HC Deb 09 June 1998 vol 313 cc899-909

'.—The Secretary of State may compensate employers for costs arising from the provisions in Part 3 of this Act.'.—[Mr. Green.]

Brought up, and read the First time.

Mr. Green

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this, it will be convenient to discuss the following amendments: No. 106, in clause 29, page 28, line 26, at end insert 'subject to no employee being entitled automatically to more than eight hours of study or training leading to a relevant qualification.'. No. 101, in page 28, line 30, at end insert 'but regulations made for the purpose of subsection (1)(c) may not provide for a standard of achievement higher than NVQ Level 2'.

Mr. Green

The proposals stand in my name and that of my hon. Friend the Member for Havant (Mr. Willetts). We have heard much during our debates about the benefits of higher and further education being spread fairly among the individuals who pursue them; the firms that benefit from those individuals' efforts; and society as a whole. The costs, too, should be spread fairly. The purpose of new clause 11 is to achieve such a spread under part III of the Bill, which would otherwise place an onerous and damaging cost on businesses, particularly small businesses.

I should make it clear at the outset that, in moving the new clause and the amendments, we are not in any way being anti-training. We believe strongly that 16 and 17-year-olds should be fully trained to the level of which they are capable, to allow them to take a full place in the work force and play a full part in society, both for their own benefit and for the benefit of society.

The problem in this instance is that the Government's good intentions will have ill effects. In that respect, the proposals differ slightly from others in the Bill, where the Government seem to have started off with malevolent intentions. I do not accuse them of that in this case, but their proposals will have unintended ill consequences.

My text comes from the Minister for School Standards, who is regrettably no longer in his place, speaking at a conference in Germany, snappily entitled "Die Bekämpfung von Arbeitslosigkeit in Zeiten der Globalisierung", which I think means, "The problems of unemployment in times of globalisation". The Minister made several cogent points in that speech, telling his audience, safely many miles away from his colleagues in this country, that we must address the issue of non-wage costs; that the cost of over-regulation can be high; and that, in Germany, as I have often heard my right hon. and hon. Friends say—indeed, I have made the point myself—for every £100 spent on wages, an employer must add £31 in non-wage costs, whereas in Britain things are better, since non-wage costs are only £15. That is all entirely valid stuff.

The Minister went on to say: We can no longer bury our head in the sand over this issue. Costs do matter. Over-regulation and high non-wage costs put European firms at a competitive disadvantage, and that costs jobs. He is absolutely right. I therefore find it rather strange that he is putting his name to a Bill that will achieve precisely the ill effects of which he warns us.

If the Government will not accept our new clause and amendments, the problems that part III will bring about will be particularly acute for small businesses. The costs of the measure are estimated to be £130 million in a full year. Research from the Library shows that between 80,000 and 130,000 businesses could be affected by entitlement for time off for study or training. Of those businesses, 80 per cent. are likely to be employing fewer than 25 people.

Further research has shown that the £130 million, to which hon. Members on both sides of the House have referred as the measure's likely cost, will be incurred if only 50 per cent. of eligible 16 or 17-year-olds decide to take up the opportunities. Therefore, costs could be much higher, and would fall disproportionately on the businesses that are less likely to be able to afford them.

If I may, I shall anticipate the response of the Under-Secretary. I dare say that he will produce a letter from the Confederation of British Industry.

Dr. Howells

I was not going to.

Mr. Green

Oh, well, I shall do the hon. Gentleman a favour, then. The CBI says that it accepts the need for something along the lines of the Government's proposal—indeed, that the cost will certainly be affordable for big businesses. Further down the scale, however, they may not be so.

The unreasonableness of the burden falling on small businesses is the reason for amendments Nos. 106 and 101, which try to inject some certainty into the level of obligation that small businesses will be letting themselves in for. How big a commitment are they meant to make? The Bill uses the potentially weasel word "reasonable" to decide the level of commitment. What may seem reasonable in the calm recesses of the Department for Education and Employment may not seem reasonable to a small firm employing one or two people which is struggling or which wishes to expand to employ more youngsters but which will find it more difficult to do so under the Bill.

The effect on small businesses could be serious; more serious still, however, is the potential effect on the very 16 and 17-year-olds whom part III is meant to help. We must ask ourselves what options a potential employer of 16 and 17-year-olds will have. The first option is to take on a long-term liability—giving employees the chance to take time off to study, which may not be practical in many businesses.

The second option is to reduce wages to make up the costs that the business will incur. That must be unpalatable to the Under-Secretary; he would not want the measure to be used as a weapon to drive down wages for 16 and 17-year-olds, although that could be one of the unintended consequences to which I referred.

