Should we stop the universal funding of apprenticeships?

We hear from the Skills Minister, Anne Milton, that she is giving consideration to no longer funding all apprenticeships. Why is she now thinking this, and what might be causing the possibility of such a significant policy change?

Two pieces of news have emerged from the government during the last few days that paint the background to the Minister’s comments. Firstly, there is the very real prospect that the apprenticeship Levy will be overspent by up to £500m by the end of 20/21. Secondly, the year-end starts figures for 17/18 show a 24% decline in overall starts on 16/17, and a 26% decline over the last full year pre the apprenticeship levy in 15/16.

So, what is going on, and why are starts down so much, whilst the cost of apprenticeships seems to be spiralling over budget? Let us look at what is behind this apparent conundrum

Firstly, some analysis by FE Week shows us that based on starts so far, the costs of an apprenticeship standard is on average, three times the cost of an old framework. This raises the question, are new standards worth it? Only time will give us the answer to that! It is however the huge rise in the number of management apprenticeship starts that is the main cause of this increase. Up until January 2019, when it will be reduced to £22,000, the very popular Chartered Management Degree Apprenticeship allows employers to draw down £27,000. Other management qualifications at levels 3 and 5 have also been very popular. However, following the recent funding band review by the IfA, they too have had they funds reduced. The huge rise in high-value management apprenticeships has been accompanied by a corresponding decline in level 2 apprenticeships of 38% year on year and a 19% decline in level 3 starts.

In addition to the overall pattern of fewer, higher value apprenticeships, the apprenticeship reforms that we have seen in the last four years have also brought in a 10% mandatory financial contribution for SME’s (this is being reduced to 5% from April 2019), and a rigid enforcement of the 20% Off-Job Training requirement for all apprenticeship standards. These reforms have also had a negative impact on the number of new apprenticeships starts. SME employers who were historically used to not having to make any contribution towards the cost of an apprenticeship, have walked away from apprenticeships in their thousands at the prospect of paying 10%. In addition, the prospect of losing their employee for a fixed 20% of their working time to undertake off-job training, has also been a deterrent to many employers.

So if the minister is worried about declining numbers and ‘rocketing’ costs, what should she be doing about it?

The first thing that she should NOT do is introduce some form of restrictions around the availability of apprenticeships. I believe that the universal right for anyone at any age, to undertake an apprenticeship at any level should stay. Why? We have long since left the days of a single career for life behind us. Career changes are now common place. Why should a 40 year old, who changes career, be denied the opportunity of completing an apprenticeship in their new job?

Management Apprenticeships have also come under fire, with Ofsted the most recent organisation to suggest that employers are merely replacing their in-house management training with one of the growing number of management apprenticeships. I personally do not see this as a problem. Why? For years we have moaned about the quality of management and the lack of management training in the UK. We now have a scenario where companies are offering their employees, regulated, high quality management training through the new apprenticeships. Surely if this addresses many of the failings of ad-hoc, in-house management training of the past, then it is to be lauded, not criticised?

Having said that, I am concerned at the decline in the number of level 2 starts, and the impact this will be having on young people. I believe that we should fully fund all 16 - 18 apprenticeship starts. Why are apprenticeships the only from of education and training for 16-18 year olds that are not fully funded? We need to achieve parity between apprenticeships and the more traditional vocational route.

I would also remove the 10% (soon to be 5%) mandatory contribution for all companies with less than 500 employees. In effect I would make it applicable to medium size businesses only, and in so doing remove a significant barrier that is preventing small businesses from taking on an apprentice.

Work also needs to be done to refine the implementation of the 20% off-job training. Applying 20% to every single standard, irrespective of the level or complexity is just wrong! Off-job training is essential in every standard, but not at 20%. Some need a lot less, whilst some should have more. The amount of off-job training should be tailored to each individual standard. Doing this would remove another barrier to starts.

So far my ideas would hopefully have a positive impact on the number of starts, but wouldn’t solve the apprenticeship levy overspend problem that is heading our way! My answer to that would be to reduce the payroll threshold as to when the levy becomes payable from £3m to £2.5m. This would bring in scope some medium size businesses, and provide an incentive for them to take up apprenticeships.

I really hope that Anne Milton does not start to ‘ration’ apprenticeships, by restricting funding. We need more investment aimed at generating more people of all ages on apprenticeships.

Tony Allen

December 2018.