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Westminster Hall

Wednesday 21 July 2010

[Martin Caton in the Chair]

National Apprenticeship Scheme

Motion made, and Question proposed, That the sitting be now adjourned.-(James Duddridge.)

9.30 am

Richard Graham (Gloucester) (Con): I am grateful to Mr Speaker for enabling me to re-secure this debate. I am also grateful to him and many others for their kind reminders about its starting time, which, together with the help of three alarm clocks and several telephone calls from my wife in Gloucester, have ensured that this parliamentary apprentice has already rehearsed his speech in this Chamber this morning. I am sorry that the shadow Minister for apprenticeships, the hon. Member for Cardiff West (Kevin Brennan), is unable to be with us, but if he has any difficulties with a faulty printer, I am available to offer assistance.

It is important to hold this debate on apprenticeships, and I am grateful that the Minister, who knows the subject so well, is here to respond. It is telling that the majority of Members here are Conservatives. One irony of the past 13 years is that the previous Government could have done so much more to promote the importance and perception of apprenticeships. I have not found a single secondary school in my constituency that has made presentations on apprenticeships to its pupils, but they all worked assiduously on the previous Government's drive to get 50% of students into university-a target that was never achieved and which has thankfully now been dropped. That took place when the previous Government allowed manufacturing to decline at its fastest pace ever and youth unemployment to grow to its highest ever. Those sad facts are not unrelated.

Let us be clear about what is at stake. Without apprentices, our national and local capability to do and make things, and our ability to stem the decline in manufacturing and retain, if not improve, our status as the world's sixth greatest manufacturer will simply not produce results. Only 10 years ago, Gloucestershire manufactured 24% of its GDP; today, the figure is 16%. That is not because our service sectors have grown, but because manufacturing has shrunk faster than anything else. That is not acceptable. The situation must be turned around, and apprentices are the key, just as they are to reducing the 18%-almost one in five-of our 16 to 24-year-olds who are neither learning nor earning. If ever there was a time to support apprenticeships, not only in the manufacturing and construction sectors, it is now.

It is true that the previous Government did some rebranding and restructuring work on apprenticeships, and put some taxpayers' money behind that.

Alison McGovern (Wirral South) (Lab): The hon. Gentleman makes some interesting points about the previous Government's work, but is he aware that in the borough of Wirral between 1997 and 2008, the
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number of apprenticeships rose from 90 to 2,000? His characterisation of the past decade as one of no growth is, certainly in my area, a mischaracterisation.

Richard Graham: I thank the hon. Lady for her intervention. I recognise what she says. If she waits a second, I will cover that specific point.

The previous Government put some taxpayers' money behind their restructuring and promised to create 500,000 apprenticeships. I appreciate that, but it is also true that they missed that target, like so many others, by a very wide margin-about 50%. The restructuring broadly fitted the epitaph for his party given by the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), who said that a day without a new initiative was a day wasted for new Labour. The idea of the restructuring was more important than the outcome. I will touch on that later.

I have a suspicion that the shadow Minister here today, the hon. Member for Wrexham (Ian Lucas), might try to distract us by referring to the decision by the Department for Work and Pensions not to extend the future jobs fund and to redeploy the cash as part of the Work programme. However, we are not talking about future jobs; in Gloucester, we are talking about placements in the public sector or quangos, which have kept people out of the unemployment statistics for six months and provided some useful skills, but which have not led to job offers. That is different from an employment contract for a serious three-year apprenticeship, which is what business wants.

It therefore falls to the coalition Government to recognise and restore the vital role of apprenticeships for future business growth in many sectors, increase the number of apprenticeships so that our record youth unemployment can be reduced and implement an expanded Government programme of apprenticeships in a much leaner, more flexible and user-friendly way.

David Simpson (Upper Bann) (DUP): I congratulate the hon. Gentleman on securing this interesting debate. The new coalition has announced 50,000 new apprenticeships over a number of years. Does he agree that those apprenticeships need to be relevant to today's needs and future needs, and that there need to be linkages with industry so that we can find out exactly what those needs are? The courses offered by universities and further education colleges also need to be relevant.

Furthermore, young people need easy access to apprenticeships. In Northern Ireland, they must be sponsored by industry-whether the building industry or whatever-to go into apprenticeships, but that is difficult today, and the financial reward is not what it should be. I trust that the new coalition will consider those points, and I am sure that the hon. Gentleman will agree with me on them.

Richard Graham: The hon. Gentleman makes a number of good points, some of which I am coming to. He is absolutely right that training providers need to tailor their courses to be most relevant to business needs.

That leads conveniently to my next point. The approach that the coalition Government should take is about not simply good management practice, but a political philosophy. I agree with the former Labour Minister, Lord Myners, who told the other House that his colleagues
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never understood the fact that the Government do not create jobs, but set, or fail to set, the framework in which businesses create jobs. I also agree with Oona King, who recently regretted that new Labour's belief in social justice counted for nothing if it forgot successful economic stewardship. Our mission is therefore to spread apprenticeships, which are critical to restoring the economy, and to boost social justice. There is no justice in increasing the number of those dependent on handouts. My city of Gloucester is a proud working city, not a centre of benefits, and apprenticeships are a major gateway to work and a better life.

Esther McVey (Wirral West) (Con): I want to pick up on the point about the Wirral apprenticeships raised by the hon. Member for Wirral South (Alison McGovern). Although we are doing well in Wirral, we are seriously over-subscribed. Last year, more than 1,000 young people submitted 3,117 applications to the fewer than 150 businesses involved. To move forward, we are looking to build on something that has done so well.

Do colleagues agree that although we are talking about apprenticeships, there is something that each and every one of us in the room could do? It is good to talk about these things, but we in Wirral West are about to embark on taking on political apprentices, and I know that other colleagues are doing the same. Former apprentices include Sir Alex Ferguson, Alan Titchmarsh, Henry Ford, Vincent van Gogh, Isambard Kingdom Brunel-

Martin Caton (in the Chair): Order. I am being indulgent with a new Member, but interventions should be brief. If the hon. Lady wants to make a speech, she should try to catch my eye.

Esther McVey: Thank you, Mr Caton. I was responding to what had been said.

Richard Graham: My hon. Friend makes a number of good points and anticipates brilliantly what was going to be my punchline.

Mr Oliver Heald (North East Hertfordshire) (Con): Will my hon. Friend say a word about the problem of girls? Two per cent. of apprenticeships go to girls and something needs to be done about it. Does he have any ideas on how to encourage girls to go into engineering, science, technology or mathematics?

Richard Graham: My hon. Friend began by asking whether I could do something about the problem of girls; on the whole, I would encourage them. He makes a valid point, as always, and I am also grateful to my hon. Friend the Member for Wirral West (Esther McVey) for pointing out the need for more apprenticeships in her constituency. I hope that many will benefit from the expansion of apprenticeships that the Minister has announced, which I shall encourage him to continue with in due course.

If Alan Sugar did much to bring the word "apprentice" to our TV screens, ours must be the Government who bring apprentices into many more large, medium and even small companies. There are different programmes of help for the young, emerging from three different Departments under the coalition Government: the Work programme from the Department for Work and Pensions, the national citizen scheme from the Cabinet Office,
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and apprenticeships through the Department for Business, Innovation and Skills. Those will require some cross-departmental co-ordination, perhaps through the new Cabinet Committee on social justice. The Minister may want to offer his thoughts on that co-ordination later, but today I shall focus on apprenticeships.

Alison McGovern: Business confidence is crucial for expanding apprenticeships and we are in a difficult and uncertain time, especially given the alterations to business support through the regional development agencies. What would the hon. Gentleman suggest to the Government to keep business confidence high in a period of uncertainty, and how could the Government fill the gap in work on skills at a regional level, as we move-perhaps-towards local economic partnerships, maybe in two years' time?

Richard Graham: The hon. Lady asks what I would do to boost business confidence. My feeling, as a former businessman, is that business confidence depends above all on a stable macro-economic situation. That is precisely what the coalition Government are pledged to restore, and I believe that they made significant steps forward with that in the emergency Budget a few weeks ago. Business confidence depends on that, and I believe that it is growing. That is reflected in several indicators, not least falling unemployment, at the moment.

Mr Heald: I do not know whether my hon. Friend is aware that Essex county council recently sponsored, I think, 140 apprenticeships to ensure that the engineering base will be maintained in the county, which is of course run by a Conservative authority. Is that perhaps an example to follow?

Richard Graham: My hon. Friend makes a good point and gives a striking example. My congratulations go to Essex county council.

Today's debate could have centred on the situation in my own city and the county of Gloucestershire, but I decided to widen it into a national debate, because the issues are mostly generic. Our experience in Gloucester can help to bring alive the national picture, and other hon. Members will supplement that with their remarks. I want to begin by discussing the value of apprenticeships, and I shall make suggestions about their status, the role of schools, the structure and measurement of administrative organisations, and the current types of apprenticeship, including matters of price and flexibility. I am grateful to the many organisations and individuals who have given me their time and thoughts.

When I was a boy, one of my favourite stories was that of the 12th century meeting, before their armies, of the giant Richard the Lionheart and the more slender Saladin. Richard showed his great strength by bringing down his enormously heavy double-handed sword to break in half a steel anvil. Saladin then tossed a silk scarf into the air and slashed it in two with his curved scimitar, with great strength of wrist. The important thing was that neither could have done what the other did. Both were remarkable. So it is with degrees and apprenticeships. I am quite incapable of fixing many things-including faulty printers, but also things under the bonnet of my car-and some of my friends who are engineering geniuses might struggle with essays and speeches. We need both skills, but it is absurd to rate the degree more highly than the apprenticeship, and the marketplace will often reward the practical skill more highly.

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My key message to students, parents and schools in my constituency and more widely is that an apprenticeship, especially a higher apprenticeship, is every bit as much of an achievement as a good degree from a good university. I urge the Minister to direct the Department for Education to encourage all secondary schools to provide their students with presentations on apprenticeships from training providers, employers and apprentices themselves. Those presentations could start by making the important distinction that from day one apprentices earn to learn, rather than building up debt. They could spell out the differences between the second, third and fourth, or higher, levels of apprenticeship, which many people are unaware of.

I hope that the Minister will confirm that under this Government more status and recognition will be given to apprentices. I propose that we should create a national apprenticeship day to celebrate what apprentices have achieved and what they contribute throughout the country. A special stamp issue, for example, could commemorate some of the world's most famous apprentices, some of whom my hon. Friend the Member for Wirral West alluded to, such as Vincent van Gogh, Isambard Kingdom Brunel and Alexander McQueen.

As to the structure of Government bodies involved with apprenticeships, I am not absolutely sure that the previous Government's disbanding of one quango, the Learning and Skills Council, to create three, led by the Skills Funding Agency, just as the budget deficit began to reach record proportions, was the right move. I would welcome the Minister's comments on that. I believe that employers and training providers broadly welcome the National Apprenticeship Service, but I am sure that the administrative cost associated with the programme could be reduced. Perhaps he will say something about that too.

The structure is also very top-down. There is a quota system, parcelled out to regional offices of the NAS and from there to the shires-rather like the unloved regional spatial strategies in the planning sector-and constructed on the basis of historical demand, which is a bit like looking out of the rear window while driving. The system-in Gloucestershire, anyway-is inflexible. If training providers find that demand for one sector or age group has increased, and demand for another has diminished, they cannot swap or trade quotas. In an era when businesses can trade carbon emissions, it surely should be possible to trade apprenticeships, or to do away with the regional approach and give my county and others a sum of money for apprenticeships. The local economic organisation, which in our case is Gloucestershire First, and the NAS could decide how to manage it.

That leads me to the question of marketing, which in Gloucestershire is done by one employee of the NAS. That is ambitious and she depends on distributors, whose co-operation will vary without any direct, commission-style incentive. I sense that the quality of the NAS database and access to employers varies, and I believe that the service should work more closely with the local economic organisation to target and penetrate leading employers. That would be easier if the funds were controlled locally.

A related matter is penetration of the small and medium-sized enterprise market. The Department has figures that show that the majority of employers with
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apprenticeships are SMEs, but I believe that those figures are distorted by, for example, the number of hairdressers, and that take-up by members of the Federation of Small Businesses-5,000 of them in Gloucestershire-remains very small.

