While PAYE has figured heavily in coverage of the government’s apprenticeship funding proposals, the other option of an apprenticeship credit account has enjoyed less focus. Mark Corney looks at the latter option.

An interesting juncture has been reached on apprenticeship funding reform now the technical consultation has closed.

Employers are urging the Coalition to ‘get the mechanism right’ if it decides to route public grant funding for post-16 apprenticeships to each employer.

This is exactly the message to send to ministers and officials at this stage in the policy-making process, but a stronger proposal is needed.

Presumably the Coalition will finally announce its choice between the PAYE and the apprenticeship credit models in the Autumn Statement, due in early December.

But employers and their representative bodies should be calling on the government to publish a ‘technical specification’ consultation on the PAYE and apprenticeship credit models before parliamentary recess on July 22 with a closing date three months later.

The case is simple.

Employers and other stakeholders have had more than twelve months to become acquainted with the PAYE model and through the technical consultation appreciate the problems facing employers who require a reimbursement from Her Majesty’s Revenue and Customs (HMRC) if the grant funding for apprenticeships exceeds their monthly PAYE/NI payment.

The reimbursement systems looks good on paper but there is scepticism about whether HMRC and the Treasury can make it work.

The fact is the Coalition issued an unfair and unbalanced ‘technical funding consultation’.

Unfair because more time has been available to assess the PAYE model than the apprenticeship aredit model, and unbalanced because there was insufficient explanation of how the Apprenticeship Credit model would work operationally.

Indeed, the key dimension of the apprenticeship credit model was only surfacing late in the consultation. The Coalition has asked for views on an apprenticeship credit ‘account’ model, with the key word being neither apprenticeship nor credit but account.

Each employer would have an account into which they pay their contribution in cash, which then triggers the government contribution.

From the employer perspective, if a cash contribution led to being overdrawn on their general account they could face bank charges.

Employers will want to know that they can retrieve their cash instantaneously if the apprentice fails to turn up after registration or leaves before completing because they find a job elsewhere, becomes injured or ill, or dies.

To limit their financial exposure employers will also want to release their cash contribution by instalments. After all, the government is expecting to release its contribution in relation to 80 per cent on programme and 20 per cent on achievement.

Indeed, the response to the proposition that employers need to ‘put some skin in the game’ could be ‘we will when you do’.

Critically, the government contribution will be a ‘credit’ released at the point of purchase, hence the title ‘apprenticeship credit’ model. There is no way the Treasury is going to put cash into the account for any length of time which might not be used for apprenticeship training.

Each employer will have a single apprenticeship account. Yet, employers with more than one apprentice will need a separate budget line for each because their own cash contribution will vary according to the sector standard — engineering is more expensive than business administration, and age of the apprentice. The cash balance on the account will be almost meaningless for employers with two or more apprentices.

Finally, there is the question of the agency that will manage the apprenticeship account system. An employer with more than one apprentice in two different sectors will only want to deal with one account managing agency. The Student Loans Company, HMRC or a single sector body or local enterprise partnership could fulfil this national agency role.

And yet, all these issues have a familiar ring to them. They applied to Individual Learning Accounts. Then the goal was to route public grant funding through to each individual via an account. Today, the goal is to route public grant funding through to each employer via an account. This has not been attempted before in post-16 education and skills policy.

Mark Corney, Independent consultant