We need to focus on good apprenticeships

Expanding provision should not be at the expense of quality.

Young people in the UK are being squeezed on two fronts. They face a difficult labour market, with youth unemployment now over a million and continuing to rise. And, for those who don’t go to University, the education system does not always perform well. In her review of vocational education, Alison Wolf argued that many - but by no means all - vocational qualifications offered ‘little or no labour market value’.

In response, politicians have rediscovered apprenticeships. There are good reasons for this. Ministers like to announce impressive numbers of new apprentices starting work. They feel like they’re addressing a current problem (youth unemployment) while solving a long-standing one (education for those who don’t go to University). And apprenticeships have a reassuring retro sound – reminiscent of the past glories of manufacturing or the strength of the German economy. They are the most recognisable and respected brand left in vocational education. But how exactly will apprenticeships address youth unemployment and the shortage of meaningful vocational qualifications?

Nobody questions that, in theory, apprenticeships are a good thing. But they are diverse and some apprenticeships are better than others. While apprenticeships are an important part of efforts to address the UK’s economic problems, the pay off will be in the long-term only. And, unless they are handled cautiously, political efforts to expand the system may reduce the quality.

In the UK, we tend to be sniffy about vocational education. The strength of our Universities, and declining employment in manufacturing, means we have favoured other parts of the system. While the UK provides clear and well structured pathways into work for those who do well at school, routes are less clear for those who don’t. Past attempts at reform have often been fudged. As the Wolf report argued, many vocational qualifications in the UK are essentially ways to postpone young people’s entry into the labour market.

Apprenticeships are good when they provide a route into employment and meaningful training for those who do not want to go to University. They offer vocational training, alongside genuine mentoring and career progression, which can help young people enter the labour market and succeed throughout their careers.

This does not mean they can, or should, be seen as a solution to youth unemployment. The ‘gold standard’ apprenticeships at Rolls Royce or BT tend to be oversubscribed many times over – Michael Gove has argued that some are harder to get into than Oxbridge. This is good as it suggests they are valuable qualifications. But it also makes them unlikely to help the young people least likely to enter the labour market. Those leaving school with poor prospects are as unlikely to get into the top apprenticeships as they are into the top universities.

But there are apprenticeships on offer at many levels. The most advanced apprenticeships – Higher Level Apprenticeships – are the equivalent of a foundation degree. Intermediate Apprenticeships are the equivalent of a few GCSE’s. Some apprenticeship programmes successfully link meaningful work and valuable training, others don’t.

Some have raised concerns that as the number of new apprenticeships expands, fewer of them will be of a high quality. In February, David Cameron proudly announced that the numbers of young people starting apprenticeship in 2011 was 63 per cent higher than in 2010. Yet recent stories of poor quality apprenticeships in low skilled employment, with cursory opportunities for training, threaten to devalue the brand. The recent controversy around Morrison’s was one example.

Alongside such anecdotal evidence, there has been a measurable change in the type of apprenticeships which are underway. As the number of new starts has increased, the average length has decreased: according to the National Audit Office, 19 per cent of apprenticeships started in 2010/11 lasted less than six months, up from 12 per cent in 2008/9. In response, the government has announced that new apprenticeships will have to last 12 months or more. But other issues, such as quality of training, remain problems.

Vocational education matters – and this is why keeping up quality is so important. And few doubt that apprenticeships, when done well, are good. Apprenticeships are often a good pathway for young people into work, ensuring that they can develop meaningful skills alongside the work experience which is crucial in today’s labour market. But in a rush to increase quantity there is a risk that quality may be affected. Given the lack of options for young people in the labour market, that would be a bad thing.

David Cameron meets a Waitrose apprentice. Credit: Getty

Neil is the Senior Economist at The Work Foundation


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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.