The Labour Party has called for the wages of 85,000 young apprentices to be subsidised this year, by using the £330 million apprenticeship budget underspend handed to the Treasury in 2019.

The opposition party has put forward the policy in order to boost apprenticeship starts, following a drop of a quarter over the past decade, and the rise of competing skills initiatives.

It is hoped paying the wages of apprentices will “incentivise employers to create new opportunities despite the impacts of the pandemic”.

We need a level playing field and the government should seriously consider what Labour is proposing today

Under the proposal, subsidy would operate on a sliding scale, so employers would receive a full wage grant for employing a new apprentice aged 16 to 24 for the first three months.

The subsidy would then drop to 50 per cent for the next six months, then 25 per cent for the final three months.

Money would be dealt out on a first come, first served basis, and Labour estimates it would save each employer around £3,500 per apprentice hired.

The scheme would be funded through the underspend of the Department for Education’s apprenticeship budget in 2019-20, which, as FE Week revealed last July, totalled £330 million and was quietly handed back to the Treasury.

Toby Perkins, Labour’s shadow apprenticeships and lifelong learning minister, told FE Week the 85,000 figure is based on the number of starts by 16- to 24-year-olds in 2018-19, of which there were around 210,000, according to official government statistics. It takes into account a decrease in starts owing to the pandemic, then taking half of the annual number as the proposal will cover recruitment over six months.

“Our initial proposal is based on a six-month incentive, which would need to be reviewed based on the developing health situation and its impact on employment numbers.”

He said the wage subsidy should be in addition to the long-standing £1,000 incentive that employers receive when they take on a new 16-to-18 apprentice, but not in addition to the other bonus incentives announced in chancellor Rishi Sunak’s Plan For Jobs which end in March so as not to blow the underspend pot.

Perkins added that the wage subsidy would also mean employers look more in favour of hiring apprentices, rather than using the new Kickstart incentive, by which businesses can receive grants of around £6,500 but which do not lead to a qualification.

“Apprenticeships offer longer term employment, have a far greater learning input than the alternatives, last longer, offer a recognised qualification at the end of it and have more established delivery networks,” Perkins argued.

Association of Employment and Learning Providers managing director Jane Hickie said providers have been calling for wage subsidies since the start of the first lockdown, so her organisation has “no hesitation” in supporting Labour’s proposal.

Jane Hickie

She said apprenticeships offer skills for sustainable employment, but are being displaced by the Kickstart scheme, which does not require any training. 

“We need a level playing field and the government should seriously consider what Labour is proposing today.”

Jon, Graham, chief executive of training provider JTL, supports Labour’s proposal, as he believes “action is needed now” to reverse the decline in apprenticeship starts, as the “thousands” of apprentices his company trains across the country are “vital for supporting a long-term economic recovery”.

A Department for Education spokesperson did not directly respond to the call for wage subsidies but said: “Apprenticeships will continue to play a vital role in growing our economy and as we build back better after the pandemic. In recognition of the benefits apprentices bring to businesses across the country, we’re offering payments of up to £2,000 to employers who hire new apprentices.

“More than 10,000 employers have already taken up this offer, which has now been extended until March 2021, giving more people the chance to get ahead in a range of exciting industries, from cyber security to accounting.”

Under rules for the apprenticeship levy, businesses with a payroll of £3 million or more pay each month into the pot and have a rolling 24-month deadline to spend the funds.

The levy was designed so large employers would not spend all of their funds, and unspent money could be made available to small, non-levy-paying businesses to train apprentices.

Unspent funds also provide a ten per cent top-up to levy funds, and they pay for English and maths teaching for relevant apprentices, among other things.

Yet FE Week reported in July that the Department for Education had handed back £330 million from the apprenticeship budget to the Treasury, to allow it to be “used for other government priorities”.

Perkins said the subsidy proposal is a “specific approach” to the issue of the drop-off in starts, but would look at the situation nearer to the next general election to see if it should be brought in as a permanent policy by a Labour government.