Mick Fletcher casts his eye over the government’s introduction of a 33 per cent mandatory cash contribution from employers towards the cost of apprentice training.
The new guidance on trailblazer funding from the Department for Business, Innovation and Skills is a heroic attempt to achieve incompatible policy objectives.
Encouraging more employers to take on apprentices while also insisting they pay more for the privilege was always going to be difficult, but the recent proposals almost succeed.
They do so, however, by being be too generous to employers at the same time as deterring their involvement through administrative complexity.
The spin on the proposals is £2 for £1 — government will match employer funding 2 for 1 up to a set cap per standard.
Depending on the audience this can be sold as good value for employers or getting tough with them — insisting for the first time on a ‘mandatory cash contribution’.
In the great majority of cases — most apprenticeships will be in the lower bands — a small firm can get more than its cash back and large firms pay a lot less than you might think
Actually it’s a lot more generous than that because in addition to the misnamed ‘maximum government contribution’ (MGC) or cap, the taxpayer will hand over bonuses for successful completion, for recruiting 16 to 18s and to small firms.
The key sentence is the one that makes clear that employers can ‘use these incentive payments as you wish’ — in other words, it is open to any employer to net them off against their mandatory cash contribution.
In the great majority of cases — most apprenticeships will be in the lower bands — a small firm can get more than its cash back and large firms pay a lot less than you might think.
Set this against the 25-year-old single mum wanting to better herself through a BTec diploma who gets charged 100 per cent.
A lot depends of course on how the new standards are allocated to bands or caps. Assume a given apprenticeship currently costs £6,000 to deliver and its successor much the same.
Since current funding is assumed to reflect costs government now pays £6,000 for a 16 to 18-year-old starter and £3,000 for most adults.
Employers with adult apprentices are expected to pay £3,000, but in practice rarely do and therefore providers deliver for £3,000 (or usually an average depending on the mix of ages recruited).
If this programme were to be put in the £6,000 band government would pay from £6,900 for adults in large firms rising to £9,600 for 16 to 18-year-olds in small firms; generous indeed.
If it were put in the £3,000 band government would pay from £3,500 for adults in large firms to £4,900 for young people in small ones.
Employers would need to pay no more than now for adults but over £1,000 for young people to make up the gap. This is not consistent either with the policy intent for adults nor with the assertion that ‘many’ young people would still be fully funded.
Though technically clever these new proposals seem set to fail to deliver on three of the principal stated purposes of the reform.
Firstly, they won’t lever in more employer cash, certainly not for the 16 to 18 age group as they are still mainly fully funded. This raises the question ‘Why complicate matters at all for young people?’
Secondly, they won’t exert much downward pressure on prices. There’s no incentive to negotiate 16 to 18 prices and for adults employers lose £66 of every £100 they knock off the fee.
And thirdly, the complication of five caps, three sorts of bonuses, staggered payments and an untested apprenticeship credit mechanism represent just the sort of bureaucracy that SMEs run a mile from.
Moreover the cliff edges between, for example, £8,000 and £18,000 suggests that complexity is sure to grow.
It is fortunate that the timescale for the trailblazers gives ample time for the serious revisions to this approach that are surely needed.
Mick Fletcher is an FE consultant