in unforeseen consequences and perverse incentives.

Although I agree that the 2017 reforms have started a national conversation on apprenticeships, and I agree with the hon. Member for Glasgow North West (Carol Monaghan) that we should look at prestige and whether we would want our children to follow that pathway—I would definitely encourage my girls to go forward with a degree apprenticeship model—we have to recognise that the overall number of apprentices has dropped since the levy was introduced. Some 509,000 apprentices started a programme in 2015-16, and only 393,000 started in 2018-19—a drop of 23%.

The levy has been overspent and the funds have been rationed for smaller employers. The fall in the number of SME apprenticeships is about 171,000—down an estimated 49% since the levy was introduced. Many colleges ran out of funds for new starts in SMEs, and by the end of 2019 they were not able to meet the demands, particularly in construction and engineering, which are the industries that the apprenticeship levy was meant to support. The Association of Employment and Learning Providers estimates that there are about 30,000 to 40,000 unfilled apprenticeships in SMEs due to the lack of funding.

A recent newspaper report states that the Secretary of State has said that this issue could be solved by moving to the Digital Apprenticeship Service. However, it makes no difference what system is used if there is not enough money in it to start with. The hon. Member for Gloucester commented on passing on part of the levy funds, but SMEs and large businesses have found it overly bureaucratic, complicated and difficult to find a partner to match up with. If the Minister wants to pursue that avenue, we need to consider simplifying the process and making it run a lot more smoothly. The change in the number of apprentices—and the level at which they start, which I will come on to—has been disastrous for some sectors, particularly the care sector. Many care homes are SMEs, and the sector is low margin and low wage. They have been hit really hard by the difficulties in finding apprentices to work there.

Young people have been affected more than anyone else. The number of those starting on level 2 and level 3 apprenticeships, which are predominantly provided by SMEs, has fallen by about 20%. That will not help social mobility. We are not giving our young people the access required to climb the ladder of opportunity. They cannot even get on the first rung.

I am also concerned—this has been echoed by other Members— about the apprenticisation of existing training courses. Chief executive officers have reduced or replaced other training so that they can use the levy. The right hon. Member for Harlow alluded to today’s report in the TES that since 2017 more than £104 million of apprenticeship levy money has been spent on putting senior managers through masters degrees and apprenticeship programmes. David Hughes of the Association of Colleges said:

“This is draining a fixed pot of money dedicated to apprenticeships.”

I support degree apprenticeships and masters apprenticeships, and I support retraining the workforce, but there always needs to be a balance. At the moment it appears that the system is designed to help existing employees who already have higher-level qualifications—sometimes degree and management qualifications—at the expense of 16 to 18-year-olds who are just beginning their careers and need to start at the lower levels. Does the Minister agree with Amanda Spielman of Ofsted, who says there need to be more reforms to the levy to ensure that it is used effectively? I would not want to limit businesses’ freedom and flexibility to use the levy in a way they see fit, but it seems that its design creates perverse incentives for it to be used it at the top end of the levels rather than at the bottom.

As we face our post-Brexit future, we need to look at level 2 starts. I have found some quite scary figures. If we continue on our current trajectory, by 2024 there will be more than 4 million too few people to take up the high-skilled jobs available. There will be 2 million too many with intermediate skills, and more than 6 million too many who are low skilled. Rather than waiting another year or so for the apprenticeship levy review, we need to do it immediately in order to avoid ending up with a problem by 2024, when so many people will be unable to access quality work.

I will make a few comments about social mobility. Before the introduction of the levy, the most deprived 20% of the population accounted for more than 21% of apprenticeship starts at level 4 and above. By 2018 the figure had dropped to 16.4%. With the current levy design, people from more deprived backgrounds are less likely to be able to access higher-level apprenticeships. I wonder whether that is because we have pulled away level 2 and 3 access points, which would previously have enabled them to move up to level 4.

I will now give a list of recommendations, which I am sure the Minister will jot down enthusiastically. We should consider providing guaranteed funding for 16 to 18 year-olds who want to do apprenticeships, be they levy funded or non-levy funded, and they should be treated in the same way as 16 to 18 year-olds who attend college and continue into sixth form. Their apprenticeship should be funded, and I would like to know how we are going to resolve that.

