Continued messaging from successive governments has emphasised that apprenticeships are for young people. The statistics tell a different story.
Since the Apprenticeship Levy was introduced in 2017, the number of apprenticeships for young people has declined 34 per cent. Over the same period, the proportion of 16- to 24-year-olds in England not in education, employment or training (NEET) has risen to 13.6 per cent (an 11-year high of 837,000, according to the latest government figures).
Separately, wider reforms aim for two-thirds of young people to reach higher-level education or training by age 25, with at least 10 per cent achieving Level 4 or 5 qualifications by 2040.
The government has also introduced foundation apprenticeships for entry-level roles while restricting advanced training to under-21s. SMEs will get fully funded apprenticeships for under-25s, and minimum durations have been reduced from 12 to eight months. These changes represent a significant tightening of the link between state funding and age-specific outcomes.
The Growth and Skills Levy, however, cannot operate in a vacuum. The success of this new framework will be measured by how effectively it integrates with broader industrial strategy and local employment support.
The intent is clear: reverse the trend of apprenticeships being used for existing staff rather than new entrants to the workforce. But will it succeed where others have failed?
Dame Alison Wolf, professor of public sector management at King’s College London, argues that the rise in flexibility risks exacerbating existing inequalities rather than resolving them.
Under the current system, levy funds that large companies fail to spend are recycled centrally. But the increased flexibility may mean far fewer crumbs are left on the table, Wolf warns, “leaving even less for small and medium-sized companies”, which are most likely to employ young apprentices.
Wolf describes the current system as “completely unique to this country and totally bizarre, in which a small proportion of large companies pay a levy and everybody else doesn’t”. Companies that pay the levy often “tie themselves up in knots finding ways to use the levy for things they would rather do as continuing professional development in a different way”.
In Wolf’s view, this creates a convoluted funding loop that distorts incentives and disadvantages smaller employers. “It’s a completely bizarre way to organise things,” she says, arguing that the system encourages large employers to reshape existing training to fit apprenticeship rules, while leaving SMEs dependent on residual funding over which they have little control.
Wolf advocates, like in other countries, everybody paying the levy on a sliding scale. “You don’t have this bizarre situation where large companies pay, then the Treasury works out what’s unused, then gives some of it to the [Department for Education].”
While central funds are needed because some regions have large companies and others don’t, “the whole design needs redoing”, she says. “Until you do that, you won’t get SMEs involved and you won’t address access for young people.”
In a YouGov and CIPD survey, commissioned by the Fabian Society, 57 per cent of employers support levy funds being used to tackle regional skills shortages. Wolf is “hugely in favour of devolving to combined authorities.
“Instead of searching a website, they’d go to a clearly labelled office in their local authority or combined authority, with a team managing apprenticeships locally, some funding for hard cases and, if needed, limited wage subsidies.”
Central government, she insists “needs to stop trying to run everything and instead do two things: redistribute to low-income areas and support skills that are important but have small numbers.”
Tom Richmond, an education policy analyst who previously directed the EDSK think tank, believes the Growth and Skills Levy has fallen a long way short of the reform originally promised. “From what we know so far, it’s going to be an enormous disappointment to employers,” he says.
When the policy was first announced by Labour in 2022, he continues, it was presented as a dramatic shift that would give employers far greater freedom over how they spent levy funds.
But Richmond says the version now emerging is far narrower – capped at 50 per cent and limited to specific skills areas – falling well short of the “very dramatic change” employers were promised.
In his view, the retreat from that ambition reflects Labour’s political misjudgment rather than a genuine policy rethink. “From the very moment it was announced, it felt like a very clumsy intervention,” he says, arguing that it showed “a fundamental misunderstanding of how the levy moves around the apprenticeship system”.
The original promise of full flexibility was never deliverable – a failure of competence that has left employers with a watered-down compromise that satisfies no one.
He notes the government has settled on a limited form of flexibility. The redesigned levy will fund apprenticeship ‘units’ – short and modular courses – in critical skills areas such as engineering, digital and artificial intelligence, with durations ranging from one week to a few months.
But Ben Rowland, chief executive at the Association of Employment and Learning Providers (AELP), believes the shorter courses and apprenticeship units will be beneficial. He sees these as creating useful options without abandoning the rigorous structure that distinguishes apprenticeships from standard corporate training.
“I think there should be a nice balance,” he argues. Short courses could include “plumbers learning how to put in air-source heat pumps, digital marketers getting their head around the ethics of AI, or cyber-security professionals learning about the latest threats from Russia and China”.
For Rowland, the levy’s problems stem less from design flaws than incentives that were never switched off. The government, worried employers wouldn’t participate, introduced “sweeteners and incentives” to encourage uptake.
Corporate giants such as Google and UBS duly embraced apprenticeship programmes. “Once it was in place, all the companies really leaned into it,” Rowland explains. “They never turned [the incentives] off, even when it had become successful. So you could basically never run out of levy spend.”
The result was large employers directing levy funds towards existing staff, rather than taking on young apprentices. Rowland argues the Growth and Skills Levy has done nothing to correct this, meaning that large employers can continue using funds on existing workers with even more flexibility.
Yet even if shorter courses and apprenticeship units offer employers more choice in how they spend levy funds, questions remain about whether flexibility can redirect investment toward young people rather than simply offering large employers new ways to train their existing workforce.
For Claire Green, post-16 and skills specialist at the Association of Schools and College Leaders (ASCL), the risk is that reforms continue to prioritise policy design over practical delivery, particularly in schools, colleges and SMEs – which make up the majority of employers in many local economies. “There are real question marks around how the flexibility will actually work,” she says.
Green also points to persistent policy churn as a fundamental barrier to effective delivery, arguing this reform undermines confidence in the system before learners ever reach an employer. “We can’t keep having this constant change,” she says. “Young people need to know what their options are, and it needs to stay that way and not keep changing.”
In areas dominated by very small businesses – those with under ten employees – apprenticeships are structurally impossible without additional support.
Green argues the Growth and Skills Levy fails to provide the increased infrastructure and funding required to make apprenticeships viable for micro-businesses – which constitute the majority of the UK economy.
“If there’s only one or two people who work in the business, how feasible actually is that?” she asks, adding that higher apprentice wage costs have made participation “quite unmanageable” for many employers.
Green remains sceptical that levy reform will bring the required change. “The idea of supporting younger people into long-term pathways into skills sectors where we’ve got gaps is a very sensible thing, but without that increased infrastructure around it, which can only come from funding, then it’s always going to fall short.”
With youth participation in apprenticeships declining and nearly a million young people disconnected from education or work, the need for transformational working solutions is critical. If the Growth and Skills Levy is to succeed where its predecessor fell short, it will need to be more than a technical adjustment to funding rules.
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