Proposals to reform the apprenticeship funding system have been welcomed by former Dragons’ Den investor Doug Richard, nine months after his own review called for tax breaks for employers.
Three funding ‘models’ have been proposed by the Department for Business, Innovation and Skills, the first of which is for a direct payment model where businesses register apprentices and claim government funding online.
The second is for a PAYE payment model in which businesses register apprentices online and then recover government funding through their PAYE return.
The third option, although all could be amended as part of the consultation, is a provider payment model where government funding continues to be paid to training providers, but it can only be drawn down when the employer’s financial contribution towards training has been received.
They are part of a ten-week government consultation ending on October 1 and come around nine months after the Richard Review looked at how apprenticeships in England could meet the needs of the economy.
It concluded the National Insurance or tax credit system should be used to give employers breaks as payment for training. Mr Richard said at the time such changes should be “at the heart” of apprenticeship reform.
“The funding models put forward by the Department for Business, Innovation and Skills (BIS) is precisely the steps needed to encourage more businesses to take on apprenticeships and view young people as the valuable resource they are,” said Mr Richard.
“By giving more power to employers, the new schemes will help businesses big and small have more of a say on the training their employees receive, meaning more efficient businesses and better training for apprentices.”
Neil Carberry, CBI director of education and skills, said: “This could be a watershed moment for apprenticeships, putting employers genuinely in the driving seat for the first time.
“A radical overhaul is long overdue and business has been arguing loudly for targeting funding directly through employers.
“The new system must keep red tape to a minimum if we want more firms to take on apprentices. A skills tax credit is by far the best option on paper, but needs detailed piloting to ensure the transition is smooth.”
However, there were words of caution from John Allan, the Federation of Small Businesses’ national chairman; Martin Doel, the Association of Colleges chief executive; and also Stewart Segal, the Association of Employment and Learning Providers’ chief executive.
“Getting any change to do with funding, or wider issues around apprenticeships, right is crucial,” said Mr Allan, adding: “Therefore we strongly urge government to take its time with any reforms so that they get it right first time to create a system that will last for decades to come.”
Mr Doel said: “I question the need to make further significant changes to apprenticeship funding in the middle of a recession with youth unemployment at an all-time high.”
And Mr Segal said: “We have considerable doubts over whether the PAYE proposal would actually bring more employers into the apprenticeship programme.
“In fact, it might put smaller businesses off. The co-funding option [model 3] might have merit if it properly recognises the contributions which employers make towards an apprentice’s framework achievement.”
Shadow Skills Minister Gordon Marsden said: “We will want to examine carefully all three options.
“What the government has proposed inevitably delays implementing Richard reforms and, depending which option they go for, could depart substantially from them.
“There are also no questions about the ability of small businesses to put money up front bearing in mind we need to expand their take-up of apprentices substantially.”
The first two funding models would both need the “time-consuming” construction of a new online system, but could be in place by 2016 “at the earliest”.
However, common to each is for “the employer and provider negotiating the content and price of eligible apprenticeship training”. It would replace a system of government-set national funding rates.
Skills Minister Matthew Hancock said: “By radically reforming the funding system we will allow employers to agree with training providers the content and price of training ensuring greater competition both on quality and on price.”
Responses to the consultation should be sent to email@example.com by October 1. Visit www.gov.uk/government/news/government-sets-out-radical-plans-to-shake-up-apprenticeship-funding for further details.