COMMITTEE FOR EMPLOYMENT AND LEARNING
OFFICIAL REPORT
(Hansard)
Inquiry into the Way Forward for Apprenticeships
4 March 2009
Members present for all or part of the proceedings:
Ms Sue Ramsey (Chairperson)
Mr Robin Newton (Deputy Chairperson)
Mr Alex Attwood
Mr Paul Butler
Mr Alex Easton
Mr David Hilditch
Mr William Irwin
Ms Anna Lo
Mr David McClarty
Mrs Claire McGill
Witnesses:
Mr Con Feeney ) Northern Ireland Electricity
Miss Sara McClintock )
Mr Gordon Parkes ) Viridian Group
The Chairperson:
We will now receive a briefing from Northern Ireland Electricity (NIE) on the Committee’s investigation into the way forward for apprenticeships. I welcome the NIE officials. Members will be aware that this is our fourth briefing on the subject. I thank NIE for the interesting paper that it provided to the Committee. I read it again last night and found it useful. Perhaps the witnesses will introduce themselves and give their presentation, after which I will open up the meeting for questions and answers.
Mr Gordon Parkes (Viridian Group):
I am the general manage, group human resources for Viridian, which is the parent company and owner of NIE. With me is my colleague Con Feeney, who is our training manager and is responsible at executive level in NIE for all apprentice training. He reports directly to the managing director on all training and development initiatives. Sara McClintock is our communications and marketing executive. Sara is here because, as reflected in our presentation, we consider that a major part of what we need to do in working with Government is to help to improve the promotion of apprenticeships.
First, we have a two-part presentation that will last for between 10 and 15 minutes and we will give the Committee a summary of our views. My colleague will begin by giving the Committee an overview of a paper that is now being distributed to members. The paper is on best practice for apprenticeships. Much of how we model our apprenticeships is based on considering what other organisations are doing. Con Feeney will talk you though that two-page high-level document on best practice.
For the second part of the presentation, I will refer members to our paper, which they have already read. I will simply summarise section 5, which outlines our view on how apprenticeships should evolve, and I would like to make 12 points on that.
Mr Con Feeney ( Northern Ireland Electricity):
The summary paper has just been handed out to members. My part of the presentation should take only about five minutes.
Northern Ireland Electricity (NIE) is striving to do better against these key themes but has not necessarily reached that position yet. A lot of my presentation is based on personal experience, having been an apprentice myself, and having made my way through to executive level at NIE. I also have contacts across the UK electricity industry. I attend committee meetings in London with a lot of senior people who are involved in modelling apprenticeships.
NIE believes strongly that soundly based apprenticeships are good for business. One of the key measures of success, if not the ultimate measure, is the number of apprentices who successfully complete their training. There are a number of elements that can help contribute towards a high completion-rate culture.
The reason why I emphasise completion as being so important is because — taking the example of two 18-year-olds who decide to take a career path, one through an apprenticeship and one through university — if the person going to university applies themselves, they should make it through their degree and receive some form of qualification. However, for the person who embarks on an apprenticeship, completion of the programme very much depends on the employer. The employer could pull out at any given time, so completion is very important.
It is important to ensure that high-quality informed careers advice is provided by schools and educational establishments in order to ensure that applicants have made an informed choice; that they are going into an apprenticeship because they want to do so. Employers should develop strong relationships with local schools and colleges to ensure that appropriate candidates apply.
Employers need to provide a supportive work environment, where training is seen to be valued and where there is good peer support. A number of people at senior level in NIE have come through apprenticeships. People who have been former UK apprentices of the year are heavily involved in apprenticeship schemes and supporting apprentices.
Apprenticeships need to be valued at senior management level and throughout the business. That is very much evident in NIE: even in induction week, the managing director meets the apprentices. It is very important that there should be a rigorous selection process. If you want to be in the position where you will be selecting people who, in NIE, will ultimately embark on a career that could last for 35 or 40 years, they need to be the right people.
It is important that there is high-quality information about the obligations and expectations of apprenticeships for the apprentice, their parents, where appropriate, and their employers. As part of that, induction programmes can play a vital part in helping new apprentices to be clear about their responsibilities as an apprentice, and what support is available should they experience difficulties.
