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Policy, Scholarly Activity Sandra Booth

Occasional Briefing Paper by Sandra Booth Director of Policy and External Relations

Sources: FE Week, DfE, DCMS, Creative Skillset and NatCen.

The context: The Apprenticeship Levy one year on – Targets not being met

In its 2015 election manifesto, the Conservatives – under former leader David Cameron – promised to “support three million new apprenticeships, so young people acquire the skills to succeed”.
This was reaffirmed in 2017 under Theresa May’s leadership, who pledged to “deliver our commitment to create 3 million apprenticeships for young people by 2020 and in doing so we will drive up the quality of apprenticeships to ensure they deliver the skills employers need.”

According to FE Week’s analysis of the latest figures, apprenticeship starts are 414,300, or 23 per cent, down from where they need to be to hit the target.
There have been 1,435,700 starts since May 2015, when the target was launched – meaning a further 1,564,300 are needed to reach 3m. With the target end date, in April 2020, that’s an average of 68,013 starts per month – more than three times the number so far.
The 22,300 starts provisionally recorded for May 2018 mark the end of falling year-on-year starts. The starts remain below their pre-levy number of 36,700 in May 2016.

Looking beyond the headline data there has been a shift towards levels 3 and 4 and above, with falls in the number of over 25s on level 2 apprenticeships. While it is too early to determine whether these shifts represent definite trends it is worth noting the impact they may have on the levy pot available for higher and degree level apprenticeships, with higher levels often entailing higher delivery costs.

There is still a popular perception that this is an either/or option- Apprenticeship or Degree?- and not that there is a dual award/approach whereby Universities offer degree apprenticeships in partnerships with employers and collaborative arrangements with FE and other training providers to provide progression routes into higher education.

On Friday 17 August 2018, the Guardian ran an opinion piece on the alternatives for students who are not going on to study at university. This piece questioned the options available for those who will not be pursuing academic routes.DfE quoted ‘’Full-time academic degrees at our world class universities will be right for some people, but we do not want one route to be considered superior to any other. That’s why we are transforming technical education to put it on a par with our academic system’’. DfE are working to improve the quality of apprenticeships and are also working to roll out the new T Level technical qualification routes for 2020.

Alongside this, the proportion of young people who say that going to university is important to get on in life has also fallen consistently in recent years, from a high of 86% in 2013, down to 75% this year. While higher education remains the surest route to a successful career, interest could be waning as a university route is not necessarily the best option for everyone. Of those not planning to attend university, 58% cite not enjoying that type of learning and preferring a more practical style. Notably,interest among young people in completing an apprenticeship has risen substantially over the last four years, from 55% to 64%. However, the number of degree and higher level apprenticeships available to young people still remains disappointingly low, despite the introduction of the Apprenticeships Levy, Trailblazers, early adopters in the Higher Education sector and the drive to reach the ambitious government target of 3 million new apprenticeships.

There are over 100 universities on the Register of Apprenticeship Training Providers able to offer apprenticeships – including 15 members of the Russell Group. There are now 60 approved apprenticeships at Level 6-7 (degree level) including 46 degree apprenticeships – which include a degree or master’s degree element.

The government is in the process of reforming (will this mean simplifying?)the apprenticeship system and funding bands.

Quick recap: All new apprenticeships have to be delivered against a formal ‘standard’, supported by at least ten employers and approved by the Institute for Apprenticeships (IfA). Each standard is placed in a set funding band, intended to reflect the associated training costs. The funding band sets the maximum training cost that can be covered.
Introducing the mandatory apprenticeship levy for employers with annual wage bill of over £3m. Employers in this category pay 0.5% of the amount above the £3m (so an employer with a pay bill of £4m would pay 0.5% x £1m = £5k).
Those levy payers can then use the money they have paid into the levy to pay for the training element of the cost of an apprentice – typically the cost of sending them to college or private sector training provider (apprentice wages cannot be paid from levy funds). So the full cost of the college / other training provider costs can be covered by levy funds within certain maximums.
For employers with an annual wage bill of less than £3m, at least 90% of the cost of the college / other training provider cost is covered by the Government and you have to pay the remaining 10%. This is also subject to certain maximums.

Issues for the creative industries.

Apprenticeship levy payments from the creative industries are forecast to raise up to £75 million p.a.. However, at present, the available evidence suggests there is little prospect of the industry being able to spend anything like that amount on apprenticeships.

Even larger companies that pay the levy often don’t have the headcount which would allow them to recruit apprentices in the numbers they would need to in order to recoup their levy payments. Furthermore, they often struggle to meet the 12 month contract rule because, in filmmaking for example, the production is managed via a special purpose vehicle which is not normally engaged in constant production over a full 12 months. But most creative industry companies are small – 95% of UK creative businesses employ 10 or fewer people (source: DCMS Sectors Economic Estimates, DCMS 2016).

Companies of that size who work mainly on short-term projects often say that they can’t afford to meet some of the apprenticeship rules, particularly the requirement for a minimum 12 month contract and 20% off the job learning. The protections that those rules provide to apprentices are important but we need to avoid imposing requirements on small companies who can’t meet those requirements.
Most creative industry companies are small – 95% of UK creative businesses employ ten or fewer people (source: DCMS Sectors Economic Estimates, DCMS 2016). Companies of that size who work mainly on short-term projects often say that they can’t afford to meet some of the apprenticeship rules, particularly the requirement for a minimum 12 month contract and 20% off the job learning. The protections that those rules provide to apprentices are important but we need to avoid imposing requirements on small companies who can’t meet those requirements.

It may be that additional flexibilities in the rules could have a positive impact (more employers recruiting more apprentices?) but we need the evidence that these benefits would indeed occur.