Apprenticeship Levy reforms hurting most disadvantaged

Low take-up, unambitious targets and poor-quality training: the Public Accounts Committee raises concerns over government reforms to the apprenticeships programme.

REPORT SUMMARY

The Department for Education (the Department) has failed to make the progress that it predicted when it reformed the apprenticeships programme in spring 2017.

The number of apprenticeship starts fell by 26% after the apprenticeship levy was introduced and, although the level is now recovering, the government will not meet its target of 3 million starts by March 2020.

The Department’s focus on higher-level apprenticeships and levy-paying employers increases the risk that minority groups, disadvantaged areas and smaller employers may miss out on the benefits that apprenticeships can bring.

We welcome the programme’s greater focus on quality and, after a slow beginning, more than half of apprenticeships are now started on employer-designed standards rather than the old-style frameworks.

However, some employers are using apprenticeship funds to pay for professional training or management courses that they would otherwise have paid for themselves. We remain to be convinced that this is the best use of the available funding in terms of adding genuine value to the economy.

Because of the drop in apprenticeship starts, the Department underspent the programme’s budget by 20% in 2017-18.

However, employers’ preference for higher-cost apprenticeships means that the programme is expected to come under growing financial pressure in the coming years.

Unless funding is increased, the Department will face difficult decisions about which aspects of the programme to prioritise. It is crucial that these decisions are based on sound evidence, and that they pay due regard to the added value that different types of apprenticeship bring.

COMMENT FROM PAC CHAIR MEG HILLIER MP:

“The number of people starting apprenticeships is falling significantly short of government targets. The government will not meet its goal of 3 million starts by March 2020 and the Department has underspent the programme’s budget by 20%.”

“Ultimately, the lack of progress has disrupted the direction of the programme. The way the programme is evolving is out of kilter with the Department’s objectives: opportunities for people with lower skills are diminishing and apprenticeship starts in disadvantaged communities has fallen.”

“What’s more, take-up from under-represented groups has been too low. We are supportive of the programme’s core objective to draw apprentices from a wider range of social and demographic group, but this is at complete odds with its unambitious targets.”

“We are also concerned about the quality of training: a third of apprentices are being trained by providers who have been rated inadequate or requires improvement by Ofsted and there are currently not enough assessors to meet the demand for end-of-apprenticeship assessments.”

“The apprenticeships programme has laudable ambitions, but the Department’s poor execution has created serious longer-term problems.”

“The Department for Education must get its reform of apprenticeships back on track, realigning the programme with its initial objectives so that as much of the population as possible can benefit from it.”

Apprenticeships and Skills Minister, Anne Milton said:

“We are making apprenticeships better. They are now longer, higher quality and have more off-the-job training – a point the PAC acknowledges.

“We are increasing the numbers of people with learning disabilities or from BAME backgrounds starting apprenticeships. We have projects aimed at helping people from disadvantaged areas to achieve an apprenticeship with all the benefits it provides.

“Our reforms have also seen more employer buy-in giving employers greater control so they can invest in the people and skills they need. Companies like BAE Systems, JP Morgan, Marks & Spencer and Lloyds Banking Group are embracing the system and supporting the development of new high-quality apprenticeships.

“There is still work to be done, but we won’t sacrifice quality for quantity and I’m thrilled that the number of people starting on our new high-quality apprenticeships has risen by 79% in the first half of 2018/19 compared to the same period last year.

“We are considering the PAC’s recommendations carefully and will respond in due course.”

Public Accounts Committee member and Liberal Democrat education spokesperson Layla Moran MP said:

“The Conservatives’ botched apprenticeship reforms have badly let down young people. Apprenticeship starts have fallen off a cliff since the levy was introduced in 2017. Small businesses want to take on more apprentices but training providers don’t have the money.

“There is too much bureaucracy and too little flexibility. And it’s the most disadvantaged young people who are losing out.

“Liberal Democrats demand better for our young people. We would boost the quality of apprenticeships by ensuring that each one includes a recognised qualification. And we would re-prioritise those with the lowest skills by rebranding Level 2 courses as ‘traineeships’ that provide a stepping stone to further study.

“Once businesses have a well-functioning apprenticeship programme, we can then offer them the flexibility they are so desperate for by expanding the Apprenticeship Levy to fund other forms of skills and training.”