The Treasury should increase the overall spending in schools to match inflation. SMEs should be involved in the standard designs and funded under the current levy system, and the Government should commit to a ring-fenced and guaranteed non-levy budget of at least £1.5 billion, and to separate segregated funding approaches between levy and non-levy employers. Apprenticeships need to be more flexible so that they are able to adapt. We need to consider a three-year cycle of standards reform, and that should involve businesses as well.

I have huge respect for the Minister, with whom I served on the Education Committee, but I believe the Government could show their commitment to FE and skills by appointing a separate FE and skills Minister.

3.47 pm

The Parliamentary Under-Secretary of State for Education (Michelle Donelan)

I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on securing the debate, and I warmly welcome his ongoing interest and engagement with the Government’s work on high-quality apprenticeships. It is vital that we advocate for businesses and apprentices alike up and down the country. I am delighted to see so many Members present, and I recognise the work they have already done on this issue. I hope my hon. Friend will agree that we have made huge progress on building a world-class apprenticeship system that creates opportunities for people of all ages and backgrounds, wherever they are in the country. It is great news that there have been 11,000 more apprenticeships in his constituency alone since 2010.

As Members will know, last week was National Apprenticeship Week, our annual celebration of everything that apprenticeships have to offer employers, individuals and society. Many Members present will have heard some inspiring stories. The highlight for me was presenting the awards at Wiltshire College apprenticeship evening, where I met many extremely enthusiastic apprentices of different ages and at different stages of their career. Many Members will agree that the message of optimism in our outreach work, and the determination to challenge the outdated perception that university is the only desirable option for the ambitious and motivated, are quite rightly at the top of our agenda.

Many may have also heard the frustrations. Although we have made a great deal of progress, we cannot be complacent. We know that the levy remains a source of concern for some employers, and many Members spoke about the complexities and inflexibilities of the present system. I want to assure them—in particular, the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy)—that we are keeping the apprentice system and levy under constant review to understand how it works for employers of all sizes, and most importantly how it can deliver for our economy and for social mobility.

On the timing for creating standards, which my hon. Friend the Member for Gloucester raised, we introduced a faster, better programme, which has made significant improvements. In fact, the institute has exceeded its own targets. I appreciate that there is further work to do, but we are making progress.

It is vital to recognise that the levy is at the centre of our ambitious apprenticeship reform. Fewer than 2% of employers pay the levy, but 56% of starts—almost 225,000—were supported by the funds in the employers’ levy accounts between 2018 and 2010. The apprenticeship levy is helping businesses large and small to access the high-quality training that they need. More funding is available for apprenticeships than ever before. We will make more than £2.5 billion available for investment this year—double what we spent in 2010. That point was noted by my right hon. Friend the Member for East Hampshire (Damian Hinds), whose insight from leading the Department was of great use today. His excellent speech highlighted the benefits of the apprenticeship system and how it works in practice.

Robert Halfon

Like the shadow Minister, the Minister is a graduate of the Education Committee—it is a true ladder of opportunity. She spoke about reform of the levy, but are the Government open to the idea of extending it, or are they just looking at reforms to the current system? Could she also say something about whether she has any figures for the budget for apprenticeships over the next few years?

Michelle Donelan

My right hon. Friend gives me more credit than my position is due. I am afraid that I do not set the budget, but I assure him that we are keeping everything under review. As he knows only too well, the apprenticeship levy is worked on in conjunction with the Treasury. We will be considering the impact that it has on businesses, on social mobility and on opening up apprenticeships in the long run, so that the system is not only sustainable but opens door after door for young and older people in our communities.

Hon. Members mentioned SMEs, and I assure them that we are putting those on the same footing as big business. The apprenticeship service includes an award-winning digital service to support employers to manage their funds and choose the training they need from a register of approved providers. We are rolling out the benefits of that service to smaller employers too, moving away from the previous procured contract system to give SMEs more choice than ever over the opportunities that they create. Putting employers that do not pay the levy on the same footing as big businesses will allow them to choose the training providers that suit their individual needs. As that transition takes place, we are supporting SMEs by making funding available for more than 15,000 additional apprenticeship starts this financial year. I hope that addresses some of the points raised by my hon. Friend the Member for Stoke-on-Trent Central (Jo Gideon).

