Job not done on apprenticeships reform

REC’s Kate Shoesmith discusses how Apprenticeship reforms are unlikely to achieve the PM’s aim to ‘unlock a tidal wave of opportunity’ because the overwhelming majority of people who work in flexible roles remain locked out of using the apprenticeship levy.

The government’s announcement of reforms to apprenticeships was something of a ‘yay’ moment for recruiters and employers because it should help bring in potentially untapped talent – a vital move given the UK’s labour and skills shortages. But yet again, it didn’t address the failure of the apprenticeship levy policy.

The volume of 19–24-year-olds on apprenticeships has hardly changed in 20 years, if you compare 2002/03 (167,000) to 2022/23 (176,520).

Not a great situation when our research suggests that in a labour market restricted by shortages, we could see a 1.2% fall in expected GDP and productivity by 2027 – costing the economy up to £39 billion per year. That’s the same as building two whole Elizabeth Lines – every year.

Therefore, apprenticeships are ripe for reform

And this long-overdue shake-up is the kind of thinking that can help employers to take advantage of any upturn in the economy.

The tweak that will allow large employers who pay the apprenticeship levy to transfer up to 50% of their funds to support other businesses, including smaller firms, is coming better late than never. Especially as SMEs make up 99.9% of the business population (5.6 million businesses).

But the reforms are unlikely to achieve PM Rishi Sunak’s aim to ‘unlock a tidal wave of opportunity’

This is because the overwhelming majority of people who work in flexible roles remain locked out of using the levy. Hundreds of thousands of talented people working as temps just aren’t in jobs where the employer paying the levy on their salary can fund an apprenticeship for them. Apprenticeships take a minimum of 12 months – which just isn’t how temporary work is structured.

Back in November 2021, we asked our members if they had been able to use the Apprenticeship Levy in the previous 12 months. An overwhelming 88% of respondents said that they had not. The situation hasn’t improved since then.

Our latest Recruitment Industry Status report (RISR) showed the recruitment and staffing sector generated a staggering 25.7 million temporary and contract placements in 2022 (compared to 22.4 million in 2021).

Despite the 25.7 million reasons to make the levy work for the sector, the government is yet to act.

The Education Secretary, Gillian Keegan, has said the government has built a ‘world-leading apprenticeship system’.

She wants it to and it could be, but not yet.

Apprenticeship Levy: no more half measures.

This is not to say that the outgoing Minister for Skills, Apprenticeships and Higher Education, Robert Halfon, hasn’t been a tireless champion for apprenticeships. The sector will no doubt be disappointed at his stepping down. But the first thing on the ‘to do’ list for the new Minister must be to reform the Apprenticeship Levy: no more half measures.

Around this time last year, we teamed up with the British Retail Consortium (BRC), UKHospitality and techUK, to call for the apprenticeship levy to be reformed into a broader skills levy, so that it could be spent on a wider range of accredited training, including shorter, more targeted courses, that would serve the needs to today’s labour market.

The political parties appear to have listened, with all three major UK-wide parties (Conservative, Labour and Lib Dems) committing to some kind of levy reform. But the key is to get that commitment written into their manifestos.

There’s also a case for ensuring the levy goes to support those who could benefit the most. Let’s talk about whether learners who are already qualified at or above Level 6 (equivalent to a full undergraduate degree) should be able to draw on levy funds for their apprenticeship. I understand why businesses seek to use the levy where they can. And why shouldn’t someone who wants further training and development get the opportunity to progress do just that through a valuable apprenticeship? It makes sense when the system is constrained as it currently is and it all points to why we need more investment in skills, not less.

But in a market where we see people looking for progression in their work and their pay, where we have too many people not working, and a stubbornly high number of job vacancies – that still remain above pre-pandemic levels – something has to change.

Reforms to the levy along the lines we suggest will fund high-quality, modular training and enable more people, including temporary workers, to train and fill job vacancies.

We need high quality apprenticeships. But there are other training routes that are just as valid. Especially given we still need to level things up between academic and non-academic pathways. The political changes ahead, with a fresh mandate, is an opportunity to finally get it right.

By Kate Shoesmith, Deputy Chief Executive, REC

About Kate:

Kate has been with the REC since March 2013. She is responsible for the REC’s external engagement strategy and providing a leading voice for our industry. Kate is a spokesperson for the REC, regularly appearing in the UK media and speaking on platforms to talk about the jobs market, employment and skills. 

Kate’s background is in policy and public affairs. Prior to joining REC, she was Head of Policy & Corporate Affairs at City & Guilds. She has been a governor for two London further education colleges and an adviser to a number of external forums, including Business in the Community, UNESCO Education for All, Youth Employment UK and Women in Recruitment.