David Willetts: Labour’s New Deal for young people has a focus on apprenticeships – a good idea if understood properly

David Willetts is President of the Resolution Foundation and is a member of the House of Lords.

My column a fortnight ago looked at the three key Conservative proposals for a New Deal for young people – removing the interest rate on graduate debt, boosting apprenticeships and diverting £5,000 of national insurance into a savings pot.

This is a good start. And the new report by Next Gen Conservatives, which Tali Fraser covered yesterday, would take the Party a lot further. It tackles some tricky Tory taboos. The triple lock really does have to go. We need planning reform and it is often Tory councils in the prosperous South East who have been most hostile to development as their votes, older Tory homeowners, don’t want more houses near them.

And with Government borrowing at almost 100 per cent of GDP and the urgent need to invest in defence it is hard to pledge tax cuts. But that doesn’t mean we shouldn’t reform taxes – their strong candidate is to get rid of employee national insurance, a tax on work, and shift to income tax which covers income from all sources equally.

Meanwhile the Government announced yesterday their own plans to help young unemployed people. It includes measures to try to shift the apprenticeship levy away from older employees (who usually go for degree apprenticeships in business courses) and back towards younger people and new recruits. There is extra funding for SMEs to take on apprentices. They are also planning significant expansion of their new Foundation Apprenticeships which funds further education and training for young people getting into basic entry-level jobs. These are sensible proposals. But actually delivering these programmes will be quite a challenge.

Apprenticeships are very popular – they always poll well. Politicians like them and are endlessly announcing new initiatives for them. By contrast the university route gets pretty hostile media coverage and scepticism even though it is the most popular route for young people to take. The residential university is in some ways the heir to the apprenticeship tradition – you used to leave home to live with the master for whom you worked. That is one reason university has replaced the apprenticeship as the main transition to adulthood in many advanced Western countries.

Conservatives in Government tilted the balance more towards apprenticeships – funding them out of a new tax on employers (which was relatively uncontroversial because it was for apprenticeships – any other such tax would have been politically impossible). Meanwhile we also shifted more funding of higher education on to graduates who pay back more. But these changes did not really  dent the growth of young people applying to university. Nor did they lead to a surge of apprenticeships – if anything numbers declined, certainly amongst younger people.

The conventional explanation for this is that there was a 50 per cent target forcing young people to go into higher education. But I never came across any plan to drive people to university or actually to implement  such a target. But meanwhile the 50 per cent line was finally passed under a Conservative Government which by then was strongly against more people going to university.

A clue to what was happening comes from a period when Conservatives were hostile to apprenticeships – the 1980s.

Margaret Thatcher’s agenda was economic change and dynamism. Apprenticeships were strongly associated in her mind with old jobs in old industries. The aim was for people to “get on their bike” and move to a different job in a different industry. Apprenticeships and the promise of a long-term job were seen as part of the problem. Thatcherites used to worry about how miners or steelworkers who had sadly lost their jobs could ever accept they were ex-miners and ex-steelworkers whose future lay in doing something different.

There are deep issues here about the underlying structure of the British economy. One reason voters like apprenticeships is that they are associated with a certain type of economy. They are seen as a route to long-term secure employment in strong business sectors especially manufacturing. It is no accident that Germany is strong on apprenticeships – it has supported such sectors with quasi-public financing and regional shareholdings.

Apprenticeships are also a vivid wonderful example of exchange between old and young – an older person transmitting some of his (or her) experience to the next generation. It still makes sense to learn on the job. There are also apprenticeships in classic trades such as plumber or gas engineer – though the UK has many fewer such trades protected behind a license to practice than Germany does.

There are about 600,000 people participating in apprenticeships and about 350,000 start every year. That is a valuable and significant part of our education and training system. My family history was in the Birmingham trades and I understand the appeal of apprenticeships. It is right to try to grow their numbers, especially for younger people. But there are limits. Apprenticeships thrive in environments where there are more regulated jobs and activities. They are not guaranteed routes into long-term stable employment in an open flexible economy. That is why it is hard for ministers to deliver the surge in apprenticeships which they always call for.

There needs to be proper tough-minded thinking about other ways of helping young people into work as well.