The third option is even worse: no jobs will be offered at all to young people, who will find it increasingly difficult to get work. We all know that many new jobs are created in the small business sector, and anything that makes that more difficult seems actively counter-productive.

The real fear about the third option concerns its interaction with the Government's new deal. I pay tribute to Baroness Blackstone for devising an extremely good example to illustrate how interaction between the two policies could be deadly for the employment prospects of many 16 and 17-year-olds. She gives the example of three young people. The first is aged 17, and has five GCSEs and one national vocational qualification at level 2. The second is aged 18 and on the new deal welfare-to-work scheme. The third is aged 17 and has only one GCSE.

The first young person could be employed full time at a cost to the employer merely of a salary. The second comes to the employer with a weekly bounty paid for by the Government of £60, plus £700 up-front costs to cover training. The third—the one who is meant to be helped by the measure—comes to the employer at the cost of a full salary and with the right to have regular time off for education and training at the employer's expense, which could last for more than a year. What is any rational employer likely to do? He will not employ the person whom part III is meant to help. Under the two policies, the Government are effectively saying that it is fine for 18 or 19-year-olds to receive welfare-to-work subsidies, but it is not fine for 17-year-olds to do so. They will be less likely to be employed.

5.15 pm
Dr. Howells

The hon. Gentleman is doing the reputation of small businesses no good. Many small businesses—he will know some of them; I certainly know many of them—are already investing a great deal in their young work force because they understand that, if they are to increase their competitiveness, they must explore that group's potential and quality. We are talking about 115,000 or 120,000 young people who very often go to what I am afraid to describe as dead-end jobs in firms that have no will to train them or help them to improve themselves—and so, indirectly, improve the firms. Surely progress must be made on that. That is what the Government are trying to do. Why does the hon. Gentleman not recognise that?

Mr. Green

I accept what the Government are trying to do; why does the Under-Secretary not recognise that they are failing? They are making it more difficult to employ such youngsters. I refer the Under-Secretary to the words of Baroness Blackstone, who has recognised the difficulty. She, as we know, has one of the finest minds on the Government Front Bench of either House, and has pointed out, with tremendous delicacy, a potential issue here concerning the interaction of two important commitments".—[Official Report, House of Lords, 26 January 1998; Vol. 91, c. 33.] Translated from the higher Mandarin that Baroness Blackstone is capable of speaking, that means, "There are two flatly contradictory commitments here, boys, but let us hope that nobody notices."

Unfortunately, people have noticed. More seriously, small businesses will notice. Precisely the small businesses to which the Under-Secretary referred, which may want to provide training for their employees, will find it more advantageous to provide such training under the new deal for those aged 18 or over than they will for 16 and 17-year-olds. Given the interaction between the two policies, any rational small business—even one deeply committed to training its work force, for all the good reasons that the Under-Secretary gave—will at best be less inclined than they would have been a year or two ago to take on 16 or 17-year-olds.

I hope that this is an unintended consequence and that the Government are merely guilty of incompetence. Anything worse would be impossible to contemplate. Our new clause tries to rescue the Government; it is generous of us to do so. It attempts to deal with the problems of costs affecting small businesses. It would not necessarily mean an imposition on public spending because it is permissive—it allows the Secretary of State to spend money if he wishes to alleviate the costs for the businesses affected.

That does not need to be all the costs or at all times. At different phases of the economic cycle, small businesses will be more or less likely to want to take on new employees or be able to bear the costs of their taking time off. During an economic downturn, fewer jobs will be available, and small businesses will be more pressed and therefore less inclined to give young workers time off for training. At the margin, they will be less likely to take them on.

The Bill will make it doubly unlikely that 16 and 17-year-olds will gain access to the labour market during an economic downturn. That would be a tragedy. We all know that young workers tend to be the last in during times of growth and the first out when there is a downturn. The Government's measures would accelerate that undesirable process.

We want a proper spread of the costs among all those who benefit from training. We are not anti-training. We all recognise that it is vital for young people who are not in full-time education to receive training. However, the Bill will do the opposite of what the Government intend, which is why we have tabled the new clause and the amendments.

Mr. Andrew Reed (Loughborough)

I am pleased to follow the hon. Member for Ashford (Mr. Green), because I want to dismiss most of what he has said. His speech was a sad reflection on the Conservatives and a slur on the many small companies that play a vital role in training young people. That is particularly disappointing, because training benefits not just the companies concerned, but the country, giving us a better-educated work force.

