AAT0078

Written evidence submitted by the CBI

1. The CBI welcomes the opportunity to respond to the Education Committee’s inquiry into apprenticeships and traineeships for 16-19 year olds. As the UK’s leading business organisation, speaking for some 190,000 businesses that together employ around a third of the private sector workforce, the CBI knows that improving our education and skills systems is a key economic priority. With offices in Brussels, Washington, Beijing and Delhi to communicate the British business voice internationally as well as across the UK, we are aware of the pressing need to address the youth unemployment challenge if the UK is to thrive in an increasingly competitive global marketplace.

2. The changing shape of the UK economy makes equipping young people with intermediate and higher skills more important than ever. As it is increasingly difficult to move between lower, intermediate and higher skilled jobs, there is a real premium placed on acquiring the right skills and experiences early in working life. In this response, we argue that:

• Future growth in the UK depends on the development of a world class vocational education system…
• … and getting the implementation of the current apprenticeships reforms right is the key to success
• To increase employer demand, the focus must be on quality and responsiveness…
• … and for young people, we have to fix careers advice
• Once the reforms are established, policy stability will then be required to deliver long-term rewards for all

Future growth in the UK depends on the development of a world class vocational education system…

3.                The changing nature of the UK economy is driving increasing demand for more and higher skills. According to the 2014 CBI/Pearson Education and Skills Survey, demand for higher and intermediate skills is expected to increase significantly in the next 3-5 years. This is particularly true in sectors that rely heavily on apprenticeships, such as engineering, manufacturing and construction.[1]  More broadly, there is a well-reported trend towards jobs in many sectors requiring the level 3 and level 4 skills that apprenticeships can be a proven route to develop.  

4.                Business is clear that the solution to the UK’s skills gap cannot be found in universities alone. While a university education is still a great entry point to a fulfilling career, the economy needs a more diverse range of skills. In Tomorrow’s Growth, the CBI set out the employer perspective on the need for more learn-while-you-earn options such as apprenticeships.[2] Vocational education should be directly responsive to the needs of the labour market. It should be specialised, and demand-driven. It must be truly gold-standard, and understood as such by students, parents and employers.

5.                If used in the right way, investment in vocational education delivers great returns for students, employers and the taxpayer. While estimates of the overall level of return on investment differ, it has been calculated that for every £1 spent on an apprenticeship the economy as a whole benefits by between £18 and £28. At level 2, the return can be as high as £35 for every £1 spent.[3]

6.                For business, apprenticeships must be rigorous, relevant and provide apprentices with the skills, knowledge and behaviours required for specific roles and occupations. In short, they must be a route into employment. This requires an education system that properly prepares young people to take that first step into the world of work. However, our school and college system is failing many young men and women, for whom an apprenticeship is simply out of reach. We have outlined the business vision for education First Steps[4] which sets out the reforms needs to deliver a school and college system that better prepares young people for success in work and life. But we also need programmes, like traineeships, to act as a bridge into apprenticeships and employment for those let down by the education system. The CBI have recently addressed traineeships in response to a government consultation on funding. This consultation response is attached as an appendix to this submission for information.

… and getting the implementation of the current apprenticeships reforms right is the key to success

7.                In some sectors, for some people, the apprenticeships system currently works well, and reforms should not break what works. Yet the number of people taking vocational courses and apprenticeships is far below what the economy needs. While the expansion of apprenticeship numbers since 2009 is to be welcomed, the majority of that expansion has been focused on older learners already in work doing training that is now classified as an apprenticeship.[5] This is why the reforms have been welcomed by industry.

8.                Businesses strongly support the move to a demand-led apprenticeships system, something the CBI has advocated for a number of years. 84% of employers, according to our education and skills survey, want greater ownership of the skills agenda and control of the design and delivery of workforce training. The reforms currently underway represent an excellent opportunity to reconfigure the delivery of skills, making providers more responsive to evolving demand. Through better planned and targeted training that reflects the needs of employers and industry, apprenticeships gain value and become more widely acknowledged as legitimate, respected pathways to jobs and skills.