Many small firms, such as IT consultants, public relations companies or recruitment firms, could benefit from taking on apprentices as their order books expand again, but they are reluctant to get involved, for fear of bringing excessive paperwork into the office. The NAS should focus on the FSB and SME market, using examples of clients who have found that the business of taking on apprentices is not nearly as cumbersome as it might at first appear.

Will the Minister also consider breaking training provider courses into bite-sized chunks or units? That would be popular, especially with SMEs, which do not always need a complete training course alongside work-based learning. There is, effectively, a market for an apprenticeship-lite. My final suggestion on this theme would be for the NAS to consider the provision of courses in Gloucester relative to actual or likely high-growth sectors, as one or two hon. Members have mentioned. Examples might be green energy and even more conventional sectors such as real estate agency, which are not covered at the moment.

The NAS needs to talk to some of our newest and most entrepreneurial companies, such as Gloucester's Book Depository, which yesterday was awarded the Queen's Award for Enterprise as the UK's third-fastest-growing company. There is plenty more marketing to be done, and Gloucestershire First and similar agencies in other counties can and should help the NAS to gain access to it.

On pricing, the package of Government support is worth about three times as much for 16 to 18-year-olds as it is for those aged 19 to 24. What is the formula for arriving at that ratio? Does the Minister believe that it is right? Several employers have told me that they would like a level playing field for the various age groups. In some cases, as with the electrical engineering training specialist Clarkson Evans, it appears that health and safety requirements disadvantage employers who cannot take 16 to 18-year-olds. Under a flexible scheme, they could swap x 16 to 18-year-old places for y 19 to 24-year-olds. However, as I pointed out earlier, that cannot easily be done.

Although the cash value of Government support for apprenticeships is fixed, the price from the training provider and the salary from the employer vary considerably. That can be seen either as choice and market freedom, with the price being weighed against the service quality of the training, or as a distortion of the market that encourages market consolidation and might drive out niche private sector providers. My instinct is that we have a bit of both, which may not necessarily help the smaller players. One way around that would be to provide employers with more advice on apprenticeship quality.

Quality of delivery is hard to analyse. The NAS can offer some pointers, but it cannot offer much qualitative judgment; after all, the trainers are their customers. I would love to see a simplified Ofsted-like report on each training provider's apprenticeship training schemes, and their good and not so good points, just as I hope that the Gloucester-based Quality Assurance Agency
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will one day do something similar for universities. Parents could then see immediately on websites what was best and worst about universities and apprenticeship schemes. Choice is good, but informed choice on universities and apprenticeships would be even better.

Equally important is the way different bodies are measured. The NAS is proud of the fact that, at 79%, its success rate in Gloucester-I would put inverted commas around that term-is high for the south-west, and that the south-west has the highest in the country, up significantly from a few years ago. I consider such success rate measures misleading. First, this measures only how many of those who started apprenticeships actually finished them. The NAS has no involvement with the individual apprentice. Should a judgment be made on that measure-in reality, it is customer service-or would a better benchmark be success in persuading a higher percentage of employers to take on apprentices, and in cross-selling new apprenticeships in different sectors to existing clients?

We need effective sales benchmarks for the marketing arm, not customer experience ones, which are more relevant to the training provider. My recommendation is that the Government should reconsider the measurement of various organisations. If the Minister was looking for a third way, he could measure success on both sales and customer service criteria. The important thing, however, is that the current success criteria do not prove success. That, I am sorry to say, is very new Labour; it is like the future jobs fund, which should have been called the "keep me off the unemployment stats" fund.

I draw the attention of the House to one innovative way in which Gloucestershire has succeeded in stimulating employer demand for apprenticeships. Our newspaper, The Citizen, together with Gloucestershire college and other colleges, challenged businesses to create 100 new apprentices in 100 days. They succeeded, and will shortly launch the next "100 in 100" challenge. That marketing initiative has been copied in the south-west by related Associated Newspapers titles, and it could resonate elsewhere.

I invite the Minister to join the launch of the next "100 in 100" challenge to see the wide range of companies, from many sectors, that are interested in apprenticeships-they range from hairdressing to engineering-and which are encouraged by our local newspaper and our leading further education college. The launch will also give him the chance to show that the coalition Government are doing more with less. Last year, the Minister with responsibility for apprenticeships and the Minister for the South-West were both present, but the coalition Government have dispensed with regional Ministers-something, I believe, that not even the shadow apprenticeships Minister would greatly mourn.

I realise that other Members wish to speak, so I shall summarise the main points of my argument. I hope that I have made clear our need for apprenticeships and my enormous support for them-and as many of them as possible. I would be delighted if the Minister said when we are to have the additional 50,000 apprenticeships that I and many others here today have welcomed. Does he agree that doubling our already strong commitment to 100,000 new apprenticeships-a figure that we had in mind during the election campaign, before the full truth
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of the previous Government's accounts was exposed-is a desirable goal, and might achieving it be possible over the next year or so?

I have raised questions about the number of quangos involved, who gets what budgeting quota, and how that is measured and against what targets. I hope that the Minister agrees that it is time to scrap the regional approach, and that we should devolve responsibility as soon as possible, giving training providers more flexibility and making apprenticeships more responsive to the marketplace and business demands. I hope that he agrees also that the NAS and local economic entities should work together, and that the NAS and the FSB should engage to ensure more apprenticeships in the SME market.

I hope that the Minister and everyone here today agrees that the impact of apprenticeships on youth unemployment can and should be striking. Gloucestershire took up 4,500 apprenticeships in 2009, of which the city of Gloucester had 1,200-almost the same number as the current record number of young unemployed. Doubling the number of apprenticeships would have a significant impact on those young people not earning or learning, with knock-on benefits for their families and communities, and probably a good effect on antisocial behaviour and the cost of policing and probation work. It would also contribute to growing business and tax revenues.

Lastly, does the Minister agree that apprenticeships are a genuine example of investment by Government and employers that can have a positive impact on the community in several ways? I believe that the combination of more opportunities provided by the Government and better co-operation from schools, with more courses and more flexibility, the transferability of unused quotas and a national apprenticeship day, would increase employer interest and make the future for our youngsters much brighter.

Reviving apprenticeships was a Labour idea, but it is for the coalition Government to sort it out, take it forward and make it work effectively, and to make the renaissance of apprenticeships a reality. That is my goal for my city of Gloucester and for Gloucestershire, and I intend to put my money where my speech is. I shall follow the example set by my hon. Friend the Member for Harlow (Robert Halfon) and hire an apprentice for my office in Gloucester, who will do a business admin course at Gloucestershire college. It is not often that we MPs have the chance to practise what we preach, but today provides such an opportunity.

9.57 am

Robert Halfon (Harlow) (Con): I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on initiating the debate. The quality of his speech and the thoughtfulness of his remarks will be noted by the House. From what I have heard about previous Parliaments, I think that support for apprenticeships among my right hon. and hon. Friends, both here and elsewhere in the House, has definitely increased. I am grateful to my hon. Friend and to the Minister for allowing me time to speak today.

I spoke at length about apprenticeships in my maiden speech on 2 June. I said that one in eight adults in Harlow have literacy problems and that one in five have difficulties with numeracy. We have a huge skills deficit,
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with nearly 4,000 young people not in employment, education or training. Harlow is one of the towns worst affected by that problem. I have come to the conclusion that education and skills are the real answer, but we need to transform the nature of vocational training and apprenticeships. If we give the young the necessary skills and training, we will give them opportunities and jobs. Expanding and improving apprenticeships is not just about economic efficiency based on pure utilitarianism; it involves profoundly conservative ideas-helping people to help themselves, the work ethic, opportunity and, most important, social justice. I have seen for myself the power of apprenticeships to transform lives.

I have two substantial points to make. First, a change in policy must be supported by a change in culture. Secondly, the pioneering apprenticeship scheme run by Essex county council, to which my hon. Friend the Member for North East Hertfordshire (Mr Heald) alluded, could, I believe, be replicated throughout the United Kingdom.

Despite the grand wishes of the previous Government, they made going to university their primary symbol of aspiration, and that came at the expense of vocational training. The right hon. Member for South Shields (David Miliband) says he wants 60% of all young people to go to university. Not so long ago, young people going to university would get their picture in the local newspaper-I was in my local paper for being only the second ever member of my family to do so. Now, youngsters are burdened with debt and struggle to find skilled jobs when they graduate, and some smart young people are beginning to recognise that a university degree is not always the right qualification-one size does not fit all. The problem is that apprenticeships lack cachet. There is no graduating ceremony, little institutional prestige and few opportunities to network and make friends. The social side of apprenticeship, too, does not hold a candle to that of attending university.

There is also a perception problem. Edge, the apprenticeship organisation, says that two-thirds of teachers regard their knowledge of apprenticeships as poor and that just one in four teachers recommends apprenticeships over higher education. As an MP, I intend to play my part in changing how we regard apprenticeships. I want a Britain in which apprenticeships are not just promoted by teachers, Government and businesses, but seen as the No. 1 option by both students and their families. I want being an apprentice to be as highly regarded as going to Cambridge or any other university.

This Government stood on a platform of change: people voted for change and they have got it. However, if we look closely at the policies of the coalition Government, we will see that they are also about conserving some of the great traditions of our history. Apprenticeships are just one such tradition. Records of British apprenticeships date from the 12th century. By the 14th century, they were flourishing and parents could apprentice their child to a master craftsman from the ages of 14 to 19; they would pay a premium to the craftsman and a contract would be signed. In 1563, the Statute of Artificers and Apprentices was passed to regulate and protect apprenticeships, forbidding anyone from practising a trade without first serving as an apprentice.

From 1601, parish apprenticeships were introduced under Queen Elizabeth's Poor Law. They were a way of training poor orphans-boys and girls-in farm labour,
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brick-making and running a 17th century household. The worshipful livery companies of the City of London were the apex of that tradition. They brought to apprenticeships not only rigour, but pageantry and cultural prestige, as we see in the engravings of Hogarth and the novels of Charles Dickens. To be a freeman of the City of London in a livery company was a higher honour than graduating from Oxford or Cambridge university. That is the sort of prestige that I hope this Government will restore to vocational training.

I should like to see a royal society of apprentices, rather like the Law Society or the British Medical Association, with a social and professional network similar to that provided by universities. As my hon. Friend the Member for Gloucester said, we should have an annual apprenticeships day in every local authority, which would build on the already successful vocational qualifications day. It would be like a formal graduation ceremony and act as a celebration of apprentices. In addition, the pageantry that is associated with traditions such as the freedom of the City of London could be expanded, localised and made appropriate for different parts of the British Isles. That would give apprentices a sense of civic pride in their area. Young school pupils would see the example of older apprentices and aspire to join their ranks.

In modern times, traditional apprenticeships probably reached their lowest point in the 1970s. By then, the universities were expanding hugely and apprenticeships were allowed almost to vanish. Margaret Thatcher's Government introduced NVQs-national vocational qualifications-in an attempt to revive the great British tradition. John Major took the policy further: in 1994, his Conservative Government introduced modern apprenticeships that were based on proper frameworks. The effort to restore apprenticeships has always been a key priority for Conservatives.

I am glad that the Minister has had the good sense to examine not just the zeitgeist of the past few years, but the 1,000-year-old history of apprenticeships in Britain. He is not alone. In the 14th century, it was good practice to employ apprentices from the ages of 14 to 19. Now, we have Lord Baker's university technical college, which will employ apprentices from the ages of 14 to 19. There is a lot to learn from the past, and the technical colleges will make a huge difference to young people across the country who want to pursue vocational education.

I am pleased to announce that a proper apprentice will soon serve in my Westminster office, placed at Harlow college and part-sponsored by Essex county council. The Essex county council wage subsidy for highly skilled apprentices is a pioneering and unique scheme that could serve as a model for local authorities across the UK. I encourage all MPs and Ministers to follow suit. I am pleased to learn that the Minister has decided to have an apprentice in his office.

In addition to providing a 50% wage subsidy for local apprentices in targeted industries, such as engineering and manufacturing, the Essex county council scheme funds apprenticeships in deprived areas and for lone parents returning to work. I urge the Minister to consider such a scheme. Essex county council has provided a blueprint that could be replicated by many local authorities around Britain. By way of an advert-I hope that you will allow me this, Mr Caton-Harlow college runs an
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excellent course in business administration for apprentices placed in MPs' offices. If the Minister decides to have an apprentice, I will happily introduce him to the principal, Mr Colin Hindmarch.