Companies have spent £10.6 billion on training in the past year, but many small companies do nothing. They are sponging off the others. Why should the taxpayer yet again pick up the tab for the worst companies? We have had the same debate on the minimum wage. The taxpayer always seems to have to subsidise the worst companies—those that do the least training, those that provide the worst health and safety conditions and those that pay the worst wages. That is the spiral of inefficiency of small companies that do not want to invest in their work force. Every 16 and 17-year-old has the right to training.

The hon. Member for Ashford referred to the CBI briefing note. My hon. Friend the Minister has said that he will not refer to it, but I shall. It said that the CBI fully supported the idea of the right to study, and accepted the obligations that that placed on employers. That is right. There is a genuine partnership between the Government, employers and individuals. The Conservatives use words such as "compensation", "onerous", "dangerous" and "liability". Given that we are talking about one of the most positive measures in the Bill, such words are a sad reflection on the Conservative party.

The arguments about a possible conflict with the new deal fly in the face of all the evidence, as some of the training and enterprise council research shows, because the schemes relate to different groups of employees. We are talking about 115,000 or 120,000 young people who leave school and enter the work force with the opportunity to gain experience of work and continue their education. Fewer than half the 16-year-olds who leave school and go into work have GNVQs or level 2 NVQs. For 19-year-olds, the figure is only 70 per cent.

The hon. Member for Ashford attempted to quote in German from a speech made some time ago by my hon. Friend the Minister for School Standards. In Germany, there is a genuine understanding of the need for a firm to work in partnership with the individual and the Government to increase its productivity. My right hon. Friend the Chancellor has spoken at recent seminars and conferences about the decline of British productivity relative to that of our European counterparts.

We need a genuine cultural shift to recognise that training—for young people in particular—is positive for the nation and for the companies concerned. Until we make that change, our productivity and our economy will suffer. Only when we can compete with the Germans and other European countries on the basis of the skills and productivity of the work force will we benefit.

I have worked in employment training on several Anglo-German schemes. On average, our 19-year-olds were at a level equivalent to that of 16 and 17-year-old Germans. We are two to three years behind in skills even at that stage, and we are falling ever further behind by not giving our 16 and 17-year-olds the right training.

I would like to make many other points, but I do not have much time. The measure that we are considering is positive. We want a highly skilled, high-wage, high-tech economy, not one that competes on low skills and low wages. That is one reason why the Conservatives lost the general election. Using words such as "onerous", "dangerous" and "liability" about one of the most positive measures in the Bill is a sad reflection on the Conservative party.

Mrs. Caroline Spelman (Meriden)

I am pleased to be able to speak in support of the new clause and amendments. I am frustrated, because we spoke at length in Committee about the impact on business, and put a strong case to the Government, explaining why we wanted to help them to ensure that there were no unintended casualties of the Bill. I remain unconvinced by some of the arguments that I have heard. We are talking about compulsory paid training being imposed on business, which causes difficulties.

We have theorised about the impact of the Government's measures during the debate. The Minister told my hon. Friend the Member for Ashford (Mr. Green) that the impact of the new deal had not started yet. I am particularly keen to participate in the debate, because one of the pilot schemes for the new deal for 18 to 24-year-olds is being run in my constituency. I have kept in close contact with the private company that has been selected to deliver the new deal in my area. Many hon. Members might think of Solihull as an affluent area, but it has pockets of serious deprivation and high unemployment among young people. Applying the new deal tests some of the theories that we have been discussing.

The impact on business, small or large, is not neutral. If an employee asks an employer to be allowed to go to a local college to obtain qualifications, there is an effect on company productivity. A replacement has to be found. There are recruitment costs and two staff appear, from the point of view of productivity, to be doing a job that was formerly done by one.

From my conversations with Capita, which is responsible for delivering the new deal for 18 to 24-year-olds in Solihull, it is clear that there will be an impact on 16 and 17-year-olds. Capita is actively going out to local employers marketing the benefits of the new deal—the benefits of taking on the 18-to-24 age group for the job vacancies that arise. The 18 to 24-year-old will come with a £60 a week job subsidy and a £750 training golden handshake.

In contrast, the 16 to 17-year-old school leaver will walk in at the door looking for a job with less maturity and less job experience, if any. So it is not unrealistic for Capita to point out to me, as the local Member of Parliament, that it, too, sees the problem that the 16 to 17-year-olds will lose out.

One can theorise about the impact on 16 to 17-year-olds, but I strongly urge the Minister to examine the areas where the pilot schemes are in place, and find out what their impact is today. Businesses are in business to make money, to be profitable, to invest, to grow and to contribute to the local economy. Is the Bill asking them to pick up the tab for the failures of the education system?

