07 September Mr Doug Richard Richard Review of Apprenticeships 2 nd Floor SPUR 1 BIS 1 Victoria Street London SW1H 0ET

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1 07 September 2012 Mr Doug Richard Richard Review of Apprenticeships 2 nd Floor SPUR 1 BIS 1 Victoria Street London SW1H 0ET Dear Mr Richard ICAEW submission to the Richard Review of Apprenticeships The Institute of Chartered Accountants in England and Wales (ICAEW) welcomes the opportunity to provide written evidence to the Richard Review of Apprenticeships by the Department for Business, Innovation and Skills (BIS). Our written submission covers: Key messages and recommendations; Our response to core questions; Appendix (e-attachments): UKCES Building Future Skills in Accountancy report and BIS Collaborative Forum Best Practice Code for High-Quality Internships. We would be happy to provide oral evidence to BIS. Please contact me on the details provided in my signature if you would like to discuss our submission further. Yours sincerely Fatima Hassan Public Policy Manager T +44 (0) E fatima.hassan@icaew.com The Institute of Chartered Accountants in England and Wales T +44 (0) Chartered Accountants Hall F +44 (0) Moorgate Place London EC2R 6EA UK DX 877 London/City icaew.com

2 ICAEW RESPONSE TO THE RICHARD REVIEW OF APPRENTICESHIPS WHO WE ARE 1. ICAEW is a world leading professional accountancy body. We provide leadership and practical support to over 136,000 members in more than 160 countries. We work with governments, regulators and industry in order to ensure the highest standards are maintained. We are a founding member of the Global Accounting Alliance with over 775,000 members worldwide. 2. ICAEW Chartered Accountants provide financial knowledge and guidance based on the highest technical and ethical standards. They are trained to challenge people and organisations to think and act differently, to provide clarity and rigour, and so help create and sustain prosperity. We ensure these skills are constantly developed, recognised and valued. 3. ICAEW and PwC have led the development of a new Higher Apprenticeship Programme for professional services, focusing on tax, audit and management consultancy. This programme, in collaboration with the Association of Taxation Technicians (ATT) and the Management Consultancies Association (MCA), aims to deliver 1,500 Higher Apprenticeships over the period to March KEY MESSAGES AND RECOMMENDATIONS 4. Our members support over 1.5m UK businesses. Our professional services Higher Apprenticeship Programme has been designed by employers, for employers. It includes the blend of professional qualifications and business skills that professional services employers consistently say they need. 5. Apprenticeships should aim to deliver skills training which are of benefit to the economy and to social mobility. The accountancy profession contributes to 14.4bn to Gross Value Added to the UK economy and our Higher Apprenticeship Programme enables employers to access otherwise untapped, under-represented talent. 6. Government should support the progression of the Higher Apprenticeship Programme in accountancy to chartered status (Level 6 and beyond). The current system places a cap up to level 5; which prevents learners from progressing in skills and professional development. 7. The grant for businesses (with less than 250 employees) to receive 1,500 for the first apprentice should be extended beyond March Our research suggests 52% of small businesses and 63% of medium-size businesses would consider taking on an apprentice with suitable incentives - such as funding, government subsidy or tax support. 8. The Department for Business, Innovation and Skills (BIS) Collaborative Forum executive group should produce a best practice code for high-quality apprenticeships for employers. This executive group, supported by ICAEW, produced a best practice code for high-quality internships for employers in It sets guidelines to ensure internships are fair, high-quality and comply with all employment legislation. 1