In conclusion, I urge the Government to restore the prestige of apprenticeships and to consider whether local authorities can play a larger role in delivering targeted wage subsidies for apprentices, as Essex council does. On the prestige side, a great step forward would be the establishment of a royal society of apprentices, to replicate the vibrant social life of university, and a formal graduation ceremony for every apprentice. I hope that other hon. Members will have suggestions, too.

I welcome the advancement in policy. Despite the troubles we face, this Government have provided more funding for apprenticeships than has ever been provided in our long history. As I said, I want a Britain in which apprenticeships are seen as the No. 1 option by both students and their families. Funding, prestige and local flexibility will be important. We need to encourage local authorities to support the industrial needs of their area.

10.8 am

Margot James (Stourbridge) (Con): I congratulate my hon. Friend the Member for Gloucester (Richard Graham) on securing the debate. We have heard interesting speeches from him and my hon. Friend the Member for Harlow (Robert Halfon).

Let me start by reflecting on my days as an apprentice. Although it was not formally known as an apprenticeship-it was many years ago-I thought that I would mention it because I also had a degree. I am sympathetic to my hon. Friends' view that we should not regard apprenticeships or vocational skills as a second-rate alternative to academic qualifications; the two are not mutually exclusive. Indeed, the Minister with responsibility for higher education and science has stressed that one of the benefits of the national apprenticeship scheme is that it can be a transition into higher education. In my case, the reverse applied: I had already done a degree when I joined my father's company in Coventry, essentially as an apprentice to him and the firm. I had a very good secondment to the selling function for security systems, which provided good training for life in selling. I also spent a lot of time shadowing my father and learning from him directly as he bought and sold companies, dealt with banks, lawyers and other professional advisers, managed people and sought advice.

The skills that I learned in my father's company were invaluable to me when I set up my own business. That apprenticeship, which lasted only for about 18 months, undoubtedly enabled me to do well running my own company. However, I did what many companies fear apprentices will do: I left. That is why many companies, especially small and medium-sized enterprises, resist investing in apprenticeships. It is commonly believed that apprenticeships just build up skills for competitors. Businesses need to be educated about the benefits of investing in skills and about most people's inclination to remain loyal to a company that invests in them. Businesses must take some responsibility in this matter.

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Several issues have dogged the past decade. My colleagues have mentioned the importance of manufacturing. Apprenticeships are fundamental to manufacturing, but it is important that young people understand that manufacturing is not just about plant, machinery and making processes work. These days, information technology is crucial, as is intellectual property. Manufacturing is a huge part of the knowledge-based economy. People who do not work in the sector tend to have a rather old-fashioned view of manufacturing, involving grimy factories-the very name for my part of the UK, the black country, implies it-but things have moved on hugely. In many cases, manufacturing is now high-tech, and apprenticeships are fundamental to the recovery of our manufacturing sector.

The Government are learning, as we must, from the last Government's problems with skills and apprenticeships. Train to Gain was not without success. Stourbridge college had record numbers of students in programmes, some of them in business. The trouble with the training offered was that much of it duplicated skills that young people already had. There was too much training at level 2 and not enough at level 3. That was not all the college's or the Government's fault; it was partly because business did not want to invest, as I said earlier. Level 2 was free, but level 3 required a significant payment. That is one challenge facing us as we go about making improvements.

My colleagues have mentioned the dreadful complexity of funding streams, which I fear has not improved. The Learning and Skills Council was one of the most shameful fiascos of any quango set up by the previous Government. I am sure that we are all familiar with the story, so I shall not dwell on it. However, to replace the LSC with three funding streams-the Skills Funding Agency, the Young People's Learning Agency and a plethora of local authorities-is a great risk. There is a good expression for it, which I forget. Stourbridge college must deal with three or four local authorities, not just one, because it has students from different local authority areas. The bureaucracy necessary to deal with all the funding streams is worrisome. I am sure that the Government are right not to rush to change the structure, but I hope that we will keep it under close review to ensure that the problems endemic in the previous Government's arrangements will not be repeated.

The other major issue is what I call the food chain. The budget started in the Department for Business, Innovation and Skills. It was then devolved to the Learning and Skills Council, then to colleges and then to other providers. The supposed beneficiaries-students and businesses-are right at the bottom of the food chain. The new Government's immediate action to reform the system by putting power in the hands of businesses and allowing money to follow the student will be a big improvement.

The final lesson to be learned involves the inflexibility of the previous Government's approach. Colleges were tied up in knots and companies could not access what they needed. For example, the managing director of an engineering company employing about 25 people-the Minister will be pleased to know that it was based in Lincolnshire-wanted training for the company's accounts staff. Only a couple of people were to be trained, as the staff numbered only 25, but the provider told the company that it had to supply a minimum of eight people or the course would not be viable. That was too inflexible.

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I am delighted by some of the new measures, which I know will improve the system. I will return to those measures in a minute, but first I congratulate the Government on creating 400,000 additional training placements and 50,000 new apprenticeship placements. I hope that many of those will be targeted at sectors that need skills training, such as the green economy and information technology, which traditionally has a poor record of investing in apprenticeships. We should target investment towards those sectors.

Under the old system, not all businesses had the critical mass of people necessary to get apprenticeship support. The group training associations that the Government intend to set up will do an awful lot for SMEs in my area. Overton Recycling, a wonderful company in Stourbridge with a turnover of £5 million, wants to start to offer apprenticeships, but is a bit nervous about investing in too many straight away, as it does not feel that it has the infrastructure to support apprentices' needs. The group training association, which will bring together apprentices training in different companies and provide them and the companies with infrastructure and support, will be a great boon to companies such as Overton Recycling. I urge the local enterprise partnerships being set up to encourage businesses to take advantage of the new apprenticeship places.

It was marvellous to hear from my hon. Friend the Member for North East Hertfordshire (Mr Heald) about Essex council's work. I am proud that Dudley council has an apprenticeships scheme as well. In 2009, the council offered 50 apprenticeships in customer service, IT and other disciplines; some 90% of apprentices got their NVQ and 50% found full-time employment after the apprenticeship ended. I was delighted when my colleague, Councillor Adrian Turner, announced that Dudley council would offer 50 new apprenticeship places in the upcoming civic year.

I congratulate the Government on moving fast to improve dramatically skills, learning and apprenticeship policy. That is fundamental to the revival of manufacturing, as the revival of the private sector is fundamental to our country's recovery. The Budget will play a key role in encouraging the private sector. I am delighted to see the Department for Business, Innovation and Skills fitting so neatly into the Budget provisions and getting off to such a flying start.

10.18 am

Chris Skidmore (Kingswood) (Con): I thank you, Mr Caton, for calling me to speak in this important debate, and my hon. Friend the Member for Gloucester (Richard Graham) for securing it. I know that he feels passionately about the subject-so passionate that he has managed to secure two debates on it. I appreciate the opportunity to speak on this second occasion. I also thank the Minister for giving up his valuable time to reply to the debate.

I am sure that there is not one of us in this Chamber who does not believe that we should have more apprenticeships. The Minister has stated on the record that his ambition is to build a system that facilitates more apprenticeships in England than we have ever had. That is extremely welcome. I shall briefly explore what such a system might mean and how we can facilitate more apprenticeships. It will not be achieved by Government
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action alone or by taking a top-down approach; we must bring employers with us and encourage society as a whole to value apprenticeships.

I want to highlight the "100 apprenticeships in 100 days" campaign taking place in my local area in Kingswood, Bristol. The campaign, organised by the Bristol Evening Post, began on 17 June. At the first launch event, 100 apprenticeships were achieved within 100 minutes. That is a fantastic achievement, which I am sure the Minister will welcome. The editor of the Evening Post, Mike Norton, has already stated on the record that apprenticeships provide a

that we need more of.

It is clear that apprenticeships bring in new talent, ideas and passion to businesses. A Populus study shows that 81% of businesses stated that apprenticeships make their business more productive and 67% agreed that apprenticeships led to lower recruitment costs as a whole. We need to show businesses that it is in their interests to take on apprentices. It is not always a case of saying, "Let's give an apprenticeship to an apprentice for their benefit." The businesses, too, can benefit. Apprenticeships are a good step for young people and employers. I hope that society in general will move forward under this new Government and take on new apprenticeships.

10.20 am

Ian Lucas (Wrexham) (Lab): It is a pleasure to serve under your chairmanship, Mr Caton-possibly for the first time-and to have heard the speeches of hon. Members who have contributed to the debate. I am pleased to hear apprentices and apprenticeships being valued so highly by hon. Members from all parties. Such comments are something of a damascene conversion on the part of the Conservative party because, as the hon. Member for Gloucester (Richard Graham) said, reviving apprenticeships was a Labour idea.

It was a Labour idea because in 1997, after 18 years of Conservative Governments, the British apprenticeship was dead on its feet. The enthusiasm that we have heard from the Conservatives this morning was certainly not felt by the Conservative Governments between 1979 and 1997, who effectively sounded the death knell of apprenticeship schemes in the UK. Hon. Members should be aware of the tremendous record of the Labour Government in reviving the apprenticeship scheme within the UK. I am very proud indeed of the steps that were taken by the previous Government in re-establishing the importance and status of apprenticeships.

Chris Skidmore: Will the hon. Gentleman give way?

Ian Lucas: I want to make some progress at this stage, but I will give way in due course. I agree that we need to elevate the respect that people have for apprenticeships in industry and across the training field. However, the performance of further education colleges and other providers has improved dramatically over the past decade. The satisfaction rates of employers and learners have risen. Since 2001, about 3 million adults have improved their basic skills and achieved a national qualification and, since 1997, more than 2 million people have commenced apprenticeships, compared with the position
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under the previous Conservative Government. Even more importantly, completion rates for apprenticeships have more than doubled.

The focus of this morning's debate is apprenticeships, but it is also important to mention the union learning fund, which is now worth £21.5 million a year. As a result of the fund, more than 23,000 union learning reps across the country are encouraging people to learn within their workplaces and develop their skills. That is what we all want to happen to improve the performance of UK industry. Those representatives helped nearly 250,000 workers into learning last year.

It would be remiss of me not to mention the highly successful transformation fund that supports adult learning. The fund has generated a marked increase in participation and there has been a huge investment of more than £2 billion into the Building Colleges for the Future programme, which has transformed the places in which people learn. In my constituency, through investment via the Welsh Assembly Government, Yale college has rebuilt its Bersham road site to enable it to help train apprentices equipped for 21st-century manufacturing. I hope that the Minister can reaffirm that all the schemes announced in the Building Colleges for the Future programme earlier this year will be going ahead. As manufacturing changes, it is important that colleges' facilities improve to equip modern apprentices for modern engineering, modern industry and modern work.

The impact of the capital investment in our further education colleges under the Labour Government is part of our proud legacy on skills. Not a single penny was spent on further education capital for colleges in the final year of the Conservatives' last term in office. Although the £50 million that the Minister has announced is very welcome, it is a one-off raid on revenue, not a long-term commitment.

Our White Paper, "Skills for Growth", was published last November. It set out clearly the skills challenges for the next decade and gave a clear set of proposals to meet those challenges, including an ambition to ensure that three quarters of people participate in higher education or complete an advanced apprenticeship by the age of 30. The proposals include the expansion of the apprenticeship system to build a new technical class, by doubling apprenticeship places for young adults; apprenticeship scholarships; and focusing the skills budget on the areas from which future jobs will come.

Chris Skidmore: Does the hon. Gentleman not agree that there is a huge gulf between the image and the reality of what happened under the previous Government? For example, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), the former Prime Minister, promised 500,000 apprenticeships, but the number of apprenticeships fell by 13,200 in 2006-07. Furthermore, between 2007-08 and 2008-09 there was a decrease of 7.5% in the number of 16 to 18-year-olds taking on apprenticeships. The reality of the figures does not match up with what was in the White Paper.

Ian Lucas: What is absolutely clear is that, under the Labour Government, there were far more apprentices than in 1997 and the apprenticeship scheme has a value now that it did not have at that time. Later in my speech,
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I will talk about some individual examples of young people and not-so-young people who have benefited from the progress made under the Labour Government.

