Funding rates are unreliable
The funding rates used to pay training providers for delivering an apprenticeship are not based on robust information, according to the NAO.
The NAO says the Skills Funding Agency (SFA) and NAS have set tariffs without “reliable evidence” to support estimated training costs.
The ‘Adult Apprenticeships’ report states: “The Agency and the Service currently set tariffs without sufficiently robust information on the cost of provision.
“This may mean that some frameworks have become more financially attractive to offer than others.”
The NAO say both the SFA and NAS are unable to judge the extent to which providers may be generating significant profits or losses as a result of inaccurate rates.
Skewed funding rates on individual frameworks have led to some employers not paying the expected contributions towards training providers’ costs.
The report adds: “Employers pay apprentices’ wages and deliver on-the-job training, but some are not paying the expected contributions towards training providers’ costs.
“Employers are required to contribute towards the cost of adult apprenticeships, and the funding rates paid to providers assume employers contribute at least half of the training costs, either in cash or ‘in kind’.
“However, evidence suggests that some employers do not pay the required contributions.”
£1.2bn – Programme cost in 2010‑11, including £451 million for adults
Simon Waugh, chief executive of the NAS, says the government is devoted to raising quality in the programme and driving out poor performance.
“We are working with the Skills Funding Agency and other partners to raise the bar on quality, recognise excellence, and drive out poor performance; reducing unnecessary red-tape and bureaucracy for those who engage with the Apprenticeship programme,” Mr Waugh said.
The NAO report references a survey, conducted in 2009, which found that 43 per cent of providers choose not to collect fees from employers.
“With full contributions from employers, government funding could deliver more or higher quality apprenticeships for the same cost,” the report states.
Amyas Morse, head of the NAO, said: “It [BIS] needs to target resources more effectively; confirm the training provided is in addition to what would have been provided without public support; and make sure that the funding system is informed by robust information on the cost of delivery.”
Adult apprenticeships are good value for money
Adult apprenticeships offer good value for money, but the government needs to focus its resources on industries which offer the best economic returns, a report by the National Audit Office (NAO) claims.
The independent body says the Department for Business, Innovation and Skills (BIS) needs to “set its sights higher” on the apprenticeship programme, despite exceeding all previous expansion targets.
Amyas Morse, head of the NAO, said: “The apprenticeships programme has been providing a good return for public spending.
“Nevertheless, the Department should set its sights higher in order to get better value from the £0.5 billion and rising now spent on adult apprenticeships each year.”
The apprenticeship programme has increased by 140 per cent during the last five years, of which 68 per cent were learners aged 25 or above.
Previous recruitment targets set by government were smashed, at least in part, by the 182,100 new adult apprenticeship starts in 2010/11.
David Hughes, chief executive of NIACE, described the increase in adult apprenticeships as “great news”.
He said: “NIACE is pleased that the NAO confirms BIS’ view of there being a public value of adult apprenticeships and endorses their prioritisation.”
Julian Gravatt, assistant chief executive of the Association of Colleges (AoC), added: “This is a balanced report from the NAO, which confirms that apprenticeships are valuable for young adults, that the expansion in adult apprenticeships has been well managed, but that action is needed in a number of areas.”
However, the NAO report also criticises BIS and the National Apprenticeship Service (NAS) for not targeting the higher level qualifications, frameworks or age groups which will have the biggest impact on the economy.
The report states: “The Department needs robust evidence to identify which qualifications are having most impact and where the additionality delivered against public funding is greatest.
“The Department should use this information to decide where to target its resources. It has recently announced its intention to do so, though has yet to publish details.”
More than 80 per cent of the expansion between 2006/07 and 2010/11 was covered by 10 apprenticeship occupations, with health and social care, customer service and retail coming out on top.
John Hayes MP, minister of state for further education, skills and lifelong learning, said: “The report rightly identifies a need to prioritise investment where returns are greatest, and that is what the government is doing.
“We will continue to drive improvement by developing new higher level apprenticeships, giving training providers more freedom to meet the needs of local businesses, reducing bureaucracy and making financial incentives available to small firms hiring their first apprentices.”
The unknown level of ‘dead-weight’
The value of adult apprenticeships is being exposed to significant dead-weight, according to the NAO.
The NAO says “optimistic” figures produced by BIS assume all of the training delivered by apprenticeships would not have occurred without public support.
The criticism follows statistics by BIS, reported in March 2011, which estimate that adult apprenticeships deliver a return of roughly £28 for every £1 of public spending.
The NAO says the programme produces a return closer to £18 when considering all levels of an apprenticeship.
The NAO report states: “The difference between our figures and those of the Department reflects the sensitivity of the calculations to the underlying assumptions, in particular our respective assessments of the available evidence on the potential wider impact of the training on the productivity of the workforce.”
Skills minister John Hayes said he was pleased with the NAO estimates.
53,110 starts – in customer service – most popular apprenticeship subject, 2010/11
“I am delighted that the NAO has recognised the progress we have made and that they identify the extraordinary economic benefits of apprenticeships,” Mr Hayes said.
“Few, if any, other government programmes produce anything like the return of £18 for every £1 spent let alone the still greater return that our economists estimate.”
The NAO says BIS has failed to assess the level of additionality (the extent to which public funding results in training that would “not otherwise have occurred) being delivered by the apprenticeship programme.
The report states: “The Department assumes that, for economic returns to apprenticeships, all public funding achieves additionality, but lacks data to support this; therefore any reduction in additionality would result in an equivalent reduction in the economic returns.”
The NAO says BIS has an evaluation in progress which will help them to measure the additionality of the apprenticeship programme, with results available in early 2012.
One in five adult apprenticeships under six months
A growing number of adult apprenticeships are being delivered in under half a year, the NAO has revealed.
The report says 34,600 apprenticeships were delivered by providers in less than six months in 2010/11, making up nearly a fifth of completions for learners aged 25 and above.
A further 6,200 (three per cent of adult completions) were found to be less than three months long.
The NAO says the rapid expansion of the apprenticeship programme “presents risks that need to be managed.”
“In four of the top ten fastest-expanding subjects around a quarter or more apprentices completed in six months or less (2010/11),” the report states.
“In one of the fastest-growing subjects, IT and telecoms professionals, over two-thirds (68 per cent) completed in under six months.”
The NAO say SFA and NAS are currently investigating 87 providers thought to be delivering ‘short duration’ apprenticeships and have said they will be checking to see if providers are complying with their contractual obligations, and will close down provision if necessary.
Simon Waugh, chief executive of NAS, said: “We will continue to strive to ensure that Apprenticeships represent the best value for money for the investment made in them by government and by employers.”