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6 March 2018updated 24 Jun 2021 12:25pm

Is the apprenticeship levy pricing young people out of training?

The CIPD’s Elizabeth Crowley, the CBI’s Neil Carberry and EFF’s Verity Davidge discuss what the new funding model means for school leavers.

By Will Dunn

The official story, as told by Anne Milton in her conversation with Spotlight this week, is that while the number of people taking up apprenticeships fell off a cliff in 2017 – dropping by 61 per cent in less than a year – the drop was mainly concentrated among lower-quality programmes. The numbers of more advanced, higher-quality apprenticeships rose. In November, FE Week reported a “huge spike” in higher-level programmes funded by the apprenticeship levy, as courses at level four and above rose by over 400 per cent. This, says the government, is good news – more people are doing better apprenticeships.

But within this data is another story. Supported by a range of anecdotal evidence from businesses, there is a growing concern that apprenticeship reform, particularly the funding mechanism, has reduced the number of apprenticeships available to school leavers in favour of management apprenticeships for people who have already been employed for some time.

Elizabeth Crowley, skills adviser at the Chartered Institute of Professional Development, describes this as “a pre-existing challenge within the system. Before the levy was introduced, two thirds of apprenticeships went to existing employees. Only a small number actually went to new starters. However the levy, or rather the incentives in the levy, appear to us to have shifted that balance further.”

Crowley explains that the new funding model means the priority for employers is now to recoup their levy money efficiently. “Employers are looking for ways re-badge existing training activities to be able to reclaim their levy money.” In its research into the unintended consequences of the levy, the CIPD found that “46 per cent of businesses were looking at ways to rebadge their existing training activity as apprenticeships, including leadership and management training.”

“Early indications from [the DfE’s] data show that we’ve hit the lowest point since 2009/10 for the number of young people getting an apprenticeship place,” says Crowley. “The IFS has been quite clear that the changes in the incentive structures actually disadvantage young people, because previously all of a young person’s training would have been paid for, but now they’re on a level playing field – the employers can spend to reclaim the levy cost for training no matter what age the employees are.”

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Neil Carberry, managing director of people and infrastructure at the Confederation of British Industry, says that the CBI, too, has “anecdotal evidence from members that some of them have had to cut their apprentice numbers because of the way the levy is structured. And we have had anecdotal evidence from members that some of them are accrediting training they already did via an apprenticeship framework.”

For Carberry a significant part of the problem is that the rules mean companies often can’t spend the money they’re entitled to recoup from the levy. Most importantly, the new rules state that “the only thing that the levy can pay for is the cost of taught time – so, the money that you pay to the college or the private provider for the classroom time off the job.” Carberry quotes an example from a CBI member, “a business in a regulated sector with a £2.5m budget for their apprenticeship scheme. Their arrangement with the college [for off-the-job training] costs £300,000 a year and everything else is a capital cost – the tools for the apprentices, the trainer time, the salaries. But then the levy turns out to be £500,000 – so the cost of the apprenticeship scheme goes from £2.5m to £2.7m. And the question then becomes, can they afford that £200,000 increase in cost?”

Verity Davidge, head of education and skills policy at EEF, agrees that many employers will not use their levy allowance. Of the EEF members who are levy payers, says Davidge, a third said they would have to cut training budgets, and three quarters don’t think they’ll spend their full levy allowance. And EEF, too, has seen change in funding translate into fewer places for school leavers and more management courses.

“We do see some companies who have said they’re using them within their existing workforce. The big push at the moment is around leadership and management, so a lot of the management courses have taken off quite quickly,” Davidge explains.

This is a concern for EEF’s members, which comprise most of the manufacturing and engineering companies in the country, because it is in these sectors that the classic notion of a good apprenticeship – in which people learned on the job and progressed through a company for much or all of their career – was formed in the UK. “About 75 per cent of our members say they still generally recruit 16 to 18-year-olds,” Davidge says, because apprenticeships have “been very much a means of securing the skills they need for the future. For our sector, a level two apprenticeship is never an end point.

It’s always a stepping stone. Of all the apprentices at the manufacturing companies I speak to, it’s never a case that they’ve just done a level two or even just a level three, they’re on level four, five, six, they do degree-level qualifications.”

“Our concern is that if so much money is targeted towards those higher-funded management apprenticeships, actually we’re not targeting it at young people, people who need level two qualifications to move on to level three. The government’s Industrial Strategy says we need technicians, well, let’s make sure there’s enough money to fund technician apprenticeships.”

“There shouldn’t be an age limit on apprenticeships”, says Davidge – Neil Carberry, too, says that “the important thing is not the age of who is doing an apprenticeship” – but Davidge, Carberry and Crawley all argue that the system of funding for apprenticeships as it currently stands is inflexible, and that this inflexibility is pushing businesses to compensate, quite rationally, in this way. All three recommend what Neil Carberry calls “a flexible skills levy, so companies can fund the things that make a real difference, not specifically one type of training”. Verity Davidge says that “employers were promised ‘this is your money, and if you train apprentices, you can spend it and you’ll get back more than you put in’. Those goalposts have firmly been shifted, to a point where employers don’t even think they’re visible.”

In October of last year, as management became the second most common apprenticeship subject, the DfE’s permanent secretary, Jonathan Slater, told the Public Accounts Committee that it was “very early days in the new levy, and we are watching it closely”. If the trend becomes more pronounced over time, it may grow to have a profound effect on the people who need apprenticeships most of all.

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