I should say to Conservative Members that I am simply not going to allow the previous Government's record to be trashed in the way that the Conservative party is determined to trash it. The reality is that if it were not for the Labour Government, there would not be any apprentices at all in UK industry; the support that existed in 1997 was parlous in the extreme.

Chris Skidmore: Does the hon. Gentleman seriously believe that if it were not for the Labour Government, there would not be a single apprenticeship in this country? Is he willing to make that statement or would he like to retract it? The fact is that the number of young people not in education, employment or training has increased significantly-the figure is even higher than 1997 levels-to 837,000 in 2010, which is up from 618,000 in 2005. It is delusional to suggest that there would not be a single apprenticeship in this country and that apprenticeships would not exist if it were not for the Labour Government. In fact, youth unemployment skyrocketed under the Labour Government. He cannot deny that.

Ian Lucas: What I can say is that the Labour Government's approach to apprenticeships from 1997 was a marked contrast to that of the preceding Government, and that it placed far more emphasis on the apprenticeships scheme. I will come on to talk about some specific examples from my area of which I am personally aware and mention the individuals I have met who have benefited hugely from the apprenticeships scheme.

Richard Graham: Will the hon. Gentleman give way?

Ian Lucas: I will just make a little progress and then I will certainly give way to the hon. Gentleman, whom I should have congratulated on securing the debate; I do so now.

The White Paper's proposals included a joint investment scheme with sector skills councils, more national skills academies, skills accounts, user-friendly public ratings for colleges and providers, and better skills provision for those on out-of-work benefits. The promotion of apprenticeships as a priority in public procurement is important and we also wish to reduce the number of publicly funded skills agencies by more than 30. It is important that we make apprenticeship schemes as easy as possible for employers to access, and we need to focus resources on key economic strategic areas, so that we can make real progress.

The Labour Government have a strong record of achievement and the Labour party has a clear strategy for the future. I have heard the Minister speak many times of his passion for apprenticeships and I profoundly admire his rhetoric, so I hope that the Government will carry that through with real action. I hope that he will be clear this morning on whether he intends to follow the strategy set out in the White Paper or whether he intends to jettison it.

Richard Graham: The hon. Gentleman suggested earlier that the Conservatives had had a damascene conversion on apprenticeships. I suggest gently that if he looks at the Members on this side of the Chamber, he will see
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that none of us was on any road in 1997, let alone the road to Damascus, as we are all new Members. It is rather telling that few Members from his party, old or new, have attended. Although we could argue about the role of the previous Government and their achievements on apprenticeships, does he not recognise that several positive suggestions for taking forward apprenticeships have been made today and that he might agree with them?

Ian Lucas: I do not wish to be churlish in any way and at the outset I welcomed the fact that the debate was taking place. I also welcome the genuine and sincere contributions that have been made. However, my political views were forged in the 1980s and 1990s and my perceptions were based on the Conservatives' attitude to manufacturing as I saw it in the north-east of England. I know that progress has been made in the apprenticeships scheme and I want to put that on the record, because we have heard a contrary view during the debate.

We have also heard from the Minister, who has been trying to soften the savage in-year cuts that the Chancellor has imposed on his budget by recycling £200 million from the skills budget into 50,000 apprenticeship places, costing £150 million-£3,000 per place. What kind of apprenticeship places will the Minister be able to get for a unit cost of £3,000? How has he costed those places, and what will be the breakdown by sector? He sometimes tries to give the impression that he is the first Minister ever to announce investment for extending apprenticeships, but the fact is that the previous Government rescued apprenticeships from the oblivion they faced under the Conservatives, who allowed the number of apprenticeships to fall to 65,000, with a completion rate of only one third.

Yesterday, I had the privilege of attending a reception for the Society of Motor Manufacturers and Traders in the House of Commons and of meeting young apprentices. Some were from General Motors at Ellesmere Port, some were from Toyota at Burnaston and some were from Ford at Dagenham. They were of varied ages and backgrounds, but they all shared a passionate belief in what they were doing and the part that they would play in the future of automotive manufacturing in the UK. It was an inspiring reception. I was disappointed not to see a Minister there, who could not only have met the apprentices, but listened to an interesting speech by Ron Dennis, from McLaren, on the future of UK manufacturing. Earlier this year, I attended the Airbus annual awards scheme, where the largest apprenticeships scheme in the UK was celebrated.

Justin Tomlinson (North Swindon) (Con): I, too, attended yesterday's reception and met some of the apprentices from Honda UK, whose head office is based in my constituency. For me, the telling point was that 85% of those who take part in that scheme end up in employment with Honda, and the majority of the remaining 15% find jobs elsewhere, potentially being paid more money. That contrasts with the number of graduates who are unable to find work, as all the newspapers have been reporting. That shows the value of giving people real applied skills with real job opportunities at the end.

Ian Lucas: The hon. Gentleman makes a valid point. To bring a little local experience to that observation, I should say that a successful scheme is operating at the
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Airbus factory in Broughton, close to my constituency. It is very attractive to young people in their teens who are still at school, whether they are capable of going to university or not. I know young people who are perfectly capable of going to university, but who have chosen to go through an apprenticeship programme because they regard it as the best way of developing their future careers. The scheme has been taken forward by combining study at further education colleges with development of that study through a foundation degree at a local university, and there is the added bonus of earning, which for many young people is preferable to incurring debt.

One point on which we can all agree is that apprenticeships need to be valued and their status recognised. The hon. Member for Harlow (Robert Halfon) made the interesting suggestion that there should be a royal society for apprenticeships, which is a good idea. The level of expertise and skill required by many apprentices to carry out their jobs is entirely equivalent to that acquired through a degree. Larger companies, such as the car manufacturers I met yesterday-I have visited Honda in Swindon, which was an interesting experience-are doing a great deal to support apprenticeships.

The real challenge lies with smaller businesses, and that is the most difficult area on which we should concentrate. We need to carry forward the good work that has been so successful with many of the large investment companies that I have mentioned, develop it and learn the lessons so that we can extend the apprenticeships scheme to smaller businesses.

Mr Robin Walker (Worcester) (Con): Does the hon. Gentleman agree that part of the problem with the apprenticeships scheme under the previous Government-I accept that there were many achievements-was that too often they were in a rush to increase the numbers and so approached large companies, particularly in retail and catering, that could easily transform traineeships into apprenticeships to get the numbers up? We must do much more to reach smaller companies, particularly those in manufacturing, such as Aeromet, an aerospace company based in my constituency, whose representatives I met yesterday. They told me that they had not been approached by central or local government at any time about apprenticeships and that they would like to learn more.

Ian Lucas: We certainly need to work hard with smaller companies to develop apprenticeship schemes, but there are good examples. I will mention another company in my constituency, Lloyd Morris Electrical. It is a small construction company that deals with electrics. It places great store by its apprentices and the training of its young people. There is a great appetite for apprenticeships among young people. Some of them could go to university but simply do not want to do so because they see their lives developing along an alternative route.

An important point was made earlier when we mentioned teachers and their attitude to apprenticeships. We need to give teachers a much more accurate and up-to-date representation of modern apprenticeships, and I mean that not in a particular sense, but in a broad sense. High-skill, high-technology and high-value jobs are involved, and teachers should encourage their students to follow them.

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The Minister has made a commitment on apprenticeships, and I welcome his language, which contrasts, I am afraid, with what was said and done by the Conservative Government before 1997. He needs to be transparent about the details of what will happen in future and not pretend that his commitment is something that it is not. He hopes to announce the creation of 50,000 extra apprenticeships, giving the impression that they are new jobs for young people. First, it is one thing to promise apprenticeship places and another to deliver them-the devil is in persuading businesses, small ones in particular, to take on apprentices. I have often had that discussion with businesses in my area.

Priti Patel (Witham) (Con): Small and medium-sized businesses are at the heart of my constituency, creating something like 80% of local jobs in Witham. The hon. Gentleman spoke about small businesses. Having been in government, what practical measures would he recommend to enable small businesses to take on more apprentices? The small businesses that I speak to in my constituency are struggling and are fed up with the paperwork and bureaucracy associated with taking on apprentices.

Ian Lucas: I ran a small business myself and was Minister with responsibility for regulatory reform, so I do not like paperwork or bureaucracy-no one does, and every Government talks about reducing the burden.

We need to reduce regulations and burdens as much as possible. Saying that is easy, but doing it is difficult, because we have to be accountable for the use of public money. It is important that we should have a scheme tailored to what small businesses need, and that requires commitment by business. Businesses cannot expect such tailoring to happen by accident; they have to commit to working with providers and putting together an appropriate scheme that will be of benefit. That is what we need.

My first point was that it is easy to say that 50,000 apprenticeship places should be delivered, but that we need to get them delivered. Secondly, even if 50,000 places were supported, the Minister needs to guarantee that they will be quality places, helping those who need them most.

We need the Minister to be clear today and to answer questions about his plans. How many of the 50,000 apprentices does he expect to be new recruits and how many will be existing employees? How many will be under 25? That is an important issue. Those questions need to be addressed. Will he please respond to the question about level 3 and level 2 qualifications? Does he value level 2 apprenticeships? We need to look at the detail of what will happen. It is easy, when talking about apprentices, to talk the talk; what we need from the Minister is an assurance that he will walk the walk.

10.42 am

The Minister of State, Department for Business, Innovation and Skills (Mr John Hayes): Thank you very much, Mr Caton, and it is a pleasure to serve under your chairmanship. It is a pleasure, too, to participate in the debate secured by my hon. Friend the Member for Gloucester (Richard Graham), who cares about such matters deeply. I welcome the shadow Minister, the
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hon. Member for Wrexham (Ian Lucas), who is not in his normal territory but standing in for the shadow apprenticeships Minister, who cannot be here. I know how keen the hon. Member for Cardiff West (Kevin Brennan) says he is to debate apprenticeships and I hope that he will find the time to do so with me in due course.

The debate is timely. My hon. Friend the Member for Gloucester spoke at some length about why he, like me and the Government, is so committed to the apprenticeship programme. In his maiden speech on 9 June, he treated the House to a striking description of his constituency past and present, as well as announcing his intention to convene an all-party group on urban regeneration. Many of the issues that he and other hon. Members raised this morning spring logically from such commitment, because they are closely connected with the economic future of all our constituencies.

Like many other places up and down the country, Gloucester remains a city whose prospects depend in large measure on the skill of its people and the success of its businesses, in particular the small and medium-sized enterprises. I shall speak a little about the challenge made by the hon. Member for Wrexham in a minute. Before I do so, however, I will answer one other point made by him. I shall also try to respond to all the points made, although they are numerous. If I cannot do so, I will happily engage with hon. Members one to one and take up the matters not covered today.

The shadow Minister mentioned the White Paper and a strategy for skills. The Government are absolutely determined to build on the best of what the previous Government did. No Government are all bad or all good; they each have good policies, people and ideas. We will take the best of those ideas and build them into our strategy. I look forward to putting that strategy together over the coming months, on a highly consultative basis, but of course it will be coloured by the comprehensive spending review. The hon. Gentleman knows that Ministers are in discussion with the Treasury about spending constraints. The Government are determined that we should spend only what we earn as a nation, but he can be assured, as can this Chamber, that in that context I will make a vigorous case not only for skills in general but for apprenticeships in particular. Our strategy will have apprenticeships at its heart, so I am not by any means ignoring the important principles laid out in the previous Government's strategy; we will absorb the best of them into a plan for the future.

My hon. Friend the Member for Gloucester and others who have spoken understand, as I do, that apprenticeships must play a vital part in securing our economic future. In the latest year for which figures are available, more than 500 people started an apprenticeship in the city of Gloucester, in sectors as diverse as health and social care, retail and hospitality, catering, hairdressing, construction and engineering. I expect the National Apprenticeship Service and its local partners to increase still further the number and range of apprenticeships in my hon. Friend's city.

The belief that apprenticeships can play a major role in building the future of Gloucester and our nation as a whole is not founded on transient political fashion or a preoccupation with the zeitgeist, but on the evidence of centuries. To paraphrase Chesterton, education is simply the soul of a nation as it passes from one
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generation to another, and apprenticeships are indeed time honoured, as hon. Members have described this morning.