It is evident in NIE that some apprentices can experience personal difficulties at the start of their apprenticeship and throughout that three-year period. We have a process whereby we can help to bring them back on track. Some have been able to complete the programme because of that, and it is very important to give them every chance possible.
Employers should be aware, or be made aware, of the business benefits of completing apprenticeships and be encouraged not to take people off their apprenticeship programmes before all the elements of the training are complete. Employers should keep pay under review to ensure that it remains competitive, and that progression and achievement at key stages of the apprenticeship programme is recognised. We review apprentices’ salaries annually.
The quality of the training is critical. Apprentices should be offered high-quality, on-site training. We believe that on-the-job training is key. In NIE, around 50% of year one of the apprenticeship programme is on-the-job training; around 80% in year two and 90% in year three. The apprentices are learning on the job; they are not off the job.
There should be effective communication and partnership between the key stakeholders involved in the apprenticeship: the apprentices; employers; training providers; training colleges and the Department for Employment and Learning. That is so that everyone is singing from the same hymn sheet.
There should be an early identification of “at risk” apprentices and mechanisms should be put in place in order to manage that. That relates to my former point. There should, ideally, be the opportunity for a permanent position on completion of apprenticeships, subject to performance, which is made clear to the apprentice from an early stage. Government funding should be back-ended to reflect that. In NIE, all apprentices who complete the apprenticeship programme get a job, providing they meet the standard, although the standard is pretty high.
There should be recognition that successful completion of an apprenticeship can often lead to further academic achievement. Each year, we sponsor the top two or three apprentices to continue with HNCs, and a number of them have made it through to degree programmes. A number of apprentices have made it right to the top of the organisation: one former apprentice sits on the Viridian board of directors. There should be a clear outline of the possible career paths for successful apprentices.
I want to clarify for the Committee our position with regard to this year’s intake: it is important that I do so. At present, Northern Ireland Electricity is training 36 apprentices, in their first, second and third years. We normally commence our annual apprentice recruitment programme in February. However, it has been decided not to commence the programme at this time because of the prevailing economic conditions and until we can determine whether it is possible to source significant additional external funding.
NIE remains wholly committed to apprenticeship training and will regularly monitor its position with a view to expanding its training programme as soon as it makes business sense to do so. Interested parties will be informed of our decision in due course.
Gordon will take the Committee through the second part of the presentation.
Mr Parkes:
This part of the presentation will build on what Con has been talking about and will focus on 12 areas in which we feel that apprenticeships need to evolve. I refer to paragraph 5 of the document that members have before them.
First of all, employers and Government must work to improve the perception of apprenticeships. Our business has a presence at the careers fairs of at least 20 schools, in the Belfast area, Enniskillen and other locations. The impression we receive is that, in schools, an apprenticeship is not seen as a career of first choice: it is for those who fail at everything else. That is our problem. Every other profession such as teaching, the medical profession and others, recognises that vocational training — putting people into a job and having them learn on the job — is the way forward. We also believe that strongly, and we do our best to promote, and to improve the perception of, apprenticeships; however, more could be done as a joint effort by employers and Government. We would like to be involved in any such ongoing process. Our communications and marketing department is represented here to help with that promotion.
We talk to hundreds of schoolchildren at the various events that we attend, and the sort of feedback we get shows that teachers push pupils towards the university route. If they are not capable of that, they are pushed towards unskilled jobs. The middle area of an apprenticeship is not focused on in schools. An apprenticeship is also not seen as a career choice for girls: rather, they are actively persuaded against taking apprenticeships. In the last year of intake, we recruited no girls among 14 people, but there is one girl on our programme. We had 600 applications, 1% of which were from females. In schools, an apprenticeship is not promoted as a career path that is interesting, challenging, rewarding and a positive environment. A lot of work must be done in that area.
Secondly, we want to encourage a wider range of applicants — I have already referred to the lack of interest among females. Apprenticeships could be promoted to those who have tried and failed in other areas, or have made the wrong career choice. A number of our successful, recent apprentices have tried elsewhere and were unsuccessful, but have been successful in coming through the more structured training route that we provide. However, we focus particularly on attracting more females: that is a key target for us.
Our third target is to recruit more experienced trainees. The new Government funding in the past two years has helped in that. Our current recruitment has included people aged up to 24. There will be no age restriction at all on future recruitment, because the funding is no longer age-restricted, which helps.
