Stop levy funding for all level 6 and 7 apprenticeships, demands training providers

All level six and seven apprenticeships, including those with integrated degrees, should be removed from the scope of levy funding to relieve mounting pressure on the budget, the Association of Employment and Learning Providers has said.

The radical proposal comes just weeks after the National Audit Office warned there is a “clear risk” the apprenticeship programme is not financially sustainable after finding levy payers are “developing and choosing more expensive standards at higher levels than was expected”.

After the Institute for Apprenticeships and Technical Education revealed modelling that the apprenticeships budget for England could be overspent by £0.5 billion this year, rising to £1.5 billion during 2021/22, the NAO suggested the government should think about reducing the level of public funding for certain types of apprenticeship.

The AELP estimates that up to £573 million has been committed to level 6 and 7 apprenticeship starts since August 2016, and the association’s chief executive Mark Dawe has warned: “Unless the government decides it wants to levy more money from employers, the apprenticeship budget will soon be exhausted and therefore a new way of funding the highest level apprenticeships has to be found.”

The association, which represents over 900 training providers, recommends level 6 and 7 apprenticeships, which are equivalent to a bachelor’s and master’s degree respectively, should instead be funded by employers, a student loan to the apprentice, and any government grant which is available to full-time HE students.

But Robert Halfon, the chair of the Commons education select committee and a degree apprenticeships champion, has warned doing this would be a “retrograde step”.

“Degree apprenticeships help build the prestige of apprenticeships, meet our high skills deficit and provide a ladder of opportunity for the disadvantaged to do higher apprenticeships, without taking on the burden of a huge student loan,” he said.

“Students earn while they earn, have not debt and have a good skilled job at the end. Degree apprenticeships should be a strategic priority of the government, with the aim of getting 50 per cent of students having the chance to complete them.

“Far from discouraging degree apprenticeships, we should be rocket boosting them.”

The AELP argued degree apprenticeships will not be diminished by the proposed change, as there were 135,000 employer-funded degree apprenticeships in existence before the levy system was introduced.

The recommendation is part of a submission paper to the Department for Education, titled ‘A Sustainable Future Apprenticeship Funding Model’.

The submission suggests the government should also consider reducing or removing the payroll threshold companies have to pass before they pay the levy and increasing the amount companies that pay towards it.

Companies currently have to cross a threshold of spending £3 million on payroll, before they have to pay the levy, and those that do pay 0.5 per cent of their payroll bill towards it.

The recommendations come ahead of a Public Accounts Committee hearing on the apprenticeships system with government officials in the House of Commons on Monday.

It comes at a time of increasing pressure for degree apprenticeships, after skills minister Anne Milton said in December the government “needs to look at whether we continue to fund apprenticeships for people who are already in work, people doing second degrees”.

Milton said the apprenticeship system should be about progressing people with level two qualifications onto level three and four apprenticeships.

The minister has also said, in reference to the rise in degree apprenticeship starts,  that fears of a “middle-class grab” on apprenticeships are valid. 

Ofsted chief inspector Amanda Spielman added her voice when she said that month the inspectorate was concerned about levy funds being spent on higher level apprenticeships at the expense of young people on lower levels.

The Department for Education is currently researching what’s behind the drop in level two apprenticeships, as the latest statistics show numbers have fallen by more than a third in the space of a year.

To address these concerns, the AELP has previously called on the government to fully-fund level 2 and 3 apprenticeships and ring-fence at least £1 billion every year to small-to-medium enterprises which do not pay the levy, to spend on apprenticeships.

Last month, FE Week revealed that the non-levy funding for providers to train apprentices from small businesses had already started to run dry and some were having to turn apprentices away, but it would appear the government has no cash left in the system to ease the situation.

Dawe said the government “seems to have lost sight of the importance of SMEs offering apprenticeships when they have been the bedrock of the programme over the last two decades”.

A Department for Education spokesperson said:  “The apprenticeship programme is designed to be employer-led, so that business can choose the type and level of training that they require to meet their skills needs.

“Higher-level apprenticeships give employers the opportunity to strengthen and expand their training in a way they may not have done previously.

“However, we are aware of the NAO’s report and we will look carefully at this ahead of the Spending Review.”