I take the point made by my hon. Friends the Members for Gloucester and for Harlow (Robert Halfon) and others that the aesthetic of apprenticeships is critical. I have already made that point to my departmental officials. I am determined to ensure that the role of practical learning is elevated, in terms of its "prestige"-the word used by my hon. Friend the Member for Harlow-and we will look closely at the issue of local apprenticeship days.

We already have annual apprenticeship awards. I was at the ceremony last week and spoke with some eloquence-

Ian Lucas: Even though the hon. Gentleman says so himself.

Mr Hayes: Even though I say so myself. I was greeted with warmth and appreciation, because of the commitment that the coalition, of which I am a humble member, has made to skills and to apprenticeships in particular.

The important thing to emphasise when considering that aesthetic is that apprenticeships involve not only the crafts we think of when considering the craftsmen who built the great cathedral church of St Peter and the Holy and Undivided Trinity, but those in the modern economy. Growth industries mentioned by various hon. Members include the green economy, the IT industry and high-tech engineering. The whole range of advanced apprenticeships in advanced subjects in the modern economy will do so much to fuel our nation's recovery and future prosperity.

I have already had meetings with sector skills councils about such high-tech, high-growth areas, and with individual employers, missioning them to develop new apprenticeship frameworks and to make the best of existing ones. In that way, we will make apprenticeships, as described by the hon. Member for Upper Bann (David Simpson), relevant to businesses and current economic need, and exciting and seductive from the perspective of learners. That those sectors matter is absolutely right, as the hon. Member for Wrexham said. We will focus on those high-growth sectors because that is what we must do to feed national economic growth. We see our skills strategy as very much tied to our growth strategy. My Department, the Department for Business, Innovation and Skills, is after all the Department for growth.

Let me pick up some of the other points made by hon. Members this morning. There has been a welcome for the Government's conviction of the value of apprenticeships and the view that they should be an indispensable component of any effective and responsible further education system. There has also been an appreciation of the fact that we have put our money where our mouth is, and I am grateful for what the hon. Member for Wrexham said in that regard. One of the first things we did in government was transfer £150 million from Train to Gain to the apprenticeship budget. We did that because we know what competencies apprenticeships deliver, how long they take, how much they cost, and that they are valued by employers and supported by learners. Nevertheless, there are important questions to ask about them.

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Our plan involves transferring resources from Train to Gain to the apprenticeship programme. That is a challenge for providers, which they have discussed with me and are willing to take up with relish. None the less, it is a challenge. It is important that the apprenticeships that evolve from that are meaningful and are the right product for employers, and it is absolutely right that employers buy into them.

My hon. Friend the Member for Kingswood (Chris Skidmore) said that such things cannot be managed from the top down but have to be built from the bottom up. We need to look at some of the supply-side reforms mentioned by various hon. Members, including my hon. Friend the Member for Stourbridge (Margot James), and how small businesses in particular are disincentivised from taking on apprentices.

We must ensure that the framework matches current economic need. The economy is dynamic. Perhaps, Mr Caton, I might be allowed, at a tangent, to give a short lecture in economics, as I believe that it will be relevant to the debate. As economies advance, they not only require greater skills but also become more dynamic. Skills needs become more dynamic, too, so it is critical that the skills system is as responsive and flexible as possible.

The best way to deal with that kind of economic change is to ensure that money and competence are devolved to the sharp end-to businesses and those who serve them in terms of training. That is why we are so determined to free up provision and to give further education colleges and independent training providers more flexibility and freedom to respond to employer need. Apprenticeships are at the heart of that, and I have had discussions with the FE sector, which welcomes the changes that I have recently introduced to free up colleges, and with independent training providers, who relish the opportunity in a more freed-up market to be more responsive to an increasingly dynamic economy. But let me move on from that short tributary on the subject of macro-economics that we have travelled up together back to the questions that have been put properly by hon. Members in the course of the few minutes that we have had to discuss apprenticeships.

It is important that we are absolutely certain about where apprenticeships are to be delivered and how. The hon. Member for Wrexham knows very well that we are talking about an average when we talk about £50,000. Some apprenticeship frameworks cost much more than others. An apprenticeship in hair and beauty, for example, will cost the Government less than an apprenticeship in aeronautical engineering, so we are discussing an average. In the end, such things must be demand-led. I cannot dictate exactly how many apprenticeships there will be in a particular sector at a particular time. The dynamism that I described earlier will dictate exact requirements for skills in particular parts of the country.

My hon. Friend the Member for Gloucester said that the programme is too target-driven. I have done some research on the basis of earlier discussions that he and I have had on the subject. I know that he is extremely concerned that there should be flexibility for the National Apprenticeship Service to respond to changing local demand. I assure him that we will not be rigid about setting unalterable targets, and in a meeting that I had
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earlier today, just after my extremely luxurious breakfast in the Tea Room upstairs, I asked officials to look at those issues.

The truth of the matter is that the success of our plan will depend on our motivating-indeed, galvanising-businesses, and I will look at how we can help small and medium-sized enterprises. There is an argument for giving them particular support, both on supply-side reform and through a series of incentives. We spoke in opposition about an apprenticeship bonus to support SMEs in that way, but hon. Members will understand that we live in difficult economic times. We have inherited circumstances that no incoming Government would have wanted, and we have to see how we can deliver more for less. Nevertheless, I remain committed to the idea that, in particular sectors and for particular kinds of business, we need to have carefully tailored policies that help to make our ambitions for apprenticeships a reality. We must walk the walk and not just talk the talk, although I am immensely grateful for the complimentary comments of the hon. Member for Wrexham about my rhetoric.

I do not want to be too hard on the previous Government and, particularly as the hon. Gentleman is performing outside his natural brief-he is a full back performing as a striker today-I do not want to be too hard on him, either. Nevertheless, it has to be said that the culture of aspiration that apprenticeships should embody-the culture that they feed aspiration and satisfy economic need, which unites people across this House-was previously, unfortunately, swallowed up by a series of meaningless targets and inflated figures. The previous Government forgot Einstein's dictum:

And we had the curious business of confusion between level 2 and 3 qualifications. The hon. Gentleman asked me particularly about that.

Let me be clear: it is vital that we identify levels in a meaningful way. I am looking at building a progressive ladder of training, beginning with re-engagement for those who are outside the work force altogether-that might involve small, bite-size, modular chunks of learning as described by various hon. Members-running through to level 2. Of course, much level 2 training is useful and purposeful, but we would move to full apprenticeships at level 3. The idea that we are exploring is for foundation apprenticeships at level 2, full apprenticeships at level 3, and advanced apprenticeships at levels 4 and 5. We are working on and consulting on that kind of clarity, which I feel the previous Government did not deliver.

In addition, we need to look at the costs of what we deliver through the apprenticeship programme and the effects of how it is delivered. In these times in particular, we need to look closely at whether more money can be delivered directly to employers, as my hon. Friend the
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Member for Stourbridge suggested, whether we can be less bureaucratic about how we manage the apprenticeship programme, and whether that too can be made more cost-effective.

Yes, we are committed to the idea of apprenticeships as a route into further learning, whether that further learning is at levels 4 and 5 in a college or in an institution of higher education. My right hon. Friend the Minister for Universities and Science and I have worked together, hand in glove, for many years on these matters and share a view that the division between FE and HE should be more permeable, that the university sector can play an important part in assisting us with the elevation of practical learning, and that we do not need to see this as an either/or, as it is sometimes seen. He is the personification of how one can be both a practical achiever and an academic.

Esther McVey: Will the Minister give way?

Mr Hayes: I will, but then I must move to my exciting peroration.

Esther McVey: Does my hon. Friend agree that we will increase the status of apprenticeships by introducing the apprenticeship rate tied in with the minimum wage from October 2010?

Mr Hayes: That is a complex question which I would rather deal with offline, but my hon. Friend is right to say that we need to look at the rewards for businesses and the rules for individuals. People who do apprenticeships accept that they will not earn money while they are doing so at the rate that they might have if they were not training. However, the evidence from cost-benefit analyses carried out in 2007, as she will know, is that a person with an advanced apprenticeship is likely to earn £105,000 more over their working life than someone with a lower qualification. There is a sense that people get trained because they know that they will do better later.

I shall now move to my conclusion. Once again, I thank my hon. Friend the Member for Gloucester for drawing these matters to the attention of the House. As a distinguished historian, he will know that there was another Richard Graham, also a Tory, who was elected successively to represent Cockermouth and then Cumberland. He rose to become Lord President of the Council but, unfortunately, fell when he became involved in Jacobite plots. I hope that my hon. Friend does not fall, and that he continues to advocate the case for apprenticeships. He will certainly have my support. His position is in line with the Government's policy, as I can assure him and others in this Chamber-

Martin Caton (in the Chair): Order. We must move on to the next debate.

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Offshore Financial Centres

11 am

Mr Mark Field (Cities of London and Westminster) (Con): As international organisations and major Governments seek to understand the cause of the global financial crisis, small international financial centres have repeatedly endured political attacks and misguided criticisms-from pejorative sniping about their being tax havens and offshore centres for avaricious bankers, to allegations that they provide secrecy jurisdictions for shady figures in the international business community. Those criticisms suggest that they are partly to blame for the shortcomings in the financial markets. The debate about the role of small IFCs has, to date, been remarkably one-sided, which is unfortunate as it demonstrates a fundamental lack of understanding about their function and the benefits that they provide to the wider global economy.

Before the United Kingdom and our global partners look to develop further rigorous international standards on financial regulation, it is critical that politicians and policy makers should formulate and implement policy in an informed, consistent and balanced manner and vital that we should now take a dispassionate view of the offshore IFCs and look sensibly at the significant benefits that they can offer, both to our nation and the broader global financial system.

The UK has an almost unique position in the debate about IFCs. We have a constitutional relationship, through our Crown dependencies and overseas territories, with half of the top 30 offshore financial centres. With the Chinese Government successfully lobbying the G20 last month for both Macao and Hong Kong to be excluded from any OECD grey list on matters of tax transparency, it looks increasingly likely that the standards and regulations currently being formulated may be imposed in some jurisdictions yet overlooked in others. Not only is that incompatible with the need to find a global response to the formation of new financial regulation, but it risks undermining the UK's financial sector and the wider British economy, which is a major recipient of investment capital raised through small IFCs.

Some small international financial centres, such as Jersey and Guernsey, are used by the global financial community for various reasons, including political stability and a favourable economic outlook; familiar legal systems, often based on English common law; a very high quality of service providers; the ability to meet important investor requirements, such as a legal infrastructure to sell shares; a lack of foreign exchange controls that remove restrictions on the payment of interest of dividends; tax neutrality-not to be confused with tax evasion-which enables investors from multiple jurisdictions to ensure they do not meet multiple layers of taxation as funds pass through the global financial system; and legal neutrality, which ensures that no nationality is given special treatment.

For those reasons there has been a mutually beneficial relationship between the City of London, in my constituency, and many Crown dependencies and overseas territories. That is demonstrated not only by the massive capital flows between the two, aiding market liquidity and investment in the UK, but by the legal and constitutional similarities and the transfer of skilled professionals.

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To give some idea of the scale of the capital flows, I should say that UK banks had net financing from Guernsey alone-one of the 30 top centres-of $74.1 billion at the end of June 2009. Unfortunately, because the public debate is largely myopic in respect of IFCs, these benefits are often overlooked or conveniently ignored, in part as a result of small IFCs' relatively low profile and partly because of a lack of seats on intergovernmental bodies that design global financial regulation.

There now needs to be a much greater understanding of the role and proven benefits provided by small international financial centres as part of the City of London's transaction chain. I therefore seek to dispel some of the popular myths that surround such centres. The first myth is that IFCs have a negative impact on growth in the global economy. In reality, many of the smallest IFCs are able to provide a stable, well regulated and neutral jurisdiction through which to facilitate international and cross-border business. Investment channelled into small IFCs will in turn provide much-needed liquidity, further investment opportunities, genuine competitiveness and access to capital markets for businesses and investors in both the major developed world and, increasingly, in countries with vast emerging markets.

The recent Treasury review of this area, undertaken by Michael Foot-not that one, Mr Caton-concluded:

Those funds are largely accounted for by the up-streaming of deposits collected by UK banks to their UK head offices, including the nationalised or part-nationalised Lloyds Banking Group and Royal Bank of Scotland, as well as Barclays, HSBC, Santander and a number of building societies.