9.                But there is much work still to do if the reforms are to be a success. An effective apprenticeship system must deliver the skills that industry and the economy need rather than those deemed most appropriate by government or training providers. The trailblazers show that there is potential to do this. The process of developing new standards has shown the hunger of employers for a system that really reflects their needs and is easy to understand. More than 400 employers have so far engaged in the development of standards, giving up time and resources to lead the way. The next phase is soon to be announced, with many new firms getting involved and many of those who have already been engaged coming back for more.

10. As we have previously argued, simplicity for businesses should be the founding principle of the new system – from standard development, to apprenticeship delivery and certification. Our education and skills survey found that the top three factors that would encourage greater employer engagement with apprenticeships are: qualifications relevant to business needs; employer control of government apprenticeship funding; and reductions in bureaucracy.[6] The need to maximise simplicity should underpin every decision taken on apprenticeship reform, along with the need for the system to work well for firms of all sizes and in all sectors.

11. The principle of simplicity is particularly pertinent for the smaller and mid-sized businesses that will provide the majority of apprenticeships. For smaller businesses and those spread thinly around the country, negotiating training provision and administering apprenticeships is a big challenge, as illustrated by Exhibit 1 below. To ensure that employers are well connected with apprentices, the government must develop support arrangements, encouraging the use and creation of Group Training Associations and Apprenticeship Training Agencies, alongside its planned funding reform. An effective apprenticeship system should encourage clustering and cooperation in sectors, regions and supply chains. Supporting the development of mechanisms that make taking on an apprentice easier is far more likely to lead to success when paired with direct funding than if the strategy is restricted to reforming the funding and framework alone.

To increase employer demand, the focus must be on quality and responsiveness…

12.            The focus of all political parties continues to be on the quantity of apprenticeships delivered. This is wrong. If we can get the quality right – meaning relevant, rigorous training that produces people ready for skilled full-time employment – the quantity will take care of itself.

13.            For business, an apprenticeship is not an end in itself - but a vehicle to develop skills, knowledge and behaviours and a route into a long-term, fulfilling and productive job. This means that there is an optimal number of apprenticeships for the economy at any one time. This optimal number can be achieved first by removing the barriers to taking on apprenticeships (such as excessive bureaucracy or lack of awareness) and by ensuring that the funding of apprenticeships is shared by the government, the employer and the apprentice, reflecting the proportions in which each benefit. Once barriers have been removed, and financial support put in place, the number of apprenticeships will reflect the economy’s capacity to absorb them. While the barriers that still exist mean we are not currently at this capacity, the optimal level can be increased in the long-term only by raising quality.

14.            Artificial incentives to take on more apprentices is not the best way to raise employer engagement or to drive long-term success for young people. For example, mandating apprenticeship numbers for businesses of certain sizes, or for those bidding for public contracts, may result in more apprentices but, if there is no business demand, are less likely to provide a route into employment. Such approaches also call into question commitment to the principle of employer ownership.

15.            The current process of reforms is working to drive up quality. Properly implemented, the reformed system will allow employers to demand exactly what they want from training providers. And, well designed, the bureaucratic barrier can be lowered. But the awareness and esteem issue remains, and it is urgent that this be addressed.

…and for young people, we have to fix careers advice

16. The status of apprenticeships is still a problem, although we are starting to see that change as young people look for alternatives to expensive higher education. The status of apprenticeships can best be enhanced by delivering a system that leads the vast majority of apprentices into fulfilling jobs that have good opportunities for progression. It is vital that apprenticeships and other vocational routes stop being perceived as a “second-class” option - for those who do not perform well academically. We must aim for parity of esteem between apprenticeships and academic routes, such that a student who achieves well academically may legitimately choose to take on an apprenticeship instead of attending university. Improving quality and the number of apprenticeships at a higher level is part of the answer, but we also know that many young people do not even consider apprenticeships as an option, and are not encouraged to do so. 
17.            Careers advice and guidance in England has been inadequate for some time, and recent changes that have placed the burden solely on schools have failed.[7] Current careers advice drives the majority of young people down a few narrow paths.[8] In the recently published Future Possible the CBI outline how this has to change in order to achieve parity of esteem and widen the pipeline of young people choosing vocational routes.[9] Our answer is the creation of local brokers – centrally funded but locally organised people whose job is to create connections between local schools and colleges and businesses. This will facilitate the expansion of work inspiration opportunities and work experience placements, as well as making careers advisors better informed about the range of options the local economy provides.