We have found that the benefit of recruiting more experienced trainees is that they hit the ground running quicker. Therefore, the apprenticeship need not necessarily be three years, which is another point that I will make. It can be reduced and compacted. The other big advantage is that the more experienced people influence the younger apprentices very positively. We tend to find behavioural issues with young people on their days back in college. They think that they are back at school and that they can throw bottles at each other. That sort of behaviour is modified when they are alongside older, more experienced colleagues. Therefore, having more experienced trainees bestows two main benefits: they hit the ground running; and there is a positive influence for the younger trainees.
In paragraph 5.4 of our paper we highlight the need to improve flexibility of colleges. The main point in that is that our trainees are not all based in one location in a factory. They are based in various fields all around the country and beyond. The problem is that the structured training happens in a college from 9.00 am until 5.00 pm. We would like the colleges to look at the terms and conditions of their staff to ensure that they have more flexibility, in the way that we have with our employees. It will not always be nine-to-five training in a single location. Colleges could improve their flexibility in order to help us provide the keys skills that we need.
Paragraph 5.5 states that apprenticeships must be developed to include a career path right through to degree level. We believe that the apprenticeship should not be the end of the training; it is the start of a career journey. Again, that can help in the promotion of apprenticeships. It attracts a wider pool if we can say to people that they should differentiate themselves; that they do not have to go to a degree course right away; and that they can do their degree with us. Therefore, using apprenticeships to take people right through to graduation is something that we already do. Last year, four people who started as apprentices completed their degrees. Numerous members of our management team have taken that route. There is one such person sitting to my left.
The sixth area is the need to respond to market demands. If apprenticeships are to evolve we need to know what is going to happen next. In energy, for example, as the Committee knows, it is renewable energy. We must be a step ahead, and we have already begun a training programme to ensure that our apprentices know how to deliver the engineering requirements for renewable energy.
The next point is about increasing multiskilling, which is important not just in our sector, but across all sectors. Customers do not want to see two people from two different trades. They want to see someone who can deal with a job in their house, whether it is an electrical or a plumbing fault. If the people we send out to a site to fix a fault can cut the trees around that fault in order to prevent that fault reoccurring, and they are multiskilled to cut trees and to fix the problem, it saves us money as an employer, and it gives the employee additional skills. Multiskilling is key to development. Many current qualifications are structured for one specialism rather than for multiskilling.
The focus of paragraph 5.8 is on increasing the technical knowledge. We have been doing that by working with BTEC, in addition to City & Guilds, in order to produce a higher national certificate, and to improve NVQs, which is dealt with in paragraph 5.9 of our submission. NVQs are very important to us. We deliver level 2 and level 3. The downside of it is that NVQs are too generic and not specialist enough for our industry. Hence, we have worked with a number of organisations that are mentioned in paragraph 5.9 — E.ON, Scottish Power, Scottish and Southern Energy and others — to develop a much more specific NVQ for our sector. The key thing is that that NVQ is more meaningful to the job; it must relate exactly to what the role is. We have found that some of the content of the generic programme is not directly transferable to people’s jobs.
At paragraph 5.10, we talk about the need to reduce bureaucracy, which is another key element. Again, this point is made in the spirit of continuous improvement rather than criticism. By way of an example of continuous improvement, in a 12-month period we would be subject to the same or similar audit five times by five different Departments. Our view is that there should be a standardised process, and perhaps one organisation auditing on behalf of all the organisations, rather than all five auditing separately. The bureaucracy around that creates an administrative issue for us.
Among improvements that we would like to see in that bureaucracy is a more unified approach to auditing. Secondly, training organisations need to prepare a common detailed document that will work for all of them, whether it is the Education and Training Inspectorate or the Improving Quality: Raising Standards process. They should all operate from a similar platform because they are looking for similar information.
Finally, there should be one point of contact. We experience that with Bridge to Employment, where it makes a great difference. In normal training schemes, there are five or six different contacts, which makes it difficult. A recent example occurred last week, when our administrator had to make five different calls in order to get a decision on a particular issue.
