Apprenticeship funding bands might be about to change – because employers “do not feel able” to negotiate with providers on price.

The Department for Education has announced that it would review the “effectiveness of the current funding band structure” which “includes considering funding band structures” – and any changes will apply to new starts from August 2018.

“When we moved to 15 funding bands, we expected to see employers and providers negotiating on price below the funding band upper limit,” it said.

“However, this hasn’t materialised across all of the market, with many employers telling us that they do not feel able to negotiate with providers. We are therefore considering changes to incentivise negotiation and drive better value for money.”

Every apprenticeship standard and framework are allocated a funding band of between £3,000 and £27,000.

That band represents the maximum government or levy funding an apprenticeship can attract and employers are expected to negotiate with providers on the price.

Employers can agree to pay more than the funding band maximum, and pay the difference from their own cash.

The current 15 funding bands for apprenticeship were introduced in May 2017, an increase from the previous six funding caps for apprenticeship standards.

According to today’s announcement the maximum funding band will stay the same, but other bands could change. Any changes would be confirmed in the spring.

“If we do change the funding band structure, we will work with the IfA to ensure that any new standards that are approved for delivery are allocated to both one of the 15 current funding bands and to a new, post-August funding band.”

 



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7 Comments

  1. Employers are completely able to negotiate with suppliers on price. However an open book costing approach which considers EPA cost, completion rate, risk, cohort size, expenses and 20% support usually leads to higher price than the cap. Usually the employer does not want to pay higher than the cap and hence the cap is settled on. It is microeconomics that is driving this rather than an unwillingness to negotiate. The ESFA should look at new profit margins in the sector and make a judgement on if there is profiteering going on (I think I know the conclusion from this).

    The situation is also completely analogous to university tuition fees where the ‘cap’ is nearly always charged, again because to charge less usually means lower quality.

    • Just Saying

      An alternative view is that the university tuition fee charged is nearly always the cap because this is the result when the best example of a cartel operation known to exist is permitted to continue to operate unchallenged by any regulatory or government body!! It results in a cosy status quo service provision remaining unchanged and unchallenged!

    • Agreed

      Think about the Standards for Adult Health level 2 and 3 standards vs level Hair Standard. An apprentice on the 1st takes care of your life and the other looks after your hair. The 1st is capped at £3k and the 2nd at £9k. The EPA cost on the 1st is just under the 20% allowed and less than 5% on the 2nd. Utterly bonkers.

      Profiteering? Unlikely – any gains on higher value delivery is undermined by break-even or losses on the lower value apprenticeships. This is especially the case for providers offering a mix of apprenticeships where standards are not yet available in generic occupations at levels 2 and 3 (which is where the most demand from employers is).

  2. Julie Williams

    I’m interested to read in this article that the lowest funding band is quoted at £3000. Both current early years frameworks are currently well below that amount. We cannot continue to deliver all the requirements for £2000 (L2) and £2500 (L3). In comparison to other standards they are woefully low. I hope to see our funding bands reviewed otherwise many providers will have no option but to withdraw provision. Is this likely when we switch to standards (one day!)?

    • How about all of the frameworks with a £1500 cap? Poorly funded doesn’t equate to cheap to deliver. It also sends out the kind of message Govt doesn’t want in terms of social mobility or the value to society some career choices have (or indeed the harsh realities of low operating margins in some sectors of employment where employers don’t have ‘spare cash’ to pay over the cap)

  3. What do I think? I think it a real shame that Cameron and Osborne are no longer leading the Government. This whole mess that Apprenticeships has become is entirely of their making and they should be the one’s carrying the can on it.