Matthew Hancock – 2014 Speech on Apprenticeships

Matt Hancock
Matt Hancock

Below is the text of the speech made by Matthew Hancock, the Minister of State for Skills and Enterprise, in London on 2nd June 2014.

It’s a great time to be talking about apprenticeships.

Apprenticeships are on the rise. For the first time, a whole new generation are seeing apprenticeships as the route to a brighter future.

As we hear the welcome news that our economy is on course to grow faster than any other advanced economy, as we hear that employment is at a record high and wages catching up with inflation, now is the moment to enhance, strengthen, and back our apprenticeships and our apprentices to make real this goal: that all young people when they leave school or college should go on either to university or into an apprenticeship.

Now is the time to reform our apprenticeships system, to make it truly world-leading and to put apprentices at the very forefront of economic growth in the years to come.

So that side by side with university, apprenticeships are the norm for young people leaving school.

Alongside that goal, I want apprenticeships to become the first choice for businesses, professions and employers of all kinds across the country to train their next generation of skilled staff.

And increasingly the first choice for Further Education providers, as all the evidence shows that this intrinsic linking of work with training works to prepare people for their career.

I know that that is what everyone in this room is working hard to achieve and I want to thank you for all of your efforts.

We must remember how far we have already come in driving up the quality of apprenticeships over the last few years.

When I started in this role, so-called ‘programme-led’ apprenticeships meant that some of our apprentices did not have the all-important link to a real employer that must be at the heart of every apprenticeship.

Some apprenticeships lasted 6 months or less, providing minimal training for entry level roles, rather than aspiring to create the highly skilled professionals of tomorrow.

And perhaps most worryingly of all only half of apprentices in England reported receiving off-the job training and 1 in 5 said that they received neither on-the-job nor off-the-job training.

We have tackled these issues head on to drive up quality.

Now, all apprenticeships must be real, paid jobs from day one. They must last for at least 12 months and they must involve meaningful on-the-job training.

And this is already paying off.

Since 2010, we have stripped out over 172,000 short duration apprenticeships and almost 14,000 so-called ‘programme-led’ apprenticeships without jobs.

I was told, with certainty and passionate belief, that tackling poor quality would lead to fewer apprenticeships.

But has raising the bar on quality dented the number of opportunities available?

No. The number of people participating in apprenticeships is at a record high.

Lower quality apprenticeships have been replaced by higher quality apprenticeships.

Having risen sharply, the number of starts has remained at half a million even as low quality provision was stripped out. As duration has increased, the numbers participating in an apprenticeship have continued to rise.

Over the last 4 years, the number of ‘full apprenticeships’ – excluding those of under a year or without a job – that number has doubled among 16 to 18 year olds and trebled overall.

The proportion of 16 to 18 apprenticeships is rising, and the fastest growth is in higher level apprenticeships, preparing young people to become the next generation of pilots, accountants and space engineers.

By raising standards, ensuring apprenticeships are rigorous and demanding, we prove their worth to employers and to potential apprentices.

And the truth is this: driving up rigour and responsiveness creates more high quality apprenticeships.

The number of employers offering apprenticeships has risen every year of this Parliament, and the number of small employers involved is at record levels.

We are putting rocket boosters under the Apprenticeship Ambassador Network, getting more employers and the idea of apprenticeships into schools and working to change the culture of the whole country. And today we are launching a new online toolkit to help employers in recruitment of people with disabilities into apprenticeships. We are on track for 2 million apprenticeship starts over the Parliament.

We are getting behind apprenticeships like no government before us: making changes so they are an unimpeachable part of our country for the future.

And I want to go further: expanding higher apprenticeships – funding 20,000 more and providing an extra £20 million for apprenticeships at degree level, all the way up to the equivalent of a Masters.

So we are not just making a reality of apprenticeships and university becoming the norm young people leaving school, but combining the 2 to offer the best possible start to careers.

And as we drive up standards in apprenticeships, so we must also prepare young people with the skills, experience and behaviour employers are looking for.

AELP was one of the first voices calling for a programme for young people not yet ready for an apprenticeship or a job.

And in collaboration and consultation with you, in August last year, we introduced Traineeships. From policy idea to initial implementation in just eight months, we wanted to get the programme started, and grow and refine it based on what we learned. In the first 6 months over 3,000 traineeships started. More and more employers getting on board. Momentum is growing. From this coming academic year, we’re extending traineeships to young people up to 24, and making delivery more flexible, while retaining the controls to ensure a high-quality programme, helping more and more young people prepare for the world of work.