In paragraph 5.11, we make the point that the time that is required to complete apprenticeships should be reduced. The last two items are linked because they relate to the funding aspect. At present, apprenticeships take three years. We believe that in two or three years’ time, with more-experienced people coming in and influencing less-experienced people, we can reduce the training time for apprenticeships from three to two years. That has a cost implication: it means that those apprentices can hit the ground quicker. They can produce results for the employer more quickly. That improves efficiency.
That links to the funding support that we have talked about. At present, we welcome the funding support that we get from DEL. It is important in encouraging us to maintain the programme. We have maintained the programme and brought in apprentices year on year, every year. This year has been the most difficult economic year that our organisation, like many others, has faced in a long time. It is the first year that we have considered not recruiting apprentices for the programme.
The cost of an apprentice is approximately £60,000. The cost of some of the more specialist training programmes is slightly more. That is the full cost for three years. Our apprentice training centre that we run in two locations costs over £900,000 — just short of £1 million — to run every year. It is an expensive process. However, it is valuable and produces a business benefit.
At present, we receive funding of £4,000 for each apprentice per annum, which equates roughly to around 20% of the costs. Our proposal to evolve the process is that, perhaps, for a short-term period, funding of 50% could be considered. If that is combined with a reduction in the duration of apprenticeships, and more funding is squeezed into a shorter period of time, it may not necessarily cost any more overall, but in the short term, employers could be offered increased funding to help them through difficult times. I would encourage employers like us to continue the process and not to stop during current economic conditions.
That is the end of our presentation. We are open to take questions.
The Chairperson:
Thank you very much. You have put forward some interesting ideas and suggestions. I am struck by the retention rates. Con, you hit the nail on the head when you said that you can see how someone who comes in at the bottom level as an apprentice has the opportunity to reach senior management. The mindset that exists about what an apprentice is must be changed. I am proud of the fact that I started my career as an apprentice. It was not the case that, because I did not go to university, I had to do an apprenticeship: I chose to be an apprentice, and I went on to complete my apprenticeship. Therefore, you are right: the mindset that exists in schools about apprenticeships must be changed.
The retention rate of 84% is a good figure. The retention rate for the Steps to Work programme is 25%. When we look at departmental policies that have achieved only 25% and compare them with those of companies like yours that achieve 84% retention — which, OK, is slightly different — we must ask where we have gone wrong or if we have gone wrong. I am impressed with Con’s comments.
For members’ information, I spoke at an event yesterday — the invitation came quite late last week. The Minister was supposed to speak, but was unable to do so. The event, which was sponsored by the Equality Commission, was called Bridge the Gap. Its main focus was to deal with marginalised groups in society. It was attended by around 110 or 120 people, and a lot of them were employers. It was a useful way to get people who work with marginalised groups in society and employers into the same building. That is about changing the mindset on how people can work collectively on the matter.
I appreciate your ideas and suggestions on the way ahead. The Committee is carrying out an inquiry. We want to make constructive suggestions to the Department. If needs be, we will not be shy about supporting and promoting some of the issues that you have raised. I am interested in visiting your centre, if that can be set up. That would be quite useful. I know that some of the Committee staff have been out to see the poles, and so on. It strikes me that an overarching view should be taken. People might go out to fix an electrical fault, but they can also cut the trees down if necessary.
It is about a common-sense approach. If we can set that up, the Committee can go and look at that, which takes on board the point that what is going on needs to be seen at first hand.
I appreciate your submission and your presentation. I will now open up the meeting for members’ questions or comments.
Mr Newton:
I welcome Mr Parkes, and his colleagues, to the meeting. During evidence sessions, a number of those giving evidence will effectively set the benchmark against which apprenticeships in the future will be measured. Today’s evidence sets one of those benchmarks, and, I hope, we will recommend that standard. We have heard one of those benchmarks for the future. The approach set out in the ‘Best Practice Apprenticeships’ paper is right. The quality issue is inbuilt, the outcomes are there with regard to apprentices getting jobs at the end of the day, and the ethos that is driving the programme is right. I think that that is going to be, Chair, one of the benchmarks that we will undoubtedly use.
I believe that the foundations are there, and my only real question is around the funding issue. You made the point about the downturn in business, the cost of running the apprentice programme, and the support from the Department on that. How does the support that you get in Northern Ireland measure against that which your colleagues in energy generation in other parts of the UK, or, indeed, in the Republic get?