Penny Cobham, Managing Director of The 5% Club has responded to the report saying: 

“The Public Accounts Committee’s (PAC) report highlights that the government will not meet its target of 3 million apprenticeship starts by March 2020, and that the standard of some apprenticeship training is below par, which is disappointing. Representing more than 375 UK businesses, committed to offering ‘earn and learn’ training opportunities, The 5% Club wants to see more young people starting and completing good quality apprenticeship training. Today’s report supports our members’ view that the Apprenticeship Levy is not yet delivering on its promises. 

“The 5% Club wants more employers to embrace apprenticeships but this can only happen if the quality of apprenticeship training is up to standard. One of the key issues the PAC report highlights is the poor quality of training providers and the lack of end point assessors. Such fundamental problems undermine the value of apprenticeships, as well as the support businesses give to apprenticeships. Crucially, it is also unfair on the very people for whom apprenticeships should provide the skills our economy so badly needs – young people. 

“The PAC finding that ‘opportunities for people from disadvantaged communities has fallen and that take-up from under-represented groups has been too low’ is also concerning. In 2018, The 5% Club’s own report Playing to Our Strengths: Unlocking Social Mobility for Economic Good highlighted the correlation between improving social mobility and education, and addressing the UK’s skills gap. It is now essential that more is done to create opportunities for those who are at a disadvantage.

“We urge the Department for Education to take on board today’s PAC report; to evaluate its interventions in the case of failing training providers and; to set and meet more stretching diversity targets covering BAME apprentices and those with a learning difficulty, disability or health problems. Only then can the UK deliver the huge number of apprenticeships which young people and the UK economy desperately need.”

CONCLUSIONS AND RECOMMENDATIONS

The Department has not set out what productivity gains it is expecting from the programme.

Addressing the United Kingdom’s poor productivity compared with many international competitors is a core purpose of the apprenticeships programme.

The Department uses a ‘skills index’ as a proxy measure for the impact of apprenticeships on productivity. The index takes account of the number of apprenticeship starts, apprentices’ progression into jobs, and the subsequent increase in their earnings.

The index increased by 3% in the academic year 2016/17 and by a further 2% in 2017/18, as a result of more people achieving higher-level apprenticeships and a small shift towards sectors with higher wage returns.

The Department has not set out what improvement in the headline value of the index would constitute success.

Recommendation: The Department should publish the level of improvement in the skills index that it is aiming to achieve in the short and long term.

The way that the programme is evolving risks leaving behind people with lower skills and those from disadvantaged communities.

The programme is now more heavily weighted towards higher-level apprenticeships. Around 20% of the new standards are available at level 2 (often the level at which learners join the programme).

In contrast, more than 40% of the old-style frameworks were previously available at this level. Some employers and training providers are concerned about the lack of suitable level 2 standards, and the challenge of enhancing learners’ English and maths skills while also delivering occupational training.

The proportion of apprenticeship starts among people from disadvantaged areas has fallen, partly because of the growth in starts at level 3 and above.

In 2017/18, just under 23% of new apprentices were from the most deprived local authority areas, compared with the Department’s target of 25%.

The ESFA is carrying out research to understand more about why the programme appears not to be working well for people from disadvantaged areas.

Recommendation: The Department should assess whether there are enough level 2 standards to allow school leavers or those with fewer skills to easily access apprenticeships, and report back to us within six months on its assessment and any action it proposes to take to redress the balance.

The Department’s approach to widening participation among under-represented groups has been inadequate.

One of the programme’s four main objectives is to draw apprentices from a wider range of social and demographic groups.

However, the Department’s targets for apprenticeship starts among the black, Asian and minority ethnic (BAME) population, and among those with a learning difficulty, disability or health problem, are unambitious in that they are below the respective levels of these groups in the working-age population.

There are no gender-based targets for the programme – we recommended that the Department should set such targets in our 2018 report on science, technology, engineering and mathematics (STEM) skills but the Department rejected our recommendation.

In 2016/17, women made up only 8% of STEM apprenticeship starts. The Department reports that this figure has since risen to 9%, but acknowledges that the position is “hopeless”.

It says that it is seeking to raise awareness of apprenticeships among women and girls, and to provide positive images of women doing STEM-related work, but we consider that it is taking far too long for the Department to get to grips with this issue.