Once the reforms are established, policy stability will then be required to deliver long-term rewards for all

18.            The great attraction of the changes proposed by the current government for many businesses is the idea that, once delivered, there will be an extended period of policy stability which will give companies, providers and others time to build the value of the apprenticeship brand. This should be achievable given the broad consensus that has formed around the Richard Review reforms.

19.            A period of genuine policy stability can only be delivered if government has ensured that broad consensus exists about the path of policy. On standards, we believe real progress has been made through the trailblazers. On funding, however, it is clear that a consensus has not been reached, in part due to the lack of clarity on the level and structure of government co-investment. This emphasises again the need for piloting and phasing of the government’s plans. While apprenticeships have the potential to be valuable for firms in the long-term, they are initially expensive. Taking on an apprentice is a long-term decision, and one that requires confidence about the future business environment. If there is doubt about the sustainability of the programme introduced as a result of these reforms, businesses are likely to defer that investment. This could be particularly damaging when the proposed reforms rely on the engagement and activity of employers from the start. See Exhibit 2, below, for two typical responses from employers.

20. Business needs reassurance from government that sufficient time and resources will be committed to ensure that the system has been thoroughly thought-out and piloted, with decisions made on funding mechanism and funding policy together - not separately. Business will judge the next government on its commitment to seeing the reforms through to their conclusion and then allowing them to become deeply embedded. If this can be achieved then we can allow the system to grow organically, with changes only coming as standards and assessment methodologies require updating to reflect the evolving economy.

21.            Much has been invested by government and industry to make the current changes a success. And if the reforms are seen through to a successful conclusion, then we will have a vocational education that can set the UK up for sustained growth and prosperity. It is critical that apprenticeships are properly supported and truly responsive to economic need rather than political imperative.

APPENDIX

Traineeships Funding in England: Funding Reform Technical Consultation

CBI Response

22. The CBI welcomes the opportunity to respond to this consultation on reforming the funding model for Traineeships in England. As the UK’s leading business organisation, speaking for some 190,000 businesses that together employ around a third of the private sector workforce, the CBI knows that improving our education and skills systems is a key economic priority. With offices in Brussels, Washington, Beijing and Delhi to communicate the British business voice internationally as well as across the UK, the CBI is aware of the pressing need to address the youth unemployment challenge if the UK is to thrive in an increasingly competitive global marketplace.

23. A lack of work readiness and the failure of our education system to equip young people with the skills that employers value are two major contributors to youth unemployment. The Traineeships programme, properly focused and supported, can play an important part in overcoming these two challenges. In this response, we argue that:

• Traineeships can be flexible tools that help ease the transition into work, and they should be available to all who can benefit…
• …but they cannot be an end in themselves, and must deliver valued outcomes
• To encourage take-up, organising and delivering Traineeships must be as simple as possible…
• …and they must reflect business needs

24. The CBI has publically supported the Traineeships programme, most recently through a joint statement released with the TUC to mark the one-year anniversary of the programme.[10] While traineeships are only one part of the answer, well-designed offerings can have positive results. The intention of the current consultation is a timely attempt to ensure a higher proportion of traineeships realise the programme’s goal.

Traineeships can be flexible tools that help ease the transition into work, and they should be available to all who can benefit…

25. The issue of youth unemployment in the UK is of vital importance to our social and economic future. 767,000 young people are currently unemployed in the UK, and we know that an extended period of unemployment while young can have serious long-term implications for wage and employment potential.[11] The CBI’s work on youth unemployment has been brought together in a new publication entitled Future possible: The business vision for giving young people the chance they deserve. The publication is included with this submission and should inform the wider development of policy around Traineeships.

