David Way Talks Good News and Greater Flexibility

Apprenticeships and the Levy – Digging Deep for Good News and Creating the Financial Headroom for Greater Flexibility.

Amid calls from the sector for greater transparency about the operation of the Levy, we have seen two reports that shine some light into this very important aspect of Apprenticeships. The first analysis of employer uptake and barriers comes from City and Guilds. The second is the Government’s own Apprenticeships and Levy report.

These reports are invaluable since the future of the Levy is far from certain, with the Government’s own review underway and the NAO report due soon. It is worth remembering that the Levy was introduced not only to fill a funding gap that austerity measures had necessitated but also to boost Apprenticeship investment and numbers. There are a few Levy schemes elsewhere in the world but I have yet to identify one that closely resembles our arrangements.

The City and Guilds report demonstrates that the Levy has been much more successful at raising revenue than it has been at increasing investment in Apprenticeships. This is unsurprising at this early stage of the Levy’s introduction though the design of the new scheme could have reflected this expected reality and been more sympathetic to employers responding positively to the challenge of introducing or expanding Apprenticeships.

It is clear that large companies are substantially subsidising the training costs of SMEs, where previously Government took on that responsibility. It remains to be seen whether, in the post-austerity period, Government takes back that responsibility.

In these circumstances, it is unsurprising that employers are looking for other ways in which they can use the Levy flexibly. This creates an absolute tension for Government between funding and policy needs. Allowing employers to use their Levy funds on activities directly supporting Apprenticeships or related skills activity sits well with the objective of boosting investment, outcomes and productivity. In recent years, this might have been referred to as a no-brainer.

Unfortunately, the Government cannot afford to let that happen because it doesn’t have the future funds to do so. Nor can it lower the completely arbitrary payroll threshold in the near future while employer concerns remain about the Levy and their inability yet to recoup much of what is paid in. This may change of course but for now the Government is in a bind of its own making. This has unfortunately come at a time when the post-Brexit labour force requires ‘Skills, Skills, Skills’ as recruiting out of shortages becomes less viable and training has to be the default choice.

The official statistical return from the Government paints a gloomy headline picture for the number of Apprenticeships and there are few signs that the Manifesto commitment of 3 million more Apprenticeship starts by 2020 will be achieved, though the Autumn peak of starts in 2018 seems to be significantly up on the previous year.

Most commentators have consistently and rightly argued that a successful Apprenticeship programme should be judged by a wider range of qualitative measures.  There is better news for them with a number of positive indicators in the report. The proportion of Apprentices taking Advanced levels is greater than those at Intermediate level. Public sector Apprenticeships are growing and having a positive impact on uptake by ethnic minorities and on Higher Apprenticeships. Apprenticeships are taking longer which is generally seen as linked to greater learning and quality. The expansion of Higher and Degree Apprenticeships is gathering much-needed pace as is the introduction of employer-led Apprenticeship standards.

It is very clear that there is still much to do to transform Apprenticeships and to see this reflected in uptake, especially by those leaving school or college at 18. The previous Government commitment that all young people leaving school or college should either be going to University or into a job with an Apprenticeship seems to have become more of an occasional aspiration than a firm policy.

The need for further transformation of Apprenticeships is reaffirmed in the Government’s response to the Education Committee report and by the comments from the Institute for Apprenticeships. The latter must be keen for Government to resolve funding pressures so that they can build their reputation for improving quality rather than be forced into cost-cutting exercises that are more likely to have the opposite effect.

The underlying improvements set out in the Government’s statistical report should boost the confidence of Treasury that further public investment in Apprenticeships would generate a good return. Treasury’s attitude is critical at any time but especially now with spending plans for Departments expected to show some easing in the next round.

While traditional DfE metrics are important, the key to unlocking Treasury coffers is the impact that they have on productivity which is where the Treasury’s real interest lies alongside managing public finances.

It is therefore vital, as part of this growing call for transparency in Apprenticeships, that we see the impact of the current system, as the reforms kick in, on key business measures including retention, skills gaps and productivity.

In addition, DfE must reach across Government to align its Apprenticeship ambitions and business case with other key sectors and occupations for the Industrial Strategy, especially those delivering the massive infrastructure projects, including in transport, construction, digital and energy. To win more resources, DfE must punch above its weight and show that its Apprenticeship offer is vital to the workforce resilience strategies of all sectors critical to the country’s future economic prosperity. Sector bodies that have evolved beyond their traditional skills roles can be very helpful interlocutors.

Ministers have said that the Levy needs to work for employers. This must mean employers are able to recover a growing share of the Levy funds they have invested. For these flexibilities to be affordable, either more employers are brought into Levy arrangements by reducing the threshold or Treasury needs to be convinced of the return on greater public investment. Research that looks at business returns will be essential as will the introduction of funding flexibilities that overcome specific critical business skills gaps.

We should get a clearer sense of how the wind is blowing on future public investment into Apprenticeships when we see the published NAO report. Treasury will only want to invest in Apprenticeships if they have quality at their heart and they are driving the outcomes that employers, individuals and the economy need. Extra targeted investment in a reformed programme will be vital as employers seek to take the opportunities in the post-Brexit era.

David Way CBE

Apprenticeship Ambassador for PeoplePlus and editor of ‘A Race to the Top: How to achieve three million more Apprenticeships by 2020.

 



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