In addition to aiding capital flows, a report by the university of Michigan's Professor James Hines on the relation between IFCs and the world economy reveals that expanding investment opportunities through offshore centres leads to increased domestic investment and employment, creating jobs both at the financial centre and in the domestic economies.

Small IFCs play an important role in helping to allocate capital efficiently. To this end, they act as important financial intermediaries, matching the capital provided by savers in one country with the investment needs of borrowers in another. Although that has, understandably, led to concerns about "round tripping", in which capital is recycled through an offshore centre to give it the appearance of foreign investment and attract a more favourable tax regime, the experience of China and India throws those concerns into doubt, because both of those countries have removed tax breaks for foreign investment during the past decade and both have seen internal and inward investment continue to soar. As a major net recipient of capital flows from small IFCs, our firms in the City might suffer if they found it more difficult to access capital via the international markets.

A second myth is that small IFCs played a part in causing the global financial crisis over the past three years. Although it is convenient to blame offshore centres for causing the crisis, even those who work in the financial markets do not accept that small IFCs were a major cause. Last year, the Treasury Committee found that Guernsey did not contribute at all to global financial
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contagion. Indeed, it could be argued that the liquidity provided by the small IFCs was significantly positive for the UK during the crisis.

The third myth is that IFCs engage in harmful tax practices. The Foot review suggested that the potential for tax leakage from so-called full tax jurisdictions, such as the UK, towards low-tax or zero-tax regimes, is relatively limited. Although the TUC has argued that the tax gap created in UK Government tax receipts as a result of offshore centres is some £25 billion, the Deloitte report commissioned by the Treasury at the time of the Foot report showed that only £2 billion is potentially lost in tax leakage per annum. Foot also concluded that the real figure might even be lower than that.

Concerns about the UK's tax base being stripped by unfair competition have also been overstated. It is clear that the debate about tax competition needs to be properly redefined and any further policy initiatives need to protect the important principle of tax sovereignty, as well as adequately recognising the impact of tax regimes on the productive sector. The OECD has clearly warned about the detrimental effects of high corporate tax on productivity. In that regard, I welcome the moves to reduce corporation tax and peg capital gains tax. The recent attacks on the zero-10 tax regimes reveal a worrying trend, in which the sovereignty of independent states to set their own tax rates is undermined and high-tax countries seek to export their high tax rates around the world.

Economic models vary country by country. The adoption of a tax regime premised on the principles of lower tax burdens, efficient government and dynamic private sector activity is legitimate and some degree of tax competition should therefore be recognised as positive. Regardless of that, small IFCs have shown a willingness to engage with the concerns raised by their tax regime-for example, Guernsey and Jersey are voluntarily undertaking a corporate tax review to act within the spirit of the EU tax code.

A fourth myth suggests that small IFCs have a negative impact on transparency, regulation and information exchange. With the G20 placing tax transparency at the top of its agenda, understandably, small IFCs are actively participating in the expansion of the Global Forum on Transparency and Exchange of Information. Indeed, an International Monetary Fund review of Jersey's regulatory standards in September last year concluded that it was in the top division of financial centres, and gave it the highest ranking ever achieved by a financial centre in respect of compliance with IMF recommendations.

Mark Pritchard (The Wrekin) (Con): My hon. Friend makes an important point about tax transparency, and he also mentions capital flows. Does he accept that offshore centres such as the British Virgin Islands, which are on the OECD's white list and peer review group, have set the trend in many ways on transparency? The Government should recognise that, and that such centres help rather than hinder the UK's economy.

Mr Field: I agree, and that is greatly to the credit of the British Virgin Islands and other overseas dependencies, as well as some of the Crown dependencies to which I have referred. They have played an important role and led the way in the transparency agenda.

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One of the great myths to have grown up is that small offshore centres do not benefit developing countries. Small IFCs have been accused of supporting capital flight out of developing countries, but the Commonwealth secretariat is publishing a new report this month to illustrate the importance of the role played by IFCs in helping developing countries, by enabling them to rent financial expertise from other countries while they develop their own financial centres. Crucially, they also offer investors greater protection of their property rights against domestic political uncertainty.

It is no exaggeration to say that without smaller offshore financial centres many developing countries would not secure key funding for project finance, which makes a substantial improvement to the lives of some of the most vulnerable global citizens. Furthermore, the financial action task force gives many IFCs a positive assessment in meeting its 49 rigorous recommendations on anti-money laundering and terrorism finance. Centres such as the Channel Islands perform better in fighting financial crime compared even with bigger countries such as France, Italy, the US or-dare I say it?- the United Kingdom.

Finally, the UK's Crown dependencies are often accused of being fiscally unsustainable. Again, nothing could be further from the truth. The debate within the UK Government has, naturally, been framed by events surrounding the collapse of Iceland's banking system. When the Icelandic banks imploded in September 2008, it quickly became apparent that the contagion would spread to British savers and ultimately to British taxpayers. Furthermore, the role of the Isle of Man as a core financial intermediary between British savers and Icelandic borrowers illustrated the UK's exposure to offshore centres.

However, the subsequent Treasury review went some way towards allaying the two main concerns. In particular, the worries over the fiscal sustainability of UK Crown dependencies proved to be massively overstated. Throughout the years, IFCs such as Gibraltar, the Isle of Man, Guernsey and Jersey, have amassed large budget surpluses while actively diversifying their tax base, as Foot recommended. Indeed, the Foot report commented on the fact that none of Britain's Crown dependencies has taken on significant levels of borrowing.

It is important that the G20 summit in Korea later this year is made aware of the beneficial role that small IFCs play in the global economy. Above all, we must stand up to misinformed or narrow views of the valuable contributions that small IFCs can offer to the world economy in terms of liquidity, efficiency, investment and economic growth. Let us make no mistake: ensuring that the voices of small IFCs are heard in Korea is very much in our national interest. If we look at the example of Jersey and its positive effect on the wider UK economy, we see that the island provides a conduit through which mobile capital from around the world can be aggregated and invested, primarily here in London.

Andrew Rosindell (Romford) (Con): My hon. Friend's speech is very welcome. People from overseas territories and Crown dependencies will thank him for raising these important matters. Does he agree that one issue that is always ignored, and which is linked to what he is saying, is that we, unlike other countries with overseas territories and dependencies, do not allow the Governments
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or people of those territories any say in this place? They have no way of being represented or of speaking up for themselves. They depend on Members of Parliament to raise issues. Does he also believe that, as with other countries with overseas territories and dependencies, there should be some way for those people to be able to speak and to raise their concerns here, in the Parliament that makes laws on their behalf?

Mr Field: I have some sympathy with my hon. Friend's view. This debate is an example of the way in which we are to do that. If he is suggesting that we have a constituency, similar to the French system, that takes in Gibraltar, Jersey and Guernsey, I am sure that he would be only too happy to be a Member. Most people in Gibraltar already believe that my hon. Friend is the Member who looks after their interests. He makes a serious point, and the tremendous contribution that our Crown dependencies and overseas territories make to this country should not be understated. I hope that this debate plays a small part in addressing some of the myths that have arisen.

I want to speak about Jersey, which is a significant provider of administrative and legal services to international businesses that are active in the City of London and help to make it a more attractive place to do business. For example, Vallar plc successfully raised more than £700 million in an initial public offering in London earlier this month, and used a Jersey structure. That showed the respect that investors, professional advisers and companies have for Jersey as a jurisdiction. It also provides banking services to a large number of UK expatriates who are unable to access the UK banking system because they do not have a UK address.

The Crown dependencies also provide an important platform from which to learn about and access the British economy. For example, the Isle of Man acts as the No. 1 jurisdiction for the incorporation of Indian businesses listed in London, and has been identified by a Chinese Government economic unit as an important link in China's "going out" strategy in relation to Chinese businesses setting up in the EU.

The Isle of Man plays an important and symbiotic role in London's shipping and insurance markets, inter alia by having such a successful white list ship registry, as well as its fast-growing aircraft registry. Similarly, with satellite, space and film business, the Isle of Man brings into a British sphere of influence important strategic global businesses that might otherwise be drawn to a competitor such as Singapore, Hong Kong or the US. The Crown dependencies are keen to continue acting on this hub-and-spoke basis with the UK and adding value to Britain's international offering in a proper and transparent way.

Small IFCs desire fair recognition for their high regulatory and supervisory standards and therefore wish to make policy makers from all G20 member countries aware of their true operation, as well as allowing them an effective voice at the table. In that regard, it would be helpful if the Minister gave an indication of what measures the Government can take to ensure that the G20 process is more inclusive, and that policy prescriptions that aim to restore financial stability strike the right balance between the onshore and offshore financial communities and recognise the mutual interests that exist between the two. It would also be helpful to have
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an update on progress in meeting the Foot recommendations and information on the progress being made through EU and OECD efforts to assist the overseas territories in meeting their own international requirements.

In conclusion, too few people who now seek to impose rigorous regulation on offshore jurisdictions truly understand how those jurisdictions operate. They fail to understand their positive rankings of compliance with major regulatory standards or their beneficial role in promoting investment and growth in the widest elements of the global economy.

It is inevitable that Governments will attempt to prevent further financial crises from occurring-and so they should-and I fear that that will result in the development of global standards that may have an unintended impact on all jurisdictions. It is critical that politicians and policy makers should not depart from the need to formulate and implement policy in an informed, consistent and balanced way. When it comes to our naked self-interest, it would be foolish at this juncture if the UK ignored the proven benefits provided by small international financial centres as part of the City of London's world-class operations.

11.19 am

The Financial Secretary to the Treasury (Mr Mark Hoban): I congratulate my hon. Friend the Member for Cities of London and Westminster (Mr Field) on securing the debate and talking very clearly about the challenges and benefits that arise from offshore financial centres. He is right to highlight the UK's particular interest in this area. Crown dependencies and offshore territories that have a link with the UK form half the top 30 offshore financial centres, so we have an interest.

My hon. Friend is right to highlight the important link in retail financial services with the Crown dependencies. A number of hon. Members will have had correspondence from constituents or former constituents about the impact of the Icelandic banking crisis on them, because they had deposits in the Isle of Man with Kaupthing Singer & Friedlander (Isle of Man) or in Guernsey with Landsbanki Guernsey. We have an interest on that level because those places are used as centres for banking by expatriates and a number of people who want to place their money offshore.

It is also right to identify the significant links between these offshore financial centres and the City of London. My hon. Friend highlighted their importance as a mechanism for providing funding for the UK financial services sector: people place their money on deposit in offshore financial centres and then deals flow through to London. I was struck by the fact that in quarter 2 of 2009, as mentioned in the Foot review, $332 billion of funding was provided to the City of London from those centres. That shows their importance.

I am sorry that my hon. Friend the Member for The Wrekin (Mark Pritchard) is no longer in his place, as I am about to refer to the British Virgin Islands, which he mentioned in an intervention, saying that the BVI are on the OECD white list. We welcome the fact that offshore financial centres are keen to take steps to appear on that list and we would encourage more to do so.

My hon. Friend the Member for Romford (Andrew Rosindell) asked about representation in this place for Crown dependencies and overseas territories. Under the present Government, the imperial days of the Treasury
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are long gone. It is very much for the Foreign and Commonwealth Office and the Ministry of Justice to take responsibility in that regard, and I am sure that since the election my hon. Friend has not been slow in making his views known to Ministers in those Departments, either.

The financial crisis highlighted the need to protect our public finances. The Government have taken steps to deal with the fiscal deficit that we inherited, and we will follow that up with the comprehensive spending review in the autumn. However, that increased vigilance must run through everything that the Government do, and part of that involves pressing for high international standards that protect against the risks posed by jurisdictions that fail effectively to impose prudential regulation, tax transparency, anti-money laundering measures and standards on countering the financing of terrorism. At last year's G20 summit in London, leaders called on all jurisdictions to adhere to international standards in those areas. They called on the appropriate international bodies to strengthen peer review to assess jurisdictions' compliance with the standards and to consider possible counter-measures for those that fail to comply. It is important that the international standards are applied without discrimination, allowing all jurisdictions that meet them to compete freely in international markets.