Mr Parkes:
That is a very appropriate question. Yesterday, I was in London with my human-resources (HR) colleagues from the energy sector, looking at how, jointly, we can manage in the economic downturn. Funding tends to vary; however, we would say that the funding we get is good funding. There are other areas of the UK where there is no funding. There are areas where funding is £4,000 for the full three years of the apprenticeship. There are areas where funding is more; however, that funding is linked to incentivising the employer to make sure that, as we have been suggesting, the apprentice completes the course and does so within a three-year period. In those cases, the level of funding will be higher than here. However, that is through an incentivised route.
Mr Newton:
Do you know what the figure is for that?
Mr Parkes:
No, I do not have any evidence of what it would be. Yesterday, figures of around £5,000 or £6,000 per year were quoted for the full apprenticeship. However, I do not have the hard evidence.
Mr Hilditch:
I concur with the comments made, and, in particular, with those of the Deputy Chairperson. I think that this is going to set a standard and a level that we would like to see throughout the Province. A couple of my questions have already been answered. However, more and more, throughout the construction industry in Northern Ireland, I know that contracts are being awarded with conditions attached. Companies are required to employ a certain number of apprentices and local people, and so on. In the supply chain for the energy industry, are conditions placed on those companies that have big contracts to employ apprentices?
Mr Parkes:
There are requirements on all the people that work on our behalf, and work for us, in relation to all company policies, such as the equal opportunities policy and the requirement for apprenticeships, as part of the balance of the workforce. Most of the teams that work for us would have apprenticeships underpinning the entire process. If, for example, there were a team on site of perhaps 12 people, there would be one or two apprentices in that team.
Mr Hilditch:
What about the other major companies that you deal with when you are awarding contracts? Do you expect that they should try to attain the same level of apprenticeships or standards?
Mr Parkes:
It is not as specific as that. It is a requirement, under the equal opportunities policy, to make sure that the companies apply those principles around the male/female and religious aspects, and in particular, the workforce balance in relation to age. Therefore, we ask for a full age range, and that full age range catches the apprentices. We do not state specifically that they must employ apprentices.
The Chairperson:
I ask the following question because the Committee will produce a report at the end of its inquiry. You mentioned cost issues and condensing three-year programmes into two years. How many days do your apprentices spend in class? If three-year programmes are reduced to two years, how many days would they spend in class? I have my own view on that, but I would like to hear your answer.
Mr Feeney:
Over the last couple of years, our programme has evolved to a standard whereby all successful applicants embark on a BTEC ONC programme. Prior to that, it was City & Guilds 2320. The ONC can be undertaken as a two-year programme. Of the 36 people who are currently on the programme, five are on a two-year fast-track programme, 31 are on a three-year programme, and all of those people are doing an ONC. Indeed, some who are close to the upper age bracket of 24 come in with qualifications such as ONCs.
The Chairperson:
I know a lot of young people who have no difficulty getting up at 6.00 am or 6.30 am to be picked up at 7.00 am on the four days that they are out on an apprenticeship. However, those same young people cannot be got out of bed on the one day that they have to go to class. I am trying to work out how to strike the right balance between the required classroom-based work, such as health and safety training, and on-site training. The majority of apprenticeships last for three years. If some of those are reduced to two years, how do we get that balance?
Mr Feeney:
The decision to condense three-year programmes into two years is based on two things, the first of which is the apprentice’s aptitude. We have extended the upper limit of the age group to 24, and 22- and 23-year-old former joiners and plumbers, who have excellent hand skills, are now applying. We were able to reduce the study element of the ONC programme to one day a week for two years, which is fine. The decision is also based on the discipline concerned. We have cracked it for jointing, but — as Gordon mentioned — it could take two or three years to condense the programme for electricians who work on overhead lines and plant maintenance.
You are absolutely right that it is vital that a guy who has finished his apprenticeship can sit in front of a final authorisation panel and be deemed to be employable by NIE; that is key to the entire process. The final interview sets a bar that is pretty hard to reach. We will not sacrifice that, which is why we are taking the process in stages. We have cracked it for jointing, and we have to expand it to the other disciplines.
Mr Parkes:
We have our own training facility room — similar in size to this room — in which apprentices receive a lot of their training. Those apprentices have to go to college one day a week, but why can the college not come to us? We currently train 14 people at any one time, which is enough to justify the day elements of a programme being run on site.