I note the comments of my right hon. Friend the Member for Harlow (Robert Halfon), the Chair of the Education Committee, which I formerly served on. He talked about the issue of gaming, and mentioned second degrees. We have to be really careful, because there are a number of sectors in which we have to recruit more people because we have skills gaps, including the NHS and the police, so we actually want people to do a second degree to get into those sectors. I hear the concerns about that and the MBA debate. I want him and other Members to know that I am personally looking at that to ensure that we get it right.

We are confident that our work to improve the working of the levy will respond to the rigidity of the system, which hon. Members mentioned, and open up more opportunities for individuals and businesses. I assure hon. Members that we will continue the progress with this so we support employers in the sector. However, as my hon. Friend the Member for Gloucester said, starts have fallen since our ambitious reform programme began. We will continue to carefully monitor falls in apprenticeship starts at level 2 and by younger people, as our reforms bed in and the balance of the programme continues to shift. Apprenticeships at level 2 can provide significant returns to individuals and may be the starting point for further progression—or, as my hon. Friend the Member for Henley (John Howell) neatly said, act as the ladder of opportunity. However, it is also vital that young people and those from disadvantaged backgrounds can realise the benefits of apprenticeships at higher levels, so we will continue to look at this.

[Sir Gary Streeter in the Chair]

I want to stress the importance of quality, because apprenticeship standards are central to driving forward our reforms. Employers often told us that the quality of the training was inconsistent and inappropriate. Standards today ensure that apprentices train for a minimum of a year, with at least 20% off-the-job training, and receive a rigorous assessment at the end. All apprentices will be starting on these high-quality standards by the start of the 2020-21 academic year. We listened to employers’ concerns around their engagement in developing the apprenticeships. We have established the independent Institute for Apprenticeships and Technical Education, which was mentioned several times. It is working with employers of all sizes to ensure the standards deliver for them.

When we reach National Apprenticeship Week 2021 and look back on the achievements of the coming year, I am confident that we will still be proud of the progress we are making. By this time next year, all apprentices will be starting on high-quality standards, developed by employers to deliver the skills they need.

Gerald Jones

The Minister talks about the funding for the apprenticeship levy and the scheme, and some reforms, but I ask her to look carefully at the issue with the Welsh police forces, because it is causing real concern and has been going on for quite some time. If she cannot address it today, will she respond over the next few days?

Michelle Donelan

I am conscious of the fact that I need to give my hon. Friend the Member for Gloucester time to sum up. I will certainly meet any Members from the devolved nations to address the issues in their areas or meet my counterparts to discuss them.

By next year, we will have continued our engagement with employers, and will have brought thousands of small and medium-sized employers on to the apprenticeship service. I also want to ensure that we are doing more for those from disadvantaged backgrounds. I am personally passionate about that issue, and I will be driving it forward.

I am grateful for the support of my hon. Friend the Member for Gloucester and for the fact that he has raised the issue of apprenticeships again and is ensuring that it is at the top of our agenda. I am glad that a number of Members share my passion for ensuring that apprenticeships are a true vehicle for social mobility.

3.57 pm

Richard Graham

This has been a valuable debate about the best way to structure the provision of apprenticeships and their financing. There was widespread agreement about their value as the ladder of opportunity and social mobility, and there were different ideas about how best to use and reform the apprenticeship levy.

However, given that a quarter of apprenticeship starts have been lost over the past three years, and that the FSB says that urgent action is needed—my hon. Friend the Member for Stoke-on-Trent Central (Jo Gideon) highlighted the challenges for SMEs—I hope the DFE will reflect on the need for further reform. Although I recognise the Minister’s commitment to apprenticeships and to making the levy work better, further announcements of reform are needed soon, as promised by the Prime Minister. Leaving things as they are will not be enough to provide the skills needed by global Britain or for an ambitious programme of levelling up.

Question put and agreed to.

Resolved,

That this House has considered the effectiveness of the apprenticeship levy.