The political appetite for apprenticeships has never been greater, and neither has the pressure on funding — so where could the money for this booming programme come from, asks Richard Atkins.
Politicians in all of the political parties are telling us what a great success apprenticeships are and how they must be increased during the next Parliament, particularly up to the age of 24.
Civil servants, meanwhile, are preparing dossiers for new Ministers, giving them options for achieving their manifesto promises, including how the new government can grow apprenticeship numbers. So, what might the options be?
Firstly, we will need more young people, who are employment-ready, to choose the apprenticeship route.
Much better careers education, planned work experience and high quality vocational options for young people from age 14 will be essential if more young people are to be persuaded that the work-based apprenticeship route is right for them.
A comprehensive pre-apprenticeship programme for 16 to 24-year-olds, building on traineeships, will also be required. Secondly, we will need many more employers to offer more apprenticeship opportunities in their businesses if we are to meet the politicians’ huge targets.
The National Insurance exemption for apprentices aged under 25 included in the Chancellor’s December 2014 budget was a good start in incentivising employers to create more apprenticeship jobs.
But if we manage to achieve all of this, and create lots more apprenticeships, where is the money going to come from to fund them? Next year’s budget of £770m is already largely committed to existing and planned numbers with the current providers.
If we are going to expand apprenticeships significantly then new ways of funding them will need to be introduced in the age of austerity
Soon after I left school in the 1970s I joined a large retail and distribution business which put me through a series of planned training programmes with both on-the-job and off-the-job elements.
At various times over three years I was sent on day release and block release to colleges in London to gain relevant vocational qualifications alongside work-based training.
The company invested heavily in training because it was registered with and paid a financial levy to the Distributive Industries Training Board, based on its payroll costs, and could earn that levy back by investing in staff training of an appropriate standard and quality.
The company’s target was to earn back at least 110 per cent of the amount it paid out through the levy, giving it a real incentive to invest in internal and external staff training and development.
Indeed, like many large businesses my employer over trained, providing skilled staff for other businesses in the same sector. I notice that in the UKCES 2014 Employer Perspectives Survey of 18,000 businesses only 69 per cent said that they train their staff, and less than 40 per cent provide both internal and external training.
In the construction industry, an Industry Training Board and a levy system have been retained ever since the 1960s, and systematic sector-wide training including national qualifications is embedded in the structure of this sector.
For the past 25 years or so it has been unfashionable to argue that the training levy system should be re-introduced in this country, particularly when governments could afford to fund apprenticeships, train to gain and other schemes.
One of the key arguments against the levy has been that it would produce a burdensome bureaucracy for employers to deal with. Looking at the Construction Industry Training Board website recently, I saw that employers can register electronically, and then access a range of training services funded via the levy. This looks no more bureaucratic than several other recently proposed schemes, such as vouchers for apprenticeships or linking apprenticeship funding to HMRC for businesses.
If we are going to expand apprenticeships significantly then new ways of funding them will need to be introduced in the age of austerity.
The training levy system has been heavily criticised at times over the past 30 years but I would argue the next government should re-consider because the levy could help fund a major growth in apprenticeships while also increasing the percentage of employers who train their staff. It might also increase employer ownership of apprenticeships, because “he who pays the piper calls the tune.”