Ms Lo:
Does that happen at the moment?
Mr Parkes:
No; apprentices still go to the college.
Chair, you are absolutely right that a lot of them do not turn up in the initial period, and that issue must be managed.
The Chairperson:
I know that from personal experience.
Mrs McGill:
Thank you for the briefing. I want to speak about Gordon’s point on the notion that people apply for an apprenticeship if other options fail, which was also emphasised by the Chair. That could be addressed in the new career strategy, which I understand — and maybe someone can confirm — is been taken forward by the Department of Education and the Department for Employment and Learning
Since the rationalisation, the director of the North West Regional College is based in Derry, but there is a site in Strabane, and the people concerned are trying to raise its profile. They want relevant and meaningful training programmes, and so forth, to be available in the town. Con, how many of the 36 apprentices are from the west or north-west?
Mr Parkes:
At present, one third of the 36 apprentices are broadly from the north and north-west.
Mrs McGill:
That is the point; are you including Coleraine in the north and north-west, because that would not apply to my area.
Mr Parkes:
I suppose that the best way to answer that is that when we advertise widely across the entire country for new applicants to the schemes. Therefore, when we recruit for various areas, the geographic spread tends to vary. At present, exactly 29% of the apprentices come from the general area of the north and north-west; that probably includes Coleraine because there is no narrower definition.
Mrs McGill:
That is my point; Coleraine is included in the statistics for the north and north-west. I do not dispute the geographical relevance of that, but I represent West Tyrone. The North West Regional College covers Derry, Limavady and Strabane, but not Coleraine. In many ways, that skews what is happening with apprenticeships in the north-west.
The Chairperson:
I do not want to know how many apprentices are from West Belfast. However, to follow on from that point, do the apprentices travel every day or are they based in Belfast?
Mr Parkes:
When the apprentices are being trained on site, they have to travel to the training centres, which are based in Antrim and Lurgan.
The Chairperson:
Does that create a difficulty?
Mr Parkes:
We include assistance for travel and accommodation as part of the overall package for apprentices.
Mr Feeney:
As I mentioned earlier, the vast majority of the three-year programme comprises on-site training, and we have work bases in Enniskillen, Omagh and right across the Province.
Mr Attwood:
I agree with other members that, broadly speaking, your programme is highly regarded. Your proposals, including, given the current situation, the suggested uplift in assistance to enable you to provide apprenticeships, seem measured and appropriate. The Committee should take immediate action, or at least probe officials further, on the matter.
One of my two questions is straightforward, and the other is not. In England, people who receive state aid for providing apprenticeships are required to pay the minimum wage, but that does not apply here. From what you said about your apprenticeships, I got the sense that you provide help to pay for travel and accommodation. Given that there is an issue about many apprentices not receiving even the minimum wage, will you outline your rates of pay?
Mr Parkes:
An apprentice starts on £10,000 per annum, exclusive of accommodation costs, which are covered depending on where a person lives and how far he or she has to travel. It will vary, depending on the individual, but the base salary is £10,000 in year one, £12,000 in year two, and £14,000 in year three, rising to £16,000 on completion of the apprenticeship. Within two years of that, they can be earning a £20,000 base salary for a 37-hour or 42·5-hour week, depending on their contract.
Mr Attwood:
I have not done the maths, but does that mean that NIE pays at, or above, minimum-wage rate?
Mr Parkes:
It pays above the minimum-wage rate.
Mr Attwood:
My second question may not be so straightforward. You indicated that NIE is suspending its apprenticeship programme this year.
Mr Parkes:
There are 36 apprentices still following their training, so the programme is still in operation, but recruitment will be suspended. The intake normally begins in September, so that decision is still under review.
Mr Attwood:
As we speak, and for the purposes of this hearing, you anticipate that the intake will be suspended for this year. Obviously, that is worrying, for two reasons. First, NIE is still a highly-profitable organisation, and you indicated that the cost of the training scheme is around £1 million per year. I am a bit surprised that one of the premier organisations, which is very profitable, is deciding at such an early stage to suspend its apprenticeship scheme. Given that NIE is highly profitable it seems to me that it should be spending some of its money on sustaining that scheme.