26. Good traineeships can help to address the key elements that limit the ability of young people to progress into higher training and work. In responding to the 2014 CBI/Pearson education and skills survey, employers told us that the most important factors when recruiting school and college leavers were attitudes to work (85%), general aptitudes (63%) and literacy and numeracy (44%). The combination of maths and English study and quality work experience can therefore significantly impact a young person’s employment prospects.

27. For this reason, the CBI supports the opening up of Traineeships to a broader cohort. While the focus should remain those 16-18 year olds that do not have a Level 2 English or maths qualification, where there is demand from employers to take on trainees from older age groups this should be encouraged. 19 to 24 year olds with a full Level 2 qualification may still require support into work.

…but they cannot be an end in themselves, and must deliver valued outcomes

28. Improvements to literacy and numeracy, and developing the attitudes and aptitudes that help someone succeed in life are very valuable in themselves - but, for employers, the ultimate outcome for Traineeships must be employment. The process of reaching that goal may not end on completion of a traineeship - and it is right that apprenticeships and further training are included in the definition of a successful outcome. But young people should not be allowed to become trapped in endless cycles of qualifications and courses that do not advance their employment prospects.

29. It is important that self-employment is included as success. The changing nature of the labour market has resulted in more people choosing to take on the challenge of starting their own business.[12] This form of self-employment is supporting the economic recovery and should be encouraged. As well as providing people with workplace experience, traineeships at their best should be inspirational, and those who come up with new ideas should be supported. It is a reality however that new enterprises take time to build capital or make a profit. If the eventual timescale for measuring success is short, therefore, proof of trainee self-employment should be sufficient, without the need to demonstrate profit.

To encourage take-up, organising and delivering Traineeships must be as simple as possible…

30. The impetus for the expansion of Traineeships is almost certainly going to come from training providers. While many employers declare a great interest in providing work experience opportunities and participating in the development of their future workforce, small and mid-sized businesses do not have the time or resources to seek out trainees. This means that, while it is important that outcomes are incentivised by the funding model, creating excessive bureaucracy for providers must be avoided.

31. For this reason, the data required to demonstrate successful progression should be determined by what is easily available. Sustained employment with opportunities for further career progression should be the ultimate goal for all traineeships. However, while the burden falls on the provider, shorter-term measures are more appropriate. It is unrealistic to expect providers to be able to easily stay in contact with trainees beyond the first six months after completion. Making funding too difficult to access is not in the interests of providers, potential trainees, businesses or the health of the programme. Where the burden of reporting can be passed on to other organisations, such as the National Apprenticeship Service, this should be explored. In time, as it becomes possible for the government to match ILR and WPLS data, measures that incentivise efforts to create long-term, sustainable employment should be introduced.

…and they must reflect business needs

32. The biggest limitation on Traineeships to date has been awareness and engagement from businesses. Many are simply unaware of the programme, or would prefer to operate their own work experience programmes outside of the confines of the official channel. In the same way that the expectations of the programme cannot be too burdensome for providers, employers must be free to deliver a workplace experience that makes sense for their business. While we highlighted the elements that make up a high-quality traineeship in our recently published statement, traineeship opportunities should not be lost by mandating particular elements of the employer offering.

33. Developing the employer voice in Traineeships should be at the heart of reforms. Employers are best placed to know what skills are needed to be a success in work, and providers should be encouraged to engage more deeply with employers in the creation of individual traineeship offerings. Tailoring skills development to the requirements of employers has a number of benefits. It would:

• ensure that the skills developed are those that will be valued by the market, and not just those that the government or providers consider most appropriate;
• engage businesses more deeply, thereby encouraging them to enhance the quality of the work experience element; and
• increase the likelihood that employers would take on trainees as permanent staff upon completion of the traineeship, because they would have acquired the most relevant skills.

34. Focussing on outcomes is an important step towards strengthening the Traineeships brand and making the programme a valued tool for progression from education to employment. Giving employers ownership of the programme, and the ability to shape the outcomes, will be what ultimately allows Traineeships to become the preeminent passport to success.

August 2014