APP0182


Written evidence submitted by the London Assembly
 

I am writing to you as Chair of the London Assembly Economy Committee to outline our submission to the Education, Skills and the Economy sub-Committee’s inquiry into apprenticeships.  Our Committee has oversight of the Mayor’s economic policies and programmes, and we investigate economic issues of importance to Londoners.

In recent years, we have reviewed progress of the apprenticeship programme in London, and have examined broader labour market trends.  In October 2014, the Committee published Trained in London: Creating more apprenticeships to support the London Economy, which highlighted the relatively poor record that London has in creating valuable apprenticeships and the need to better promote the benefits of apprenticeships in key sectors of the London economy.  In February 2016, the Committee also published The Hourglass Economy: An analysis of London’s labour market, which argued for a revitalised drive on improving the quality of apprenticeships to help address the growing skills gap in the capital.  

More information on these reports and the work of the Economy Committee can be found on our website at https://www.london.gov.uk/about-us/london-assembly/economy-committee.

While London has more jobs than ever before, its economy faces a number of complex challenges resulting from the loss of mid-skilled employment opportunities and slowing productivity gains.  Employer confidence in the skill level of young people entering the labour market is diminishing and employers say they are struggling to recruit sufficient workers for the growing number of high-skilled roles.  Higher skilled roles have increased as a proportion of workforce jobs from 51 to 53 per cent between 2008 and 2015, but with lower investment in workplace training, the result is reduced opportunities for progression of low-skilled workers.

             

To help address this, we believe the newly emerging apprenticeships system must be based on three principles:

 

The Government should examine carefully the experience of delivering the expanded apprenticeship programme since 2010, to ensure the right lessons are learned as it continues to reform the system.

 

 

The target of three million apprentices by 2020, how the Government proposes to achieve this and how this may affect the 'skills gap'

  1. We welcome the Government’s renewed commitment to improving apprenticeships, including setting a target of three million apprenticeship starts by 2020.  However, the delivery of the apprenticeship programme during the previous Parliament—where the Mayor had a target to achieve 250,000 apprenticeships by 2016—produced mixed outcomes. Though the capital has seen a significant increase in the number of apprenticeships created, it still lags behind the other regions and nations of the UK.  Furthermore, the number of apprenticeships created in London has fallen in each of the last three years, and, despite having the second largest population in England, London has shown the fewest number of apprenticeship starts as business interest has faltered.  Without a vastly improved performance from London, the Government’s target is unlikely to be met.

 

  1. Past experience in London demonstrates that businesses require financial incentives and organisational support to establish apprenticeship programmes and sustain them over the long term.  For example, in 2013 the Mayor used £1.5 million to double the Apprenticeships Grant for Employers (AGE) offer from £1,500 to £3,000 for Small and Medium Enterprise (SME) employers in London, to support them with the recruitment of extra 1,000 apprentices.  Backed by a strong marketing push, AGE was quickly over-subscribed in its early stages.  However the addition of European Social Fund (ESF) support to broaden the fund resulted in changes to the funding model and increased bureaucracy, which undermined the benefits of the financial support. Taking on an apprentice can seem daunting to SMEs and therefore any financial support offered to employers should be simple and easy to access.

 

  1. The Government should seek to diversify the type of businesses offering apprenticeships, by increasing the number of larger firms engaged with the system and ensuring that all sectors are involved.  Sectors that are not performing well in London, relative to other regions, include the construction sector, ICT and leisure, travel and tourism sectors.  These sectors provide varying challenges to increasing apprenticeships.  For example, Trained in London found that poor take-up rates in the construction industry may be due to an over reliance on easily available agency workers, with employers having little incentive to invest in apprenticeships or workforce development. 

 

  1. In December 2015, we published A Mayoral Manifesto for the Digital Economy, which highlighted the poor record of creating apprenticeships within the tech sector.  The digital economy has grown from around 250 tech firms in 2010 at the launch of the Tech City initiative, to more than 5,000 today.  Over 250,000 people are currently employed in Inner London’s digital sector.  Despite this rapid growth, London’s tech sector has less than 0.4 apprenticeships per 100 employees, making it the second lowest performing sector in the capital.  Most tech businesses in need of talent are SMEs. Despite a desire to be socially responsible, SMEs offer few apprenticeships, due to cost and the perceived burden of staff who are not yet appropriately skilled. Plus, tech SMEs struggle to influence curriculum content, and thus are less likely to consider apprenticeships fit for their needs.

 

  1. We also noted that the apprenticeship system and the wider Further Education sector are currently undergoing major structural changes, which may impact on the growth of apprenticeships in the short term.  These include the introduction of the apprenticeship levy for large employers, the ongoing review of training frameworks, and new governing arrangements with the establishment of the Institute of Apprenticeships.  The FE sector is also undertaking a series of regional reviews which will have an effect on how apprenticeships are delivered at a local level.  The impact of this much change on apprenticeship figures in the short term is unknown but it is possible that this system may take a while to settle and act as a disincentive for younger people and employers to engage with apprenticeships.  Ensuring these reforms are implemented successfully will be of central importance to the growth of apprenticeships in the future. 

