Apprenticeship budget overspend: small employers to face cap on starts

Small employers are likely to be capped on the number of apprentices they can employ, as part of the government’s plan to enable all providers to access funding for non-levy payers from January.

Keith Smith, the director of apprenticeships at the Education and Skills Funding Agency, announced today that every firm on the register of apprenticeship training providers will be able to engage with the programmes with small businesses on the digital apprenticeship system from the New Year.

It will more than double the number of providers with direct access to funding for non-levy payers, including most universities.

But recognising the strain on the apprenticeship budget, as first reported by FE Week and followed up by the National Audit Office, there will be restrictions on the number of starts for the employers.

“We’ll think about funding 15,000 or so starts initially through the online service,” Smith told the Association of Employment and Learning Providers conference.

“Over the next few days we’ll give you specific information about that scale of activity and how we’ll manage that on a month by month basis.

“From a provider’s point of view there will be no stop on cap. What we are thinking about is, purely for testing reasons, putting a cap on the number of apprentices per employer. We think that is a sensible way to try and control and test. What we want to see is how the service will operate to scale.

“There will probably be restrictions in relation to the number of transactions per employer rather than the number of providers.”

Smith added that the move to the apprenticeship service will provide “certainty” that funding is “going to be there going forward”.

“We will introduce something called ‘reserve my funding’, which will enable an SME with a provider to access and reserve apprenticeship opportunities into the system and bank that investment to know that their reservation is there, although it will only be held for a period of time,” he explained.

Speaking to FE Week after his speech, Smith said the ESFA will continue to look at the caps going forward, but confirmed there will be no more tendering for non-levy contracts for providers.

Small employers were meant to move onto the apprenticeship system in April 2019 but the agency delayed this by a year to ensure the roll out is successful. At this point it extended non-levy contracts for training providers until March 2020.

Smith said today that providers with current non-levy contracts will have them extended in April 2020, but there is no fixed deadline for when these will end.

“We’re going to now embark on a dual running and transition system,” he told AELP delegates.

“We’ll move from a contract led system to a service led system. There will not be a switch off and on.

“Contracts are currently the primary route for funding small business apprenticeships. Over time we’ll be switching to those being the secondary route and the digital system to the primary route and eventually we’ll switch off those contracts altogether.”

He continued: “If you have a non-levy contract you can continue to train on that contract, but you can also engage new opportunities from the online service. In essence there will be a dual running of the two services concurrently running in parallel.

“We’re not going to put a fixed time frame to how long that transition period works, but what we can give you assurance on is those non-levy contracts will continue to operate for as long as we think you’ll need them before we fully switch them off.

“We are looking at extensions on those contracts, we think that is a very safe and sensible thing to do, but it shouldn’t be confused with some sort of delay of not moving onto the new online service.

“As we go through next year we will start to think how we’ll scale down those contracts and scale up the online service.”