Secondly, it is also worrying because one of the measures that the Minister has advised the Committee would be a way of dealing with the downturn is by identifying some of the premier employers who can take on apprenticeships, so that people who are losing apprenticeships can be fostered by other businesses. I would have thought that NIE, as a profitable, premier employer, should be taking up some of the slack, rather than suspending its apprenticeship programme. What is your reply to that?
Mr Parkes:
Your points are relevant. First, NIE is a profitable company; and certainly during the current financial year that ends on 31 March it will be a profitable company. However, like all other organisations, NIE is going into the next financial year with a gloomy forecast. A lot of people do not recognise that NIE is directly aligned to the construction sector, which accounts for a large proportion of our business. We have 450 employees, part of whose job is to connect new buildings to the electricity supply. However, in the first nine months of the current financial year the number of such connections has decreased by 25% since last year, is likely to decrease by 35%, and it is not likely to get any better over the next 12 months.
NIE’s first priority is to ensure that it gets through the next financial year and does not reach a situation, for the first time in its history, of having to speak to unions about redundancies. The first priority is to ensure that the workforce is intact and that the skills base is kept in place, including existing apprentices. It would therefore be improper for NIE not to forecast. We pride ourselves in taking apprentices on and seeing them through to completion and a successful career. We do not want to build expectation by taking young people on and then having to let them go as part of an overall process.
NIE is not immune to the prevailing economic circumstances. The reduction in new connections is one issue; however, everybody is aware that the economy is heading for deflation. As the income given to us by Government to run the network is increased in line with inflation, there will be no increase if there is deflation. As a business, we are facing things that we need to attempt to predict, and the best analysis, with all the information available at the moment, is that we should consider every pound spent in costs in every area of the business in order to preserve existing jobs. That is the starting point.
Mr Feeney:
I will expand on Gordon’s point: NIE’s price control with the regulator is RPI-linked, therefore, if there is deflation then prices will reduce in line with minus-RPI, and there will be less money available to run the network.
The Chairperson:
We are not going to talk about prices. [Laughter.] That is for a different Committee.
Mr Attwood:
What was your profit last year, and what is your anticipated profit?
Mr Parkes:
The specific profit for NIE is not shown, but for the Viridian group it was approximately £100 million last year.
Mr Attwood:
What is the indicative profit for this year?
Mr Parkes:
For the year we are about to be in, the profit for the Viridian group will be similar.
Mr Attwood:
Are you saying that that is going to be slashed to zero next year?
Mr Parkes:
No; our profitability must be considered in the context of the reinvestment that is made into the network. A large proportion of the millions of pounds earned is reinvested in the network on an annual basis to maintain the supply. Therefore, the profit is not hived off for someone’s benefit; it goes back into the network. As with all organisations, we have responsibilities to our employees, shareholders and customers — the way that the company operates must ensure that those responsibilities are balanced.
Mr Attwood:
Has a decision been taken about capping, or reducing, salaries within your organisation, given that you are not bringing in apprentices next year?
Mr Parkes:
Yes; those are all part of the measures that we are looking at.
Mr Attwood:
Given that you have made a decision about the apprenticeships, have you made a decision about the salary scales within your organisation?
Mr Parkes:
What we are saying at the moment is that we do not want to build expectations. Therefore, when a careers adviser from an employment agency asks whether we are taking on apprentices, we tell them that that is unlikely. If we get to the stage of pay freezes, we will have unions to deal with. The regulated income is decided in October, so we have got a period from now until October to decide our strategy and communicate with unions on the issue of pay.
We are looking at a number of cost-cutting measures. Those will be taken at all levels, right across the board, and will involve such measures as unpaid leave and not introducing pay rises. As an organisation, we are not immune to the economic downturn — we are being affected in the same way as every other employer.
Mr Attwood:
I hear what you are saying, and I understand that: However, I think that there are some people in this Building who do not hear what you are saying, but that is another issue. I am not completely satisfied, so I will take this as a work in progress and see where we are in three months’ time.
Mr Parkes:
The last thing that we want is to be suspending the apprentice programme — we have never had to do that. This decision has not been taken without a lot of consideration — we re-evaluate such issues on a weekly basis.
The Chairperson:
The Minister is telling us that a lot of work is being doing by the Department as regards fostering. However, if a company such as yours, whose name would be up in lights with regard to its apprenticeship programme, is not taking on apprenticeships, how does that sit with what the Minister is saying? Has the Department proposed any kind of package to you?