The changes that we have made mean that today we have an apprenticeships programme that we can all be rightly proud of. Those of you, providing apprenticeships today, are providing not just a bigger, but a higher quality programme than ever before.

There are more people in apprenticeships in this country today, working for more employers and in more sectors, than ever before.

Apprenticeships are popular with young people and that popularity is growing.

Top apprenticeships are more competitive than undergraduate places in the best universities and last year alone, apprenticeship applications rose by almost 50%.

Most importantly, they are also popular with employers.

More than 95% of organisations that employ an apprentice tell us that they are reaping the benefits in areas like increased productivity, improved staff morale and streamlined recruitment.

But I am not restful. While there are more employers involved than ever before, there are millions more that aren’t. Yes, 10% of businesses now employ an apprentice. But that means 90% don’t.

We want to build on the changes we have already made to place employers at the centre of apprenticeships and to further drive up quality.

We want to make sure that every single apprentice receives the high quality training that they need. That every apprentice who completes is a fully rounded professional in their field.

I think of our apprenticeship reforms like the digital switchover for television.

The existing apprenticeships programme, like analogue television, is popular, successful and loved by millions.

But technology is moving on and we have a unique opportunity to step up, to switch over and to create a high definition programme that will lead the world in the decades to come.

And all this is being driven by one simple insight.

For too long, the antennae of the apprenticeship system have been pointed towards government and towards committees that have tried their best to act on behalf of employers. What if we were to retune the system to pick up directly on the clear signals from employers about what they need.

To encourage employers of our apprentices to work together with providers to design the training they receive.

That would create apprenticeships that are higher quality than ever before and that deliver exactly the skills and knowledge that employers need for their future workforce.

Automatically responsive, with the taxpayer, employers, and apprentices working alongside each other.

This isn’t a vision of the far away future. It’s already becoming a reality in this room and right across the country.

More than 400 employers are already part of our Apprenticeship Trailblazers. Large and small companies working together to design new standards – developed by employers for employers.

Some of the most successful companies in the country, from PwC, Microsoft, Jaguar Land Rover and BAE Systems to smaller businesses such as The Test Factory and Walter Smith Fine Foods and many, many more are already at the forefront of this work.

The first 11 new apprenticeship standards were produced by these companies in March, creating a world-class basis for occupations from software developers to engineers, aerospace fitters to lab technicians.

They are working together to design rigorous systems of assessment for their future apprentices.

In each case these will include a clear test at the end of the apprenticeship, ensuring that every successful apprentice has the skills, knowledge and behaviour required to be a fully rounded professional in their field.

And in each case it will include grading, giving apprenticeships the stretch and kudos they need to take their place as the equal of other routes to a successful career.

The Trailblazer employers are also working with training providers including colleagues in this room.

And my message to you, to the providers of training is very clear:

You have a crucial role in the new system. Working with employers yet more to deliver the training their apprentices need to reach the rigorous new standards.

Today, you provide more than just training. You are the salesforce. You guide employers through the system. At your best, you work with them to design training that suits their needs.

In the new system, the role for these wrap around services will be in many cases greater, not smaller.

You will be the salesforce for new apprenticeships. You will support employers, responding to their needs, building long term relationships between employers and the training they and their apprentices value.

I see this in the best providers now. I want to see it in all providers in the future.

The cost of bringing any product successfully to market is made up only in part – and often a minority part – by the raw materials. The design, the marketing, the logistics, these are all part of the price of any product – and I have no doubt they will be part of your future apprenticeships too.

So my vision is clear. Committed employers leading every aspect of the apprenticeship system to ensure that it supports growth across the economy. Enthusiastic providers delivering the highest quality training so that apprentices can reach the rigorous standards employers set.

And our reforms are gaining momentum.

Following hot on the heels of the first Trailblazers, employers from 29 more industries came forward to develop new apprenticeship standards in our second phase, which will be submitted and published this summer.

We will not stop there.

We will launch a third phase of Trailblazers in September. So if employers in the industries you work with want to get involved, take control and design apprenticeships that work for you, just let us know.

By maintaining this momentum, we will see the first starts on these new apprenticeship standards by the start of next year.

By September 2017, every apprenticeship start will be on a new employer-designed standard.