Michael Foot was asked by the previous Government to conduct an independent review of British offshore financial centres, and he reported his conclusions last October. The aim of the review was to deal with concerns about the risks caused by the financial crisis to the Crown dependencies and overseas territories and, by association, to the UK. The report provided a health check of the economic sustainability and viability of the financial services sectors in the Crown dependencies and overseas territories. The message from the report was clear: offshore financial centres must meet international standards if they want to maintain active and trusted financial sectors. The challenge for offshore financial centres was to take greater responsibility for their economic future, demonstrating that they are capable of responding to financial stability risks, while strengthening their long-term commitment to meeting globally recognised standards-issues raised by my hon. Friend the Member for Cities of London and Westminster.

Michael Foot's report set out a series of steps that jurisdictions must take to ensure that they are inside the scope of international regulation and that they secure their long-term sustainability. To demonstrate their performance against international standards, British offshore financial centres were invited periodically to publish the details of their progress, setting out the international standards that they have met, covering tax transparency, prudential regulation and preventing financial crime, and the standards that they have not met, with details of how they intend to meet them in the future and how soon they expect to do so. We are talking about the setting out of clear benchmarks about what the territories should do and how far they are going in achieving those standards. That sends a clear signal that both we and the wider global community are interested in what they are doing. The more transparency there is about how much progress the territories are making towards those goals, the greater the acceptance will be of their activities in the wider global community.

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Mr Field: I am also keen to ensure that the point is made robustly about capital flows. We have had a credit crunch quite recently and we may be facing another one with all the sovereign default concerns in Europe. The free movement and liquidity provided by IFCs is key. That case needs to be made robustly at a time when others are dismissive of offshore financial centres.

Mr Hoban: Indeed. My hon. Friend makes an important point. Adherence to the standards makes the case that offshore financial centres should be part of the global network of financial centres and that they are valued. It is also important to ensure that when people talk about offshore financial centres, the debate is proportionate and evidence based. That is the best basis for debate in the UK, EU and G20. My hon. Friend made important points in that respect in his remarks.

The Foot review recommended that Crown dependencies and overseas territories should have to meet key international standards on tax information exchange, financial regulation, countering the financing of terrorism and anti-money laundering. The review strongly recommended that British Crown dependencies and overseas territories need to diversify their tax bases in a way that helps to secure their long-term economic sustainability. My hon. Friend made the argument that a number of territories had already done that and had withstood the financial crisis.

Andrew Rosindell: My hon. Friend the Minister talks about long-term stability. Does he agree that any attempt to undermine the ability of Crown dependencies and overseas territories to be self-sufficient and to look after their own affairs would in the end rebound on the British Government, with the possibility that we would have to finance some of those territories, so it is vital that policies from here, from Brussels or from anywhere else do not undermine the ability of our territories to be self-sufficient for the long term?

Mr Hoban: My hon. Friend makes an important point, but what he refers to must be done within the context of adhering to the highest possible international standards. We need to ensure that that international framework exists and that the territories comply with it; otherwise they are open to attack by other nations. Yes, it is important that the territories are economically sustainable and are not dependent on the UK, but at the same time they must meet those international standards, and a number of territories have made quite significant progress towards that goal.

With regard to the sustainability of overseas territories, they were encouraged to improve the management of their public finances to ensure that they were well equipped to withstand unexpected economic and financial shocks without external fiscal assistance. We need to recognise the progress that has been made to comply with the standards. I understand that 28 jurisdictions-almost exclusively tax havens and offshore financial centres-have moved into the category of jurisdictions that have substantially implemented international standards on tax transparency. That shows that overseas territories are taking the measures seriously, and we encourage them to continue to do so. Over the next three years, 100 jurisdictions will be peer reviewed, which will be an important part of the process to give confidence in how the standards are being implemented.

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I recognise the importance of the role that offshore financial centres can play. They are an important contributor to the City of London. They provide services to UK citizens, whether at home or abroad. However, it is vital that they comply with the highest international standards on tax transparency and dealing with terrorism financing and money laundering. Adhering to those standards would be the best safeguard for their future prosperity.

11.29 am

Sitting suspended.

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Building Schools for the Future

[Mr James Gray in the Chair]

2.30 pm

Derek Twigg (Halton) (Lab): This is the first opportunity formally to debate the consequences of the announcement made by the Secretary of State for Education on 5 July about axing the previous Labour Government's Building Schools for the Future programme. There is widespread anger and disbelief among colleagues from all parties about the devastating impact that such a move will have on education provision in the communities that they serve. Proportionally, no community has felt the impact more than Halton.

My hon. Friend the Member for West Bromwich East (Mr Watson) intended to contribute to the debate, but he cannot attend due to unforeseen circumstances. He takes a particular interest in the issue. The announcement by the Secretary of State for Education will affect the following schools in my constituency: Ashley special school, Cavendish special school and Chestnut Lodge special school. Fairfield high school had been proposed for closure, but the Secretary of State decided that the programme should be stopped, due to a clerical error on the form. That decision was made in the same week that a party was held as a thank you to those people who supported the school over the years prior to its closure-another error. Saints Peter and Paul Catholic high school will also be affected, as will St Chad's Catholic high school, the Bankfield school-my former school-the Bridge pupil referral unit, the Gateway pupil referral unit, and the Heath school.

Three school-building programmes are pending review: Halton high school academy, which is not in my constituency, but in that of the hon. Member for Weaver Vale (Graham Evans); Grange comprehensive; and the Wade Deacon high school, which was to absorb those pupils who would have gone to Fairfield high school prior to its closure.

All the secondary schools in Halton have been affected, as have the lives of 7,300 children, together with their teachers, parents and the wider community. The dedication of staff and governors and the hard work of pupils has produced a marked improvement in GCSE results over recent years, making Halton one of the most improved areas in the country. Last year, 72% of pupils acquired at least five top grades, surpassing the national average, and for the second year running, Halton has achieved more than 70% attainment. That is a remarkable increase of 34% from 1998 results. The percentage of pupils in Halton who gained a minimum of five A to C grades at GCSE, including English and maths, has increased by nearly one fifth since 1998, from 24.7% to 44.4% in 2009. In one of the most deprived boroughs in the country, that is a spectacular result.

It is disgraceful that the new Conservative-Liberal Democrat coalition Government have taken a devastating axe to the vital funding for schools in Halton, which is one of four Labour-held constituencies among the six seats in England and Wales where school culls that go into double figures have been inflicted. We all remember how the previous Conservative Government left many school buildings dilapidated and crumbling, and the
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Labour Government had to pick up the pieces and initiate the biggest school building programme in over a century.

Charlotte Leslie (Bristol North West) (Con): Although I appreciate the pain that is felt across communities due to the cuts that have had to be made, is the hon. Gentleman aware of some of the downfalls in the mechanism of the BSF programme and the local education partnerships that delivered it? I have heard representations from schools that have undergone rebuilding under BSF. They were concerned that 90% of the local education partnerships that delivered the programme were owned by the contractor, and therefore the interests of the local education partnership and the builder were those of the contractor, not of the school. Another concern was that the contractor operated at an overhead and profit level of 8% plus, as opposed to 4% on the market. Those concerns were raised by teachers and head teachers who saw money going not to their school but to contractors and consultants.

Derek Twigg: I do not try to pretend that the BSF programme was perfect. If the hon. Lady is patient, I shall deal with some of those issues later in my speech. She raises an important point.

It seems abundantly clear that many of the assertions made by the Secretary of State in his announcement of 5 July are plain wrong. First, his boast about the Government's determination


is laughable-well, it would be laughable if the consequences of his policies were not so tragically devastating to communities such as those in Halton that I represent. I fail to see how targeting the second smallest unitary authority in England, which serves the country's 30th most deprived area, with the worst cuts to the BSF programme in the north-west will bring any benefit to the disadvantaged. Will the Minister explain how the cull of 100 BSF projects, with a further 21 under discussion, in the relatively deprived region of the north-west-over half the projects affected are in Cheshire and Merseyside-constitutes proportionate, fair and decent action by the Government?

Mary Macleod (Brentford and Isleworth) (Con): Does the hon. Gentleman agree that if the Labour party had returned to government, it would have cut BSF funding?

Derek Twigg: We were committed to the programme as it stood, but a myth has been put around by the Government. With the loss of five new schools in Wigan, 10 in Blackpool, 25 in Liverpool and 27 across Greater Manchester, the only aspect of equality in the policies of the Secretary of State is the collective discrimination against the schools and colleges of the north-west. I also wish to challenge the Secretary of State's implicit view that the BSF programme is incompatible with prioritising the raising of school standards in pupil attainment and behaviour through the quality of teaching and learning.

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Ben Gummer (Ipswich) (Con): On the hon. Gentleman's point about the policy commitments given by the previous Government, a commitment was made, but it was dependent on underspend-something that the Treasury has subsequently confirmed does not exist. Therefore, the policy was unobtainable.

Derek Twigg: We need to get to the nub of the problem. We can go back and look at who was responsible for the economic crisis, the world crisis and so forth. The Conservative party keeps trying to suggest that somehow this problem is down to the way that the previous Government managed the economy.

Mr Rob Wilson (Reading East) (Con): Will the hon. Gentleman give way?

Derek Twigg: I have not yet answered the last question. The permanent secretary in the Department for Education wrote to my right hon. Friend the Member for Morley and Outwood (Ed Balls) and clearly said that the money was there. He would have asked for a letter of direction if there had been any impropriety or problems with that, but he did not do so. That is the key point, and something that the Conservative party keeps trying to push, although it is plain wrong.

I would like to make some progress. It is self-evident that the quality of the built teaching and learning environment, which embraces school buildings and the state-of-the-art facilities that they should house, will have a bearing on pupil attainment and the quality of teaching.

Lyn Brown (West Ham) (Lab): Does my hon. Friend agree that although the cuts to the BSF programme are devastating, cuts to the information and communications technology upgrade are equally, if not more, damaging to the future of our children's education?

Derek Twigg: My hon. Friend makes an excellent point. I shall return to it at the end of my speech in some of the questions that I put to the Minister. He should not take my word on the situation, but should consider the findings of the 2010 school environment survey, conducted by the British Council for School Environments and the Teacher Support Network, in conjunction with the Association of Teachers and Lecturers. The report shows that 95.8% of teachers believe that the school built environment influences pupil behaviour, and over half felt that their surroundings had a negative effect. Investment in school buildings has had a more positive impact on teachers and learners, and such work must continue. That is evidenced by the fact that three quarters of teachers now regard their school as effective and adequate at providing an effective learning environment. That compares with two thirds of teachers in 2007.

Dr Mary Bousted, general secretary of the Association of Teachers and Lecturers, asserts:

I also draw the Minister's attention to last year's report by the Government's favourite auditor, KPMG, on the effects of the private finance initiative, which is
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central to many BSF projects, on education standards. It concluded that student attainment is 44% higher in PFI schools than in conventional schools, and it built on an American report from 2002 entitled, "Do school facilities affect academic outcomes?" That report found that

In his article in The Guardian on 8 July, John Crace said that Michael Gove underestimates the impact of surroundings on school pupils.

Craig Whittaker (Calder Valley) (Con): I hear what the hon. Gentleman says about buildings and their impact on teaching and children. I also heard him talk of dilapidated and crumbling schools. I wonder what he would say to the parents and teachers at two schools in my constituency: Todmorden and Calder high schools' buildings are falling down and are among the five worst in the country. The local authority has spent more than £3.5 million in the last two years alone to keep them open. However, the previous Government's BSF programme did not apply to those schools because they attain too highly and are not considered to have deprivation. What would the hon. Gentleman say to my constituents?

Derek Twigg: I do not know about schools attaining too highly, but I shall mention later a couple of schools in my constituency in that regard. The fact remains that, during all the years in the 1980s and 1990s when the Conservative party was in government, schools fell into a state of ever more disrepair, because there was little money for repairs. When Labour was in government, at least £24 million was spent in my constituency on improving the state of school buildings.

In his statement to the House on 5 July, the Secretary of State referred to a BSF school from which pupils had been sent home because of bad ventilation, leading to the use of additional mobile air conditioners in the summer months. However, as a direct consequence of the measures that he announced this month, mobile classrooms, decades-old prefabs and the occasional shipping container that are either too hot in summer or too cold in the winter will not now be replaced with 21st century state-of-the-art facilities, leaving staff and students at dozens of schools dejected at having dilapidated classrooms after years of work on Building Schools for the Future.