Recommendation: The Department should set more stretching diversity targets, covering BAME apprentices and those with a learning difficulty, disability or health problem, for 2020/21 and beyond. In the absence of targets relating to gender, it should evaluate the impact of its efforts to attract more women into STEM apprenticeships and report to us within six months on how it plans to address under-representation.

The programme is not supporting smaller employers well enough.

Money raised by the apprenticeship levy has to pay for all apprenticeships, including those in smaller employers who do not pay the levy. Levy-paying employers have direct access to their funds, to pay for apprenticeship training and assessment.

In contrast, smaller employers access apprenticeships via training providers who are funded through contracts with the ESFA.

Under current funding arrangements, if levy-payers spend more than around half of their funds, the ESFA will have less money available to fund apprenticeships among smaller employers.

While levy-paying employers have spent a relatively small proportion of their funds so far, training providers are already reporting that they do not have enough funding to offer as many apprenticeships to smaller employers as they would like.

Levy-payers have up to 24 months to spend their funds – when unspent funds start to expire in May 2019, around £12 million a month may be lost to the programme.

Recommendation: The Department should set out how it will ensure that smaller employers can benefit fully from the programme, including considering whether to protect funding for non-levy-paying employers and assessing the feasibility of deploying expired levy funds to support skills development in particular parts of the country.

Too many apprentices are being trained by sub-standard providers.

Around a third of apprentices covered by Ofsted inspections in 2017/18 were being trained in providers rated as ‘inadequate’ or ‘requires improvement’.

The poor quality of some providers contributes to a situation where over 30% of apprentices fail to complete their apprenticeship successfully each year.

In 2016/17, this equated to more than 132,000 apprentices. Since 2014/15, a growing proportion of training providers have fallen below minimum standards for their apprenticeship achievement rates.

The ESFA may issue these providers with additional conditions of funding or extra contractual obligations. Ultimately it can terminate providers’ contracts, but this is extremely rare – it has taken this step with only 11 providers in the past five years.

Recommendation: The ESFA should evaluate the impact of its interventions with failing providers that fall short of contract termination and report its findings to us within six months.

We do not have confidence in the arrangements for assessing apprentices at the end of their apprenticeship.

Under the standards, each apprentice is assessed by an independent third-party at the end of their apprenticeship. However, in late 2018, 19 standards had no end-point assessment organisation in place, and 98 standards had only one assessment organisation.

Training providers and employers have expressed concerns about whether there will be enough assessors to meet the demand for assessments.

The ESFA contends that the 220 approved assessment organisations cover over 99% of apprentices, but it also concedes that many of these organisations work in only one area or setting and that there are gaps in coverage.

In addition, the arrangements for checking the quality of end-point assessments are muddled, and it is unclear whether the numerous bodies involved provide a consistent level of assurance.

Ofqual is one of the quality assurance bodies but, as a regulator, has greater powers than the other bodies.

Recommendation: The ESFA and the Institute for Apprenticeships & Technical Education should write to us within six months to:

• Provide more detail about the coverage and capacity of end-point assessment organisations; specifically, they should set out the coverage by region and how many apprenticeship standards have only one assessment organisation.
• Set out what they will do to streamline and strengthen quality assurance arrangements in order to give greater confidence that end-point assessments are robust, fair and consistent.

Evidence relating to this Report can be found here.

Committee membership: Meg Hillier – Chair (Labour (Co-op), Hackney South and Shoreditch), Douglas Chapman (Scottish National Party, Dunfermline and West Fife), Sir Geoffrey Clifton-Brown (Conservative, The Cotswolds), Chris Davies (Conservative, Brecon and Radnorshire), Chris Evans (Labour (Co-op), Islwyn), Caroline Flint (Labour, Don Valley), Robert Jenrick (Conservative, Newark), Shabana Mahmood (Labour, Birmingham Ladywood), Nigel Mills (Conservative, Amber Valley), Layla Moran (Liberal Democrat, Oxford West and Abingdon), Stephen Morgan (Labour, Portsmouth South), Anne Marie Morris (Conservative, Newton Abbot), Bridget Phillipson (Labour, Houghton and Sunderland South), Lee Rowley (Conservative, North East Derbyshire), Gareth Snell (Labour (Co-op), Stoke-on-Trent Central), Anne-Marie Trevelyan (Conservative, Berwick-upon-Tweed)