by GK Strategy 16th April, 2019
3 min read

High noon for higher level apprenticeships?

The Government’s somewhat-stuttering skills overhaul was given a much-needed boost by the news that the number apprenticeships starts have increased. This is the first time that the number has grown since its flagship apprenticeship levy was introduced. Between August 2018 and January 2019, 225,800 apprentices started their training; a ten percent jump on the same period the previous year. However, this still falls significantly short of the 296,600 who started an apprenticeship in the year leading up to the levy’s introduction. This raises two questions: what isn’t working, and what is the Government doing to fix it?

In a recent report on apprenticeships policy, the National Audit Office (NAO) found that levy-paying employers had only used 9% of the funds available to the to pay for new apprenticeships in 2017-18: £191 million of almost £2.2 billion of levy funds and government top-up available to them. In turn, the Department for Education (DfE) underspent to the tune of £400 million on the programme, and is expected to underspend by £500 million in 2018-19. The watchdog also voiced concern about the future sustainability of the programme due to the higher than expected costs of standards – double the forecasted figure – arguing that such financial constraints could inhibit the future growth of apprenticeships.

This has been partly driven by the proliferation of higher-level apprenticeships, which are more expensive to run and now make up one in every eight apprenticeship starts. Ofsted chief, Amanda Spielman, has said that employers are not spending the levy in its intended spirit and are instead, for example, ‘repackaging’ graduate programmes as apprenticeships. A recent report by the Social Market Foundations (SMF) also addressed this phenomenon, finding that there is a risk that some employers, ‘may reclassify employees as apprentices, as this can save employers £8,000 per year in wages per apprentice.’  As a result, an increasing number of apprentices are older workers who are undertaking professional development programmes, at the expense of those who seek a start on the lower rungs of the apprenticeship ladder.

So, what can be done to fix this? The Association of Employment and Learning Providers (AELP) has suggested rather drastic action by calling for level 6 and 7 apprenticeships to be removed from the scope of the levy and funded by a combination of employers and traditional student finance options for HE students. Top DfE civil servant, Jonathan Slater, also conceded that ‘something is going to have to give’ in the upcoming spending review to address the NAO’s warning, hinting at potential intervention: ‘one of the choices for government as resources get constrained would be to prioritise some apprenticeships over others.’ This was echoed by the NAO who called for a joint DfE and Education and Skills Funding Agency (ESFA) assessment of this approach.

However, chair of Parliament’s Education Committee and former skills minister, Robert Halfon, has said that such action on degree apprenticeships would be a ‘retrograde step’ as they raise the prestige of apprenticeships and enable economically disadvantaged apprentices to access degrees without taking on high levels of student debt. Such an approach may find favour with policy-makers keen to encourage greater take-up of apprenticeships at a higher level, and who have strongly supported the creation of an employer-led system and are thus reluctant to consider options that restrict the ability of businesses to offer the skills training they want.

A solution seems a while off. In October, the DfE hinted that a consultative exercise on the operation of the levy after 2020 could be expected ‘in the coming weeks’, yet there has been radio silence since. The Spending Review can continues to be kicked down the road – awaiting a Brexit resolution – and is unlikely to happen by the summer as once promised. Despite this, the sector-wide concerns around the flaws in the current system, as well as the ticking timer of financial viability warned by the NAO, means reform is now not a matter of ‘if’, but ‘when’.

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