5.30 pm

Subsection (c) of the new section 63A that clause 29 would insert into the Employment Rights Act 1996 mentions the need to provide educational opportunities for someone who has not attained such standard within the statutory education system. We know that that reflects the facts of life, and that some 16 to 17-year-olds—I have many in my constituency—become disenchanted and under-achieve in the education system. For them, school seems to have lost its meaning.

None the less, are we right, through the Bill, to ask businesses to turn round and pick up the cost for providing training at a basic level of attainment that we would otherwise have expected young people to achieve through the education system? I suggest that we are asking too much of businesses.

I support what my hon. Friend the Member for Ashford said about the economic cycle. The new deal is being launched in relatively good economic times. The new Government have a golden economic legacy, and thus a period in which to launch the initiative, the aims of which we share, to encourage young people off welfare and into work.

However, these are the good times. What will happen to such initiatives in the bad times, when the recessionary cycle bites? In my constituency and the surrounding areas, west midlands manufacturing is already in the bad times. The recession is already biting in manufacturing, making it even less likely that businesses large or small will take on young, relatively inexperienced employees.

It is not unreasonable to suggest compensating business for the impact of our asking it to take on the burden of the failures of the education system. It may surprise Labour Members to hear Conservatives asking for that, but we share—

Mr. Hilton Dawson (Lancaster and Wyre)

May I try to penetrate the cloud of gloom that the hon. Lady has brought into the Chamber concerning what I regard as an inspiring initiative? Would she care to tell us about some of the benefits for business of the new deal, of employing young people and of giving opportunities to young people who may have been failed by the education system but who thrive in a work environment, given the proper support of a business sector which I would say has a greater commitment to the new deal than the hon. Lady has?

Mrs. Spelman

I believe that the hon. Gentleman has just joined us. We are talking not about the new deal but about its bearing on 16 to 17-year-olds' right to study. The point that we are making is about the impact of the introduction of the new deal on that group. I am not trying to be gloomy; I am trying to be practical.

The fact is that manufacturing is in recession, and it is looking hard at recruitment—

Mr. Reed

When manufacturing came out of recession in the early 1980s and in the early 1990s, was not one of the problems that the sector found a massive skills shortage, because the first thing that companies had done in the recession was to stop training? Is that not evidence of the need to continue training? Other European countries could pick themselves up out of recession more quickly because they continued to train during periods of recession.

Mrs. Spelman

The hon. Gentleman's intervention allows me to return to a point that he touched on in his speech. There are fundamental differences between the practical training available in this country and training in Germany for 16 to 17-year-olds, which he cited. In this country we do not have the equivalent of the Handelschule. Being a student of such matters, the hon. Gentleman will know that that is a clearly designated school of training for applied skills, of which there is no equivalent in the British educational tradition—although perhaps the Minister should consider the idea.

In Germany such schools remain within the education system. We are not looking at the German example and replicating their successful schools of practical training if we ask business to do the job for us. The hon. Gentleman should know that it is important to make a distinction between the British and the German education systems. Otherwise one could go away with the impression that German business was doing all that. As for our competitiveness, I remind the hon. Gentleman to look closely at unemployment rates among our young people and among those in countries such as Germany and France, because they are revealing.

I wholly endorse the new clause, which seeks to compensate business for bearing an unfair burden. Amendment No. 106, reasonably, imposes a time limit. Why should the requirement from business be open-ended? Our amendment comes close to the old concept of "one-day" day release—the idea of eight hours of study, for which the employer pays. For the requirement to be open-ended would be unreasonable.

Mrs. Diana Organ (Forest of Dean)

Will the hon. Lady give way?

Mrs. Spelman

I am just about to finish my speech.

In Committee we tried to help the Government by warning them—people can call it gloomy if they like, but I consider it realistic—that the 16 to 17-year-olds are a group of people in British society whom, probably unwittingly, they would disadvantage under this part of the Bill. The Prime Minister used the term "the Loaded generation" to define a group disaffected from statutory education. That is the group that is likely to suffer if the Bill is passed unamended. That is why I support the new clause and the amendments.

Valerie Davey (Bristol, West)

Yesterday, concern was expressed from all parts of the House that more young people from low-income families should be entering higher education, so I am disappointed that all those Members are not here this evening to celebrate this part of the Bill.

We are genuinely concerned to ensure that young people aged from 16 to 18 are encouraged into education and training. Rather than relating that subject to the new deal, I encourage Members to read the Select Committee report on further education published last week. If the Government take that on board, more young people will be encouraged and enabled to stay on at school between 16 and 18, and therefore to enter higher education.