Building on Industrial Partnerships, tied to the Industrial Strategy, joined up across the economy.

But we are not just putting employers in charge of designing apprenticeships. We are also giving them control over how they are funded.

At the moment, government – by funding training providers directly – holds the purse strings.

How different would it be if employers were able to apply exactly the same principles to apprenticeship training as to any other business decision. Discussing and negotiating directly with you to agree the best quality training to meet their needs.

That is exactly what our changes to the funding system will achieve. By putting funding in the hands of employers, they will be free to work with you to secure the most effective opportunities for their employees.

It doesn’t mean every employer will negotiate every price. When I go to Tesco I don’t negotiate the prices, and I guess you don’t either. But they know sure as anything I can go to Waitrose next door if I want, and that drives value for money. Getting away from a price fixed by government is a key part of these reforms – to drive value and get the most out of the public funding that’s available. Instead of looking to government and regulators, industry will set new models of delivery, using new technology to the full, innovative, responsive, and led by employers.

At the same time, we will dramatically simplify the funding system for employers and providers alike.

Just as we are replacing apprenticeship frameworks hundreds of pages long with short employer-designed standards, so we will replace hundreds of funding rates and pages of guidance with a simple grid on a single sheet of A4.

We are working already with Trailblazers to test the funding approach over the coming year, based on some clear and simple principles.

These Trailblazing funding rates are not set in stone. As the saying goes, values can go up as well as down.

But they are the rates we will use for the first Trailblazers. They are based on 3 clear principles.

First, business and government share the benefits of apprenticeships and should therefore share the costs. For every £1 an employer puts into training an apprentice, we will provide £2. These employer co-payments will be mandatory.

Second, to ensure the best value for the taxpayer, we will cap the amount of government funding. Five simple caps broadly based on the training required for that apprenticeship standard. These are not rates: they are caps.

Third, we will pay an additional incentive payment in 3 key areas:

– for completion of the apprenticeship

– for small businesses with fewer than 50 employees

– for apprentices aged 16 to 18

We will fund Higher Apprenticeships on exactly the same basis as any other. This will provide significantly more funding – and much simpler funding – for apprenticeships at these levels.

In total, we will provide substantial funding alongside employers – up to £29,000 for the most stretching – although the majority will be a lot lower – embedding rigour and enabling our new apprenticeships programme to be truly world leading.

As you know, in March this year, we set out 2 options for how the funding will get to employers. One would use the Pay as You Earn system, building on the existing model which employers of all sizes know and use.

The other would set up a new system of Apprenticeship Credits, pooling government and employer funds in an online account which employers can use to buy training for their apprentices.

I want to thank everyone – including many in this room – who took the time to respond to our consultation.

We are considering all the responses now and taking the time to get this right.

Organisations representing over half a million businesses responded to the consultation supporting the principles of our funding reform. We will take time, to get the details right. We will ensure the system is super simple for employers – especially small employers – and ensure you can work with employers so they don’t take on extra burdens. I never forget that I am also the Minister for Small Business. The new system must work for small businesses too.

But gone are the days when an employer doesn’t know the value of training paid for by the taxpayer. Gone are the days when employers’ contributions go uncollected.

The principles of employer co-funding, and a price set by value not by government, are crucial for the future of employer ownership.

Employers pay for what they value, and value what they pay for. Co-funding will lead to richer relationships with employers, deeper collaboration and partnership. And higher quality with generous government subsidy that can attract many of the 90% of employers who don’t yet have apprentices to join our movement for apprentices. And as you know, once employers take on an apprentice, they tend to get hooked.

I have heard the voices raising concerns. Some are the same who said the measures we’ve taken so far to drive up quality would hit numbers. Some of the concerns I share. We must make the system work for small business. It must be super simple. I hope this robust reassurance shows that we will listen, but we are absolutely determined to proceed.

For this is a huge opportunity. It’s a huge opportunity for you, to engage, grow, and deliver for your customers: the employers and apprentices who work for them. It’s a huge opportunity, for Britain to become that high skilled economy we all crave and apprenticeships that are the envy of the world.

And it’s a huge opportunity to millions of future apprentices, to know that apprenticeships will deliver, higher quality across the board, skills relevant to the future, and give everyone in our country – everyone – the opportunity to reach their potential.

So get alongside. Let us go forward together.

The road ahead will not be easy, but for that goal, it is surely worth travelling.