 

Take-up of apprenticeships amongst 16–19 year olds and steps that can be taken to make more young people aware of available opportunities

  1. The Government must ensure that its policies help arrest the stagnation in the numbers of young people under 25 taking up apprenticeships. Since 2010, the growth in apprenticeships is largely driven by those aged 25 and over which now accounts for over half of all apprenticeships in London. Improving careers advice is key to providing a better balance in the future.
  2. The Economy Committee has heard many expert concerns about the quality of the careers advice support now being provided to students by their schools. Few schools, or parents, seem adequately sighted on the potential value of apprenticeships.  This has major implications for younger people: in the absence of a system which provides younger people with the full range of options, the growth of apprenticeships will be much harder, particularly for higher level qualifications.  Our 2014 report on apprenticeships outlined the argument for a strategic role for the Mayor in supporting the development of a pan-London careers advice service.
  3. In London Ambitions, the London Enterprise Panel (LEP) has set out its vision for this type of pan-London service.  It states that every school child in London should have access to impartial, independent and personalised careers education, information, advice and guidance, 100 hours experience in the world of work and an explicit publicised careers policy and careers curriculum in every secondary school and college.  Though the LEP has started to implement parts of this strategy—such as establishing the Enterprise Adviser programme, which recruits volunteers to work directly with schools to improve careers guidance—the London Ambitions service will need to be fully established if the Government is to reach its goal of substantially increasing the number of apprenticeships. 
  4. Improving the careers offer in schools should also help diversify the apprenticeship base in key sectors.  At present, young women are vastly under-represented in apprenticeships in key sectors.  A recent report from the Young Women’s Trust highlighted the significant disparity in numbers of women apprentices in sectors like engineering, construction and ICT.  Not only are young women poorly represented in apprenticeships, but they also tend to be paid less than young male apprentices and are more likely to be unemployed at the end of their training. 

 

The quality of, and minimum standards for, apprenticeships, and how standards can be enforced

  1. The Committee is concerned that the target driven approach adopted by the Government has led to a reduction in the overall quality of apprenticeships.  Apprenticeships should mean a job and training, with the prospect for ongoing employment on completion, yet too many apprenticeships fail in this regard. 
  2. Since 2010, the increase in Government funding has seen more than two million apprenticeships taken up. However, this surge in numbers has been mainly in sectors such as customer service, retail, administration and care. According to OFSTED, in recent years, its inspectors have seen too much weak provision that undermines the value of apprenticeships, especially in the service sectors and for learners aged 25 and over. To repair this damage, the Government will have to demonstrate that its improvements deliver real benefits for young people and business.
  3. In order to make apprenticeships more attractive to younger people, the Government should also monitor the conditions under which young people undertake an apprenticeship.  According to figures from the Skills Funding Agency, over half of all apprenticeships are not completed, representing a high amount of effort and money wasted for individuals, companies and the Government.  This implies that large numbers of young people are starting apprenticeships without having a clear idea of what it entails, or finding the conditions are unworkable.  We share the Mayor’s position that all apprentices should be paid a living wage, particularly in London where the cost of living and low apprenticeship minimum wage may act as a disincentive for younger people. 
  4. It is vital that the Government prioritises a significant increase in the number of higher level apprenticeships.  68 per cent of apprenticeship starts are at level two or below, a figure which has grown by over 20 per cent in the last five years.  Many employers would prefer apprenticeships that deliver a Level 3 qualification (rather than a level 2), reflecting the higher-skill requirements of the London economy.
  5. The Government should encourage a strong commitment from the Higher Education sector, and particularly the Russell Group universities, to provide Higher Apprenticeships which can lead to a Bachelor or even a Master’s degree. Linking the aspiration of a “good university place” with vocational training will bring together schools’ desires to be seen to be providing high quality career pathways for their students with practical job focused training. This is particularly important for London where all the research shows that half the jobs are going to require Level 4 skills and above. Our report highlighted national figures for 2013/2014, which showed that nearly 10,000 higher-level apprentices had been offered, but only 600 London residents had actually started one – a depressingly low figure.
  6. The Government’s target of three million apprenticeships is welcome.  However, in order to be effective in London, issues arising from the previous expansion of the apprenticeship system need to be addressed.  This includes targeting support and funding at sectors which have the most potential to grow, and addressing the best way of supporting SMEs to take on apprentices every year.  Better careers advice will also ensure greater numbers of potential candidates, from more diverse backgrounds, are aware of the apprenticeship offer.  It is up to the Government to ensure that quality is of paramount importance, ensuring that the type of apprenticeships offered are linked to the needs of employers and the future growth of cities and regions.

 

 

March 2016