The BSF cuts mean that Halton goes from being an authority with sufficient school places overall to one with insufficient capacity. They mean that an increasing number of children will have their lessons in mobile classrooms when they should have been in brand new schools. With Labour, it was building for the future; with the Con-Lib coalition, it is more like "Back to the Future" of the 1980s, with rampant ideological cuts and failing facilities in schools.

The Secretary of State justified his axing of Building Schools for the Future on the ground that it failed to provide value for money. I suggest to the Minister that precisely the opposite is true. Although the National Audit Office of March last year made some criticisms of BSF, on the question of value for money it said:

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Tellingly, the NAO went on to say:

Partnerships for Schools-

Graham Jones (Hyndburn) (Lab): My local authority is Lancashire county council, which has just lost Building Schools for the Future phases 4 and 5. The administrative cost of the £100 million programme for phase 4 work was £893,000. I return to the point that my hon. Friend made about politics. Does he agree that the comments made by Conservative Members are focused on the politics, not on the facts, given that £893,000 is less than 1% of £100 million and construction was due to start at the end of this year?

Derek Twigg: The focus should be that our children have been robbed of state-of-the-art school buildings. The fact remains that the money was there to carry out the programme, but the coalition Government chose, for ideological reasons, to put it towards free schools. It was their choice.

I return to the importance of the changes in my constituency. In Halton and across the piece, I suspect, the reduction in the number of school sites would have led to reduced operational staffing and running costs, allowing more money to be spent on improving pupil attainment and ensuring the high-quality teaching that the Secretary of State purports to prioritise. Indeed, Halton council was commended by the previous Government for the manner in which it approached the proposed reorganisation of secondary school provision throughout the borough, not least for achieving value for money. In Halton, significant costs savings have been achieved since the inception of the programme through the establishment of a joint delivery team with Warrington borough council. That enabled both authorities to share procurement costs, staff, expertise and best practice. At each stage of the BSF programme, the authority met the key milestones and used the lessons learned to reduce the time scale and milestones for the Warrington wave 7 programme.

Another key point is that, whereas the Secretary of State says that the money is not there and that BSF was badly bureaucratic, Halton borough council has shown that it can be done and that there are benefits.

Mr Rob Wilson: The hon. Gentleman seems to be living in a parallel universe in which no cuts would have been made under Labour. However, the former Education Secretary said in The Sunday Times that he would like to cut the number of heads and deputy heads by 3,000.

Derek Twigg: The hon. Gentleman is now quite an experienced Member and I respect him, but we have never said that there would have been no cuts. There would have been cuts. I put it to him that his Government said that they would not cut front-line education services, but what is more front-line than school buildings and the importance of improving them?

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Going back to what was done by Halton borough council, the timeline for the programme has been reduced by 50% compared with the PFS standard. Efficiencies were also planned through the integration of multi-agency services within school facilities such as health, leisure and outreach services. A strategic approach to ensure that we moved away from a "patch and mend" model-the hallmark of the Conservative years-to an overarching model that considers condition, suitability and sufficiency is now in jeopardy.

The Secretary of State says that the Government remain committed to supporting capital spending in schools and has instituted a review aimed at ensuring that value for money is guaranteed through the process. However, he could not answer my written question of 12 July about when he expects the review to be completed. That is more evidence of a rushed decision. Investing in capital spending and culling BSF would appear to be an oxymoron of the highest order. I fear that, like their vague aspiration to replace the future jobs fund, the nation will be lumbered with another watered-down and ineffective alternative, published at a yet unspecified time.

Another feature of the ill thought out and rushed nature of the policy is the prospect hanging over local authorities of legal action by contractors following the termination of school building projects. Last week, I asked whether the Education Department intends to issue advice to councils that may face litigation. The Minister said that he would reply as soon as possible, so I ask him again whether he can provide me with an answer to that question. Again, it shows that this was a rushed, botched job.

As in the wider economy, the Government seem intent on choking growth and development, and the BSF cull will play its part. Although it is easy to recognise the physical benefits that will be lost due to the end of the building programme, added value benefits will also be lost that would have been a major boost for the local economy and would have addressed many of the social, economic and educational challenges faced by Halton and Warrington. Halton borough council has told me that a number of social, economic and regeneration initiatives had been developed within its BSF submissions. The management and ongoing development of those initiatives were fully costed and allocated within the local education partnership, and the generation of social and economic benefits would have given truly additional value. Some 500 jobs would have been created, whether directly or through the supply chain and so on. that would have been a most important factor in the process.

It is important to recognise how schools in my borough, such as Heath and St Chad schools, will be hit. They are expanding schools and would have had extra capacity, but that is now in jeopardy. Those schools will not be able to expand, despite their popularity, even though it is an important part of the Government's policy to recognise and expand such schools. That is also the case with Bankfield school, my old school, which will now have difficulty in expanding. As a result, yet more children will have to be educated in mobile classrooms, which takes us back to the conditions of the 1980s and 1990s.

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Wade Deacon high school, which had a 100% pass mark for grades A to C last year, serves both disadvantaged and more prosperous areas. When it amalgamates with Fairfield school, which has been closed, it will face a difficult job managing the two sites. The situation is far from ideal; there are busy roads to cross and it will be hard to manage teachers' timetables. Under the BSF programme, the two schools would have been on one site. In another example, the Grange would have been an all-through school, catering for children between the ages of three and 16, with a number of schools coming together on one site. There will be major consequences if that school does not go ahead. There are significant public health and safety concerns-I mentioned Bankfield and the problems of moving between different school buildings-as well as a problem of insufficient capacity at other schools. Visiting schools in my constituency last week, I saw that profound impact of the decision on them.

Community access to schools has many advantages, not least in raising educational interest and encouraging adult involvement, which leads to the development of a better learning culture. In areas such as mine, where that culture has not always prevailed in many homes, community access provides a massive opportunity for improvement.

Charlotte Leslie: Does the hon. Gentleman recognise that problems were caused in many schools by the private finance initiative of the BSF programme? Communities have had to pay extra money, or there has been a lack of flexibility in their being able to use rebuilt BSF school facilities.

Derek Twigg: I can speak only for my own constituency. Having spoken to a number of head teachers in the past week, I found the exact opposite to be the case. Schools were being designed to bring in the communities and increase involvement, particularly through some of the wider initiatives. Schools in my constituency did not face that problem-quite the opposite.

Because Halton's population suffers some of the poorest health in the country, health is a top priority, which is why it was part of the BSF project. A lot of work was done locally to consider how better community facilities could be used to promote improvements in health and to tackle, for instance, the very high teenage pregnancy rate within the Halton borough. The social return on investment in terms of savings from reductions in the numbers of exclusions and of those not in employment, education or training, from welfare benefits and from improvements to mental health and community inclusion and cohesion-all goals the Government claim to aspire to and cherish-could amount to something like £34 million. Yet gone are the opportunities that have already consumed thousands of work hours and millions of pounds to create well designed, environmentally sustainable, Disability Discrimination Act-compliant state-of-the-art classrooms and facilities fit for purpose for the 21st century in schools in Halton and throughout the country.

I end with a few questions. What are the Government doing about the ICT funding that is part of the project? If the sample schools in my constituency were to get the go-ahead-that would be superb-they would get ICT funding as well, but what about the other schools that are not given capital funding to rebuild, after the Government's review is finished?

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I also have a question about the terms of reference for the capital spending review-I hope that we will get some idea when that will report. Buried deep down in those terms is the requirement to look at regulations relating to school playing fields. The regulations are there to protect school playing fields, so can the Minister give a categorical assurance that no changes will be made that will make the sale of school playing fields easier, or is he content not only to steal schools out of the hands of children but to sell off their playing fields as well? Will the Minister guarantee a strategic approach to the school estate following the demise of BSF by delivering 21st century learning space in the schools in my constituency? BSF would have provided them with a 25-year commitment to continue to invest in their buildings.

The chaos caused by the various incorrect lists continues. The Department does not take a consistent approach to the different education authorities and schools. For instance, academies or their sponsors had five days to provide the information that was requested from them, whereas the sample schools were asked last Friday to provide the information this Monday. At 8 o'clock last night, my local authority had a phone call asking it to provide building condition information for one school by 8 this morning, and for another school at 8.20 am. In addition, the local authority was told that Partnerships for Schools officers would be in Halton today, taking photographs of the condition problems that had been highlighted. That just shows the continued chaos that we are having to put up with as part of the process started by the Secretary of State. Why have some schools been asked to provide condition surveys and others not? That is a simple question.

The Prime Minister says that he wants to change the image of his party and its policies, but the Liberal Democrat fig leaf is barely disguising a return to the nakedly ideological attacks against predominantly Labour-supporting areas. The full extent of the severity of the austerity cuts to be implemented by the coalition Government is only beginning to be realised by the general public. It is a sombre thought that it will take the destruction of buildings of hundreds of schools and colleges across the country to reduce to ashes the claims of the Conservatives and the Liberal Democrats to stand up for fairness, and with it their electoral fortunes.

2.56 pm

Tony Baldry (Banbury) (Con): The hon. Member for Halton (Derek Twigg) mentioned chaos. As far as the Building Schools for the Future programme is concerned, I very much hope that at some stage there will be an independent inquiry into the conduct of Ministers in the previous Labour Government; the more I hear about the scheme and the conduct of Labour Ministers, the more scandalous it all becomes.

A project that was originally supposed to cost £45 billion ended up costing £55 billion. The previous Government spent £10 million simply setting up the procurement vehicle for Building Schools for the Future before a single brick had been laid. One person received £1.35 million in consultancy fees. It is difficult to see how that sum can possibly be justified. A single individual in this project received more than £1 million.

Mr Iain Wright (Hartlepool) (Lab): Will the hon. Gentleman name the individual?

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Tony Baldry: The hon. Gentleman who has just intervened was a Minister of the Crown in the last Government. Is he asserting from the Front Bench that no individual received more than £1 million in consultancy fees from this project? Is that what the hon. Gentleman is saying?

Mr Wright indicated assent.

Tony Baldry: So the hon. Gentleman is inferring that the Secretary of State, in putting that forward on the advice of officials, was misleading the House?

Mr Wright indicated assent.

Tony Baldry: What I am saying is what the Secretary of State asserted in the main Chamber last week. The hon. Gentleman is essentially asserting that the Secretary of State misled the House. Is that what he is saying?

Mr Wright: I am suggesting that not one single individual received the amount of money that the hon. Gentleman alludes to. It was a consultancy firm that received that money, following a wide range of different projects relating to BSF. It was not a single individual.

Tony Baldry: This is an important point. The hon. Gentleman is implying that the Secretary of State misled the House last week when he said very clearly, in terms, that an individual had received more than £1 million. I am confident that the Secretary of State would not have misled the House, either knowingly or unknowingly.

Mr Andy Slaughter (Hammersmith) (Lab): Will the hon. Gentleman give way?

Tony Baldry: Let me finish this point.

That is all the more reason why we need an independent inquiry into the BSF programme and the chaos in which the previous Government left it.

Mr Slaughter: Will the hon. Gentleman give way?

Tony Baldry: Let me finish my next points.

The money that went in consultancy fees could have gone into the front line. The BSF scheme took no account of the fact that, in many parts of the country, there is a real need for new school building as a result of the growing population. That is particularly true for primary schools, but the BSF project simply did not cover primary schools at all.

In the run-up to the general election, the previous Government sought to pretend that there was more money in the BSF programme, but they did so on the basis of hoping that they would get funds from the Treasury through the use of end-of-year flexibility of capital. It is becoming apparent, as the permanent secretary to the Department for Education has now made clear, that that was never properly cleared with the Treasury by the right hon. Member for Morley and Outwood (Ed Balls), then Secretary of State for Children, Schools and Families. The Treasury has said clearly that the right hon. Gentleman was playing fast and loose with that particular capital stream. The Treasury has made clear its opposition.

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I would very much welcome an inquiry into what went wrong with the Building Schools for the Future programme and Partnerships for Schools under the previous Government. It is very unreasonable to attach any culpability to new Ministers for a grim situation that they clearly inherited and are having to deal with.

Banbury school, a large comprehensive in my constituency, was put into the Building Schools for the Future programme. Its principal has written to the Secretary of State and she has made her comments clear in local newspapers. I should like to share with hon. Members what she said in her letter to the Secretary of State:

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