However, that will not happen immediately, so young people going into work deserve that level of training, encouraged by the Government—

Mr. Hayes

Does the hon. Lady believe that society has an ethical responsibility to fund that, or should it be funded at random—by businesses and individuals, for example?

Valerie Davey

We certainly recommend that all corners of society should contribute. The hon. Gentleman may say that education is expensive, but I am sure that business and industry, and our community, would agree that lack of education is even more expensive. We need to encourage business to make its contribution, and I think that the Opposition have underestimated the contribution that that sector is already making, and the good will involved.

I shall now talk briefly about the two amendments. The hon. Member for Meriden (Mrs. Spelman) talked about eight hours, but the amendment does not say whether that means eight hours a week, a month or a year. The amendment is sloppily worded and should have been refined before being brought to the House.

Young people who, for whatever reason, do not stay on at school deserve to reach their potential at some level. Initially, we need to encourage those young people who have not reached GNVQ level 2 but, in the longer term, young people who are out of education but who are able to reach higher levels must be encouraged. Otherwise, there will be a discouragement to employing such people.

The amendments need to be rejected out of hand and we should support the original wording of the Bill, which is to be celebrated and not detracted from in any measure by this House.

Mr. Andrew Welsh (Angus)

Throughout the debates on the Bill, I have attacked the Government. This time, I wish to support them, and for exactly the same reason—the value of education. The Conservatives' amendments show that they know the price of everything and the value of nothing. The value of education is crucial if we are to build a modern and prosperous economy.

The problem for small businesses has always been one of time. If a small business employs somebody, it needs that person to do the work. As a former senior lecturer in further education, I know that it was up to the colleges and the providers of education to make sure that provision was there as and when the businesses needed it. Therefore, it is up to the providers of education to fit in with the needs of small businesses and to make sure that their requirements are met. The problems can be easily overcome.

The official Opposition may be worried about the effect on small businesses, but it would be worse to have untrained and unqualified staff. Added value is required to build a prosperous and modern economy, and that must mean the added value of an educated and trained work force. If we want quality and raised standards, they must be paid for and planned.

The Conservatives' amendments offer nothing positive. They seek to lower the time available for study and the qualifications gained. Their aim is negative and off-target. In this case, the Government have got it right, and I certainly support them.

Dr. Howells

The speech by the hon. Member for Ashford (Mr. Green) epitomises the dilemma faced by the Conservative party. The party remains in chronic denial, clinging to a miserable reactionary position—a worm-ridden lifebelt. In 1968, we used to refer to people like the Tories as Poujadists. What a horrible bunch they are when they act like that.

The Conservatives want to deny young people in society the opportunity to take time off from work to enhance their own employability, to acquire new skills and—indirectly—to enable firms to become more profitable, so that their region can become more competitive and the country can benefit. All the Conservatives can do is to defend a miserable minority of reactionaries who always cry "injustice" whenever anybody asks them to put up some money on behalf of their employees and the country.

We will not wear it. There will be a right for young people aged 16 and 17 to take time off to study. It will benefit them, and all of us, and I hope that the hon. Member for Ashford will see fit to withdraw this reactionary nonsense.

Mr. Green

The speeches from Labour Members—epitomised by the that of Minister—combined economic illiteracy and soft-headed good thoughts in about equal measure. The Government are happy to make pious speeches on the importance of training, but they are not happy to put their own assets where their mouth is. As long as somebody else is paying the bill, it does not matter.

The Government are happy to make moral speeches about how important it is to introduce training, but they do not have the guts to do as previous Labour Governments would have done—to increase taxes. They have decided that the way forward is to have hidden taxes on business. In this case, they think that small businesses do not matter, so they can impose the burden on them. To describe the small business sector of this country as "miserable reactionaries"—as the Minister just did— epitomises what Labour really thinks. Underneath the gloss of new Labour is the hatred of small business and enterprise—

Caroline Flint (Don Valley)

Will the hon. Gentleman give way?

Mr. Green

Not at this stage. The Minister's speech epitomised his party's attitude, which has no intellectual—

It being two hours after the commencement of proceedings on consideration of the Bill, MR. DEPUTY SPEAKER, pursuant to the Order [19 May] and the Resolution [8 June], put forthwith the Question already proposed from the Chair.

Question put and negatived.

MR. DEPUTY SPEAKER then proceeded to put forthwith the Questions necessary for the disposal of the business to be concluded at that hour.

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