3 REPONSES TO SPECIFIC QUESTIONS Questions 1: Principles 1.1 What should the aims and objectives of apprenticeships be? The aim of apprenticeships should be to provide: the workforce skills that meet employer demand; develop the skills that will grow the UK economy; provide accessible routes to a professional career and support social mobility. 1.2 Who should apprenticeships be for? Due to policy reforms, the cost of further and higher education may deter some individuals from traditional academic pathways to a professional career. Apprenticeships provide a cost-effective training route for such individuals and encourage greater socio-economic diversity within the professions. The policy goal is for apprenticeships to be accessible to individuals from every part of society. 1.3 What outcomes should apprenticeships aim to deliver for individuals, for employers, and for the wider economy? Apprenticeships should aim to deliver skills training which are of benefit to the economy and social mobility. For individuals, accountancy apprenticeships should provide cost-effective educational training for those that would otherwise find it difficult to pay for further or higher education. For employers, accountancy apprenticeships provide an opportunity to develop workplace skills and diversify the pool of talent within their organisations. For the economy, apprenticeships provide a new training route for developing skills that support growth. Take the example of the UK accountancy profession. Specialists firms provide 230,000 jobs, produce over 1bn in exports of services and contribute 14.4bn to Gross Value Added to our economy 1. The profession has continued to provide a real mix of routes into a professional career in business and finance including traditional graduate and non-graduate routes. Our professional services Higher Apprenticeship Programme was designed by employers to meet their needs in a changing labour market. It includes a blend of professional qualifications and business skills that professional services employers consistently say they need. In addition, by providing a recognised alternative route into the sector, our Higher Apprenticeship Programme has enabled employers to access otherwise untapped, under-represented pools of talented recruits. 2. Content 2.1 What should the defining features of a high quality apprenticeship be? What should a high quality apprenticeship involve or contain? The features of a high-quality apprenticeship in accountancy must comply with the Specification of Apprenticeship Standards in England (SASE). The SASE provides a framework and sets standards. Apprenticeships should also consider personal career development, employer support and skills development all areas essential to the success of an apprenticeship programme. 1 Building Future Skills in Accountancy, UKCES, London, 2011, p. 9. 2

4 SASE specifies what the content of an apprenticeship needs to include: competence-based qualification (the level of this qualification determines the level of the framework and the maximum level is 5); technical qualifications including on the Qualification and Credit Framework (QCF); GCSEs in English and Maths (for those lacking these qualifications) Or Functional Skills; employee rights and responsibilities; personal learning and thinking skills; and specified volumes of taught time. (Building Future Skills in Accountancy, UKCES, 2011). 2.2 Should this differ for different sectors, types of learners or types of employers? Different sectors have different skills demands. For example, the skills framework of a high-quality apprenticeship in accountancy is higher than in other sectors. 60% have level four qualifications and above, compared to the 30% UK average. 2 There are merits in sharing best practice especially in relation to the development of functional, literacy and numeracy skills which are valued in most sectors. But some sectors, such as accountancy, require a higher skill set for learners. This enables apprentices to manage their training effectively and provide employers with the skills they require. 2.3 How can we ensure the training offered really reflects employers needs? Employers would like a single means of progression within the apprenticeship framework to full chartered status. The current system places a cap up to level 5. We recommend this system be reforms to allow training develop beyond level 5 to accommodate employer needs What role should qualifications play in an apprenticeship, and how can we ensure these qualifications are fit for purpose? Qualifications are critical to the integrity and high-quality of the UK accountancy profession. We recommend policymakers continue to ensure such qualifications are fit for purpose through continued consultation and collaboration with the five UK professional accountancy bodies which includes the ICAEW. 3. Delivery 3.1 What should government s role be with regard to apprenticeships? The current level of Government funding for a Higher Apprenticeship in accountancy depends on the age of the apprentice and the employer s size: years old receive up to 100% of the training cost years old receive up to 50% of costs 25+ will receive a contribution to the cost of training depending on sector and area. Small and medium enterprises (SMEs) with less than 250 employees, receive a grant of 1,500 for the first apprentice recruited (available up to March 2013); and provide free apprentice recruitment service and support through the National Apprenticeship Service (NAS) online Apprenticeship vacancies service. The Government should continue to provide funding is this way, particularly for SMEs. Our research suggests 52% of small businesses and 63% of medium-size businesses would 2 Building Future Skills in Accountancy, UKCES, London, 2011, p Building Future Skills in Accountancy, UKCES, London, 2011, p

