The #Apprenticeship Levy – if rationing is to be introduced, let’s get it right

There has been recent scrutiny about the forecasted overspend of the levy.

UVAC has been predicting this for some time and now the Institute (IfATE) and the National Audit Office have confirmed this is an issue.

We are now in a situation where ‘proposals’ for a way forward are being put forward, so here is a view from the perspective of an organisation that wants the levy to be used to raise productivity, enhance social mobility and support the delivery of high quality public services.

Bizarre Proposals

We’ve had some fairly curious proposals on how to manage such an over spend.

AELP has called for an end to using the levy to fund level 6 and 7 and degree apprenticeships.

So as UVAC has said on many occasions, it is the case that AELP wants to stop police forces using their levy payments to fund the police constable degree apprenticeship to train new police officers and prevent the NHS from training new nurses through a degree apprenticeship.

In the private sector, according to AELP, there should be no funding for level 6 and 7 engineering, science and digital apprenticeships.

Instead there would be a prioritisation of funding for low-level apprenticeships – presumably based on some strategy for a low skill, low productivity, low pay economy?

Ofsted’s position is even more curious.

As a representative body, I understand, why AELP argues in favour of provision delivered by its independent training provider members who dominate the lower level apprenticeship market.

Ofsted, as an independent and impartial inspectorate, should be censored for arguing that employers are spending too much on higher level apprenticeships and too little on apprenticeships for 16 – 19 year-olds without a full level 2 qualification.

It is worth reminding ourselves that apprenticeship in 2019 is not an FE or HE led programme; apprenticeships today are an employer led productivity programme.

The apprenticeship levy was not introduced to pay for school failure, where a third of young people do not achieve at the necessary lower secondary qualification level after 11 years of compulsory education.

Government and employers should make it clear – Ofsted should raise its game and not expect employers to pick up the bill for the failure of the school system it regulates.

Employers must be allowed to spend their levy payments on the apprenticeships their organisations need, rather than be forced by Ofsted to use apprenticeships they do not need.

So what would be a sensible way forward?

I would suggest the debate is shaped by three principles:

1. Decisions on funding should be based on the impact that specific apprenticeships have on productivity and social mobility – funding should be used in the best way possible to ensure each £ raised by the levy has the maximum impact on productivity and social mobility
2. Quality should always trump quantity – Ministers have largely accepted this argument, but with adverse press coverage and numerical targets there is always a risk that numbers will remain the key measure for some
3. Employers NOT providers, intermediaries or Government agencies should determine where apprenticeships should be developed and used – Government rightly put employers front and centre of decision making

In terms of what the Department for Education and IfATE should do? Firstly they need to consult with employers and providers openly.

I would like to offer a few suggestions here too:

Abolish the over generous features of the current system

Why for example do levy paying employers need an extra 10% Government top-up paid into their apprenticeship accounts?

For non-levy paying employers the current 10% co-investment rule (and from 1 April 5% co-investment rule) is incredibly generous and clearly unaffordable.

Surely if an apprenticeship is of value, an employer will purchase a programme with a 90% if not a smaller subsidy?

The parameters of the Apprenticeship levy could be changed, but should not be changed

The threshold for paying the levy could be reduced from the current £3m payroll threshold. Alternatively, or additionally the 0.5% levy rate could be increased.

If the apprenticeship system was working effectively then perhaps this would be possible, but given the historic dissatisfaction with the Trailblazer process and the bureaucracy of the apprenticeship system, I doubt this would be fair to or be accepted by employers.

Funding Bands

IfATE has made it clear that funding bands represent the maximum Government contribution to the cost of an apprenticeship. They do not represent true cost, but are determined by criteria relating to cost and affordability.

The IfATE is already rationing funding by recommending funding bands below the cost of actual delivery; the trouble is that no one is quite clear of the basis on which such decisions are made.

The IfATE needs to outline the objectives used in determining funding band recommendations and have a robust, reliable and transparent process.

Here there is a strong argument to say that funding bands should be based on actual cost and employers should be able to recover the total cost of an apprenticeship from their levy payments.

This is, after all, what employers were led to believe they could do when the levy was introduced. The trouble with this argument is that if levy payers spend their entire levy, it leaves nothing for non-levy payers.

So if apprenticeship funding must be rationed, which apprenticeships should be favoured and which should have less support? I would suggest:

Ring Fence the Public Sector Levy Pot

I cannot imagine anyone, with the exception of Ofsted and AELP, arguing that the police, the NHS or local authorities should not be able to fully fund Apprenticeships for police constables, registered nurses and qualified social workers.

Indeed all nursing and healthcare roles at any level should, I would argue, be fully funded. The same would go for local authority roles and for teachers and managers in the public sector.

UVAC has already advocated that the public sector levy pot should be ring fenced – there is no justification for levy payments made by the NHS, police forces or local authorities to be used to fund lower level retail, catering or customer service apprenticeships in small private businesses.

Prioritise Apprenticeships which will Deliver £ for £ the Biggest Impact on Productivity

I do not think anyone, from a productivity perspective, could argue against prioritising STEM apprenticeships. Management apprenticeships are a target for many.

But if we look at the facts, the justification for their funding is undeniable. The Government’s Industrial Strategy is clear that the deficiency of management skills, particularly in small businesses is a major factor explaining the UK’s productivity gap.

Supporting SMEs to use management apprenticeships will pay handsome dividends. Construction, manufacturing, supply chain and transport businesses could make strong arguments for prioritisation.

If apprenticeship is really focused on productivity then provision needs to increasingly shift upwards in levels.

But what about social justice and social mobility? Firstly, prioritising funding for nurses, teachers and social workers fits the agenda. And in terms of fair access this is where the Office for Students role comes in.

It should hold employers and providers to account in terms of ensuring provision is open to and used by individuals from all backgrounds.

Apprenticeships which shouldn’t be prioritised

From a productivity perspective I can’t see any justification to provide funding for the dead weight low level business administration, customer service or retail apprenticeships used by non-levy paying employers.

Indeed, why should the state subsidise 95% of the training costs of chefs or hairdressers in small businesses?

At the very least I would suggest a substantially lower state contribution. And if businesses do not invest in such apprenticeships, this will be far less damaging to the economy and public services than not using the levy to pay for the job roles the economy and public services need.

Arguments that the biggest problem we face is the lack of availability of Level 2 apprenticeships for young people in SMEs are simply odd. So the lack of intermediate apprenticeship provision is a bigger issue than the UK productivity gap?

If the UK is to develop as a high skill, high productivity and high wage economy we need to move away from the historic focus of apprenticeship on level 2 provision; and this is precisely what employers are now doing. We should be honest.

Far too many 16-18 year-olds, have in the past, followed level 2 Apprenticeship programmes in dubious job roles or worse, been “treading water”.

What is set out here is not an argument in favour of prioritising the ‘haves’, rather than the ‘have-nots’. There are often far better options than level 2 Apprenticeships for young people that should and are funded by the public purse – college based technical training, T levels and Traineeships.

Let us celebrate and support the upward movement in apprenticeship and the positive impact this will have on business growth and individual social mobility. The way forward for IfATE, DfE and the Treasury is obvious.

Mandy Crawford-Lee, Director of Policy and Operations, University Vocational Awards Council (UVAC)