Mr Parkes:
No.
The Chairperson:
Have you informed the Department that you are suspending apprenticeships?
Mr Parkes:
No: through the careers office we have been telling them that it is unlikely that we will be taking on apprentices. We have not made a formal announcement because it is still very much under review.
The Chairperson:
Is the Department’s careers service aware of this?
Mr Parkes:
Yes; but we were simply putting that message out in order to manage expectations. We have not made a statement saying that we are suspending the apprenticeship programme because we are not at that point yet. However, we do not want to create the wrong expectation.
The Chairperson:
There are plenty of people here from the Department; I am sure that the word will go back.
Mr Newton:
I want to push the point, if I may. Were you approached by the Department to foster a number of apprentices who had been made redundant from other areas?
Mr Feeney:
I am not aware of that happening.
The Chairperson:
Will you check that out for us, Con?
Mr Feeney:
Yes.
Mr Irwin:
Thank you for your presentation: it was practical and has given us a lot of food for thought. My question relates to apprenticeships, an area that Alex has touched on already. You have 36 apprentices, and you are proposing not to take on any next year. However, you have 1,200 employees and, to me, it seems that there is bound to be some natural wastage, which means that you are bound to need apprenticeships coming in. I am just a layman, but it seems to me that having only 36 apprenticeships seems small fry in relation to the £100 million profit that you make. When one sits back and looks at the situation, the amount that the apprenticeship scheme involves seems a pittance — you seem to be penny-pinching in this area.
Mr Parkes:
Again, taken in isolation, that is a valid point. All the measures that we are looking at are relevant to every aspect of our business, of which apprenticeships are, and have been, a key part. We are not talking about one measure, but about hundreds of measures across the entirety of our business, into areas such as pay and other sensitive matters, all of which have to be worked through with the unions.
Mr Irwin:
Apprentices are the future. I would have thought that it would be the last area that you would want to drop.
Mr Parkes:
We anticipate a downturn in our work. Currently, 36 apprentices are working their way through the system and 14 will qualify this year. They are still in the system, and if we do not have an intake for one year, we may find that we will have to take more people on in the following year, so we can ramp up as necessary. Our decision is fluid: right now, we are saying that this is our position, but we are constantly looking at that in order to review it. To answer your other question, we have high retention rates; less than 2% of our people leave the business. We do not lose many of our employees. Furthermore, there are only a small number of people who are close to retirement.
Mr Butler:
Thank you for your presentation: I apologise for missing the start. The Committee has had discussions in the past about engineering graduates and STEM subjects. You seem to be saying that you are having problems in recruiting engineers. Is there a shortage of engineering apprenticeships and full-time positions for engineers?
Mr Parkes:
There is a perception that our industry is not “sexy” enough for many graduates. They tend to like the IT stuff more; we are seen as being about three wires and a plug. Today’s graduates are more interested in the BT-type engineering with electronics added to it. Queen’s University struggles to get enough people to go through its degree course.
Mr Butler:
Is there not a deeper problem that goes back to primary level and post-primary level? Young people are not taking an interest in science and technology, or, in your case, engineering. What have you done to correct that? It is obvious that you have been working with the colleges in order to encourage people to take up the subject. I know that this is not solely down to your company; it is also a matter for the Department for Employment and Learning and the Department of Education. Is NIE doing anything to promote the idea that engineering is a good career choice, and that there is a shortage of engineers?
Miss McClintock:
Gordon is right about the way in which engineering is perceived. However, we have actively gone out to schools and careers fairs, and have been involved, along with many other employers and engineering societies, in trying to encourage people to become interested in engineering at a young age. I am sure that members will have seen some of the articles in the press about the young girls from Belfast who won an engineering competition. That is how we can get young people interested in engineering as a profession.
Mr Parkes:
In our written submission we have pointed to the introduction of GCSE engineering into the Northern Ireland schools curriculum as a major step forward.
The Chairperson:
Thank you. The presentation has been very interesting and has given the Committee plenty of food for thought for its inquiry into apprenticeships. The presentation raised some questions that we would like to get the answers to. We are keen to go out and see what is going on; I am sure that we can arrange that with you. Thank you for giving evidence today and for providing us with further information.