5 consider taking on an apprentice. But with suitable incentives, such as funding, government subsidy or tax support, SMEs could be persuaded to consider creating this type of opportunity. 4 There is also a role for Government to play in tackling negative perceptions to apprenticeships. Some still consider apprenticeships to be a subset of vocational education. Through its various communication channels and platforms, Government can work with the professions to tackle misconceptions and raise the profile of apprenticeships as a credible channel for high quality skills development. 3.2 What should employers role be? As previously noted, employers can provide valuable guidance on what skills their businesses value as part of an apprenticeship. But employers should also provide an apprentice with: an induction into their job role and actively support them with on the job training; contribute to the cost of formal and out of work training alongside Government funding; provide an apprentice with a fixed-term contract to coincide with the duration of their apprenticeship; ensure an apprentice works for at least 30 hours per week, and be paid at least the minimum wage by the employer. 3.3 Who should pay for what? Apprenticeship support should be funded by Government and employers. As previously noted, ICAEW suggests financial incentives from Government would help encourage SMEs to take on more apprenticeships. We recommend the SME grant be extended beyond March Delivering value for money and boosting access 4.1 How can we ensure value for money for government investment in apprenticeships? The National Audit Office s report (NAO) Adult apprenticeships (aged 19+) recognised that advanced apprenticeships provided higher returns for the taxpayer. It also drew attention to the fact that 33% of all apprenticeships in England are at advanced level, compared with 60% in France. 5 We support the report s conclusion that by targeting its resources more on the areas where the greatest economic returns can be achieved, Government can ensure that the funding system is informed by robust information on the cost of delivery. According to the NAO this can be achieved in the following ways: The Department for Business, Innovation and Skills (BIS) has not provided sufficient clarity on what success will look like in the medium to longer term. With the Department for Education (DfE), BIS should better define its strategy for the Programme to monitor progress against the outcomes it intends to achieve. BIS needs robust evidence to identify which qualifications are having most impact and where. BIS should use this information to decide where to target its resources. Alongside the simplification of the tariff mechanism, Skills Funding Agency (SFA) and the National Apprenticeship Service (NAS) should ensure any changes are based on an up-todate assessment of the likely cost of provision across the main types and level of 4 Creating Opportunities for the Long-term unemployed, ICAEW, London, 2012 p.2. 5 Building Future Skills in Accountancy, UKCES, London, 2011, p

6 framework. They should put in place arrangements to review the tariffs against likely cost trends. The NAS should regularly review whether the market it has created and regulates is operating as intended. For example, the SFA should review the range of provision on offer, whether it matches employers needs, and whether sufficient information is available to employers, potential apprentices, and the provider network. 4.2 How can we boost employer and learner demand for apprenticeships? Professional accountancy bodies can boost awareness and demand for apprenticeships with employers and learners. For example, through professional body activities in schools, career fairs and collaboration with member firms on apprenticeship frameworks. Our Business, Accountancy, Skills Education (BASE) games raise career aspirations and awareness. Students, years 12 and 13, work with their classmates to develop a business case study. Playing the role of an ICAEW Chartered Accountant, students analyse, debate, conclude and present back to a panel of highly regarded judges (often employers). These games provide an opportunity to introduce potential learner into a career in Chartered Accountancy and various entry routes including apprenticeships. But one area of improvement, highlighted by accountancy employers, is the need to remove the requirement that Higher Apprenticeships can only be up to level 5 in accountancy. Employers argue this can improve routes into full chartered status for learners How can we ensure that learners of all abilities get fair access to apprenticeships? We are committed to improving fair access to the professions. Apprenticeships help foster social mobility by providing a recognised alternative route into a professional career in business and finance. Our Higher Apprenticeship programme enables employers to access otherwise untapped, under-represented pools of talented recruits. Government may also want to consider the creation of a Higher Apprenticeship best practice code for employers. The code can outline recruitment and employment guidance to help ensure fair access to apprenticeships. For example, we provide work experience tool-kits to our members and students, and produced a common best practice code for high-quality internships with the Department for Business, Innovation and Skills (BIS) Collaborative Forum in Adult Apprenticeships, National Audit Office, p.11 and 12. 5