The UK has experienced the worst recession of any major economy due to the coronavirus pandemic. The government’s irresponsible response to Covid-19 is causing a weekly cost to the economy of £5.3bn and an average of 23,000 jobs to be lost every week.
Young people have borne the brunt, with workers aged 16 to 25 twice as likely to have lost their job during the pandemic compared to older workers. At the end of October, nearly 370,000 under-25s were on furlough, with research suggesting their jobs are likely to be the least stable if the government removes the furlough scheme.
Urgent action is needed if we are to avoid the next generation suffering long-term damage to their labour market prospects. Yet the government’s strategy has been insufficient for the scale of the challenge facing these young people. In the Kickstart Scheme and a cash incentive to take on apprentices, the government has been handing out sticking plasters not longterm solutions.
Even prior to the pandemic it was clear that the government’s strategy for apprenticeships was failing. In the years since the government introduced the Apprenticeship Levy, the number of starts, particularly among young people, have plummeted and ministers have failed to get to grips with this problem.
Over the past decade of Conservative government, Labour analysis shows the number of apprenticeships has fallen by a quarter, with over 130,000 opportunities being lost. In 2018/19 alone, the number of young people starting an apprenticeship fell by a fifth, to just over 270,000. This is expected to fall further as businesses continue to feel the impacts of the pandemic.
Apprenticeship starts for those under 19 account for only 24 per cent of the total of all apprentice starts, and entry-level apprenticeships (Levels 2 and 3, equivalent to GCSEs and A-levels) account for just 31 per cent of apprenticeships undertaken in 2019-20. This presents a bleak outlook for young people looking to gain skills and enter the jobs market.
Ministers have recently tried to revive the fortunes of apprenticeships, offering incentives of up to £2,000 for employers to take on new, young apprentices. So far, however, only 8,000 claims have been made according to the government’s own figures. With youth unemployment estimated at over one million, this policy will barely make a dent.
Even the announcement shortly before Christmas that the incentives will be extended for two months will not offer much hope for young people, or support for employers seeking to create longterm opportunities and fill skills gaps in their businesses.
The government has attempted to tweak the Apprenticeship Levy, in recognition of the fact that small to medium-sized enterprises (SMEs) have been left without the funding they need, while many levy-paying companies struggle to spend their funds. However, the levy transfer system (making it easier for larger companies to pass their levy contributions to businesses in their supply chain) has led to fewer than 8,000 transfers being approved, with 34 per cent of transfers being between levy-paying companies rather than SMEs.
This tinkering around the edges has not reversed the downward trend in apprentice numbers. Nor, in the context of the pandemic recession, is a cash incentive enough to persuade employers to take on the wages of new apprentices while also providing training and opportunities for new, young workers to learn skills.
It is time for a bold alternative that will bring together businesses and young people to boost our economy and help to combat skills shortages. Having spoken to businesses, sector bodies, independent training providers, and colleges, it is clear that any workable incentive policy must address the main cost of an apprenticeship: wages.
With the Apprenticeship Levy funds underspent last year and the government’s mishandling of the pandemic creating further challenges for our economy and our young people, Labour is proposing a policy to create 85,000 new apprenticeships for 16 to 24-year-olds this year to provide them with the opportunity to get their “foot on the ladder” and learn a trade.
Our policy is for the government to pay 50 per cent of the wage contributions for the first year of an apprenticeship, starting off at 100 per cent for the first three months, and tapering off to 50 per cent in the next six months and 25 per cent for the remaining three months as the apprentice becomes more productive to their employer.
Whereas Kickstart and traineeships offer a quick fix but an uncertain future, apprenticeships are a tried-and-tested way of providing young people with a job, and the chance to learn a trade and earn a wage while they progress.
With unspent levy funds of £330m pocketed by the Treasury last July, which is regrettably becoming an annual occurrence, followed by further peaks in Covid-19 infections and further underspent funds, this policy puts that underspend to good use – and to the purpose the levy was intended for.
Without action, a generation of young people will be condemned to insecure, lowly paid and unfulfilling work, wasting talent and economic potential. This cannot be allowed to happen. Unprecedented challenges call for innovative solutions and Labour is ready to propose bold new policies to boost our economy and provide opportunity.
This article originally appeared in the Spotlight report on Skills and Apprenticeships. Click here to read the full report.