New EDSK report on employer investment in skills and the apprenticeship levy

With the looming prospect of a recession adding to the cost-of-living crisis, a new report from the education think tank EDSK finds that staff shortages across the economy will not be addressed until central government ends its reliance on top-down national programmes and initiatives. The report – called ‘Changing course(s)’ – proposes that at least £1.1 billion a year is given to devolved areas of England and local communities to help them tackle skills shortages and drive economic growth.

In light of past failures with top-down skills programmes and initiatives, this report concludes that a new bottom-up approach is needed to create a more collaborative culture around investment in skills that could boost the productivity and growth of UK plc. The EDSK report makes the following recommendations to kickstart a revolution in reskilling and retraining once the cost-of-living and inflation crisis has begun to subside:

• The Government should convert the apprenticeship levy into an ‘Apprenticeships and Skills Levy’ that will support a ‘National Apprenticeship Fund’ and a revamped National Skills Fund.
• The National Apprenticeship Fund will support the delivery of high-quality apprenticeships and pre-apprenticeship training, with small employers receiving cash grants of up to £5,000 for recruiting apprentices.
• The existing National Skills Fund will be converted into a £1.1 billion funding pot that is handed directly to devolved areas and local communities to reskill and upskill adults as well as supporting collaborative training projects between employers.
• The Government should introduce a new ‘Right to Paid Training Leave’ that gives employees the legal right to five days of paid leave a year to undertake a skills or training course, with smaller employers and those employing lower-skilled workers receiving grants of up to £800 to cover the cost of any absent employees.

The report shows that the government’s desire to control almost every aspect of skills and training programmes has hindered the recovery from the pandemic-induced recession. Recent investments have some merit, such as £1.6 billion for the National Skills Fund that includes £60 million a year for Skills Bootcamps, yet the government continues to dictate which qualifications and industry sectors are covered by such schemes almost irrespective of the skills and training gaps faced by different cities, towns and regions. Even the funding that has technically been devolved to Combined Authorities such as the Adult Education Budget are still underpinned by centralised rules about which individuals are eligible for support and what training they can receive, depriving the devolved authorities of the opportunity to shape provision around the needs of local learners.

The report also found no evidence that the apprenticeship levy has led to greater investment in skills by employers. Because the levy only funds apprenticeships, employers have no flexibility over which types of training they can deliver. As a result, many employers have resorted to rebadging existing training courses as an ‘apprenticeship’ to draw down the funds generated by the levy, which has led to significant deadweight costs without contributing to economic growth or productivity. The apprenticeship levy is also delivering poor value-for-money because it encourages employers to search for expensive training courses that consume more funds from the levy, even if cheaper and better alternatives are available. For example, the popular yet controversial ‘Senior leader apprenticeship’ aimed at CEOs and CFOs costs £14,000 through the levy, even though similar qualifications are available outside of an apprenticeship for just £4,000.

In addition, this report reveals that skills shortages are being exacerbated by the lack of support for individual employees to develop their own skills and knowledge. The ‘Advanced Learner Loans’ for Further Education courses are supposed to operate like Higher Education student loans but only attract a tiny number of learners. Meanwhile, the UK remains an international outlier by not offering workers the legal right to paid time off for training or studying, in contrast to many countries across Europe that offer training leave of typically four to five days a year during which employees are entitled to their full salary.

Tom Richmond, director of EDSK and lead author of the report, said:

“The first step in fixing a policy problem is admitting that you have one. For years, if not decades, central government has churned out endless programmes and initiatives aimed at increasing training and skills investment across the economy, only for the amount of training offered by employers to continue to fall. Now that we are confronted with an economic downturn, stagnant productivity and a cost-of-living crisis, we cannot waste precious time repeating past mistakes.

“If ministers are serious about tackling staff shortages, they need to empower local areas and individual employees as well as employers to drive forward investment in training and development. This will require a new emphasis on coherent and coordinated solutions created by, and delivered by, local partnerships of employers, learners, combined authorities, training providers and other local stakeholders. Devolution cannot provide all the answers to the enduring problems with our skills and training system, but it can help to finally ask some of the right questions.”

Sector Reaction:

Matt Robinson, Commercial Director, Lifetime said:

“The EDSK think tank report made for interesting reading. Whilst this approach could draw more SME employers into apprenticeships and increase the volume of new starts, small businesses are under tremendous cost pressure from rising energy prices and ever-increasing supply chain costs. Potentially imposing the levy on smaller businesses would be another pressure and potentially force apprenticeships in environments where it would be difficult to provide off the job and mentor support effectively. 

“Instead, we would welcome the ability for large employers to transfer funds more easily to smaller businesses by transferring directly between digital accounts. Currently, the mechanism for SMEs to secure funding and large employers to transfer funds is complex and provides a barrier to employers. 

“Rather than a review or overhaul of the levy, at this point we would encourage a period of stability for the apprenticeship sector that maintains the current levy policy. The levy has positively brought more organisations into the apprenticeship market and helped to establish some high-quality apprenticeship programmes, which would not have happened without it. “