Highly-skilled jobs needn’t be the reserve of graduates, says Michael Davis. For him, a change in apprenticeships funding might allow them to solve the country’s youth unemployment problem.

For the past 18 months, the UK Commission for Employment and Skills (UKCES) has been working on proposals to change the way public and private investment in skills align to produce better jobs and growth outcomes.

It’s a big challenge, and there’s no magic solution, but one way of helping is to change the way public funding flows around the apprenticeship system.

By routing the government’s contribution to apprenticeships directly through employers we can make them the system’s true customers; carrying the responsibility and reward for ensuring they invest wisely in the skills needed for business success.

The background is this — youth unemployment is serious, but the challenging economic circumstances of the last six years are not the sole cause. The labour market has seen a long-term decline in the number of entry level jobs, and, critically, there are too few good jobs for young people.

It’s not that the jobs aren’t there. Employment in highly-skilled, technical, managerial and professional roles has grown by more than 900,000 over the course of the recession and recovery and this growth is set to continue.

In the decade from 2010, growth in these jobs will stand at 1.9m — more than 13 times greater than the 140,000 growth forecast for the sales and elementary occupations that young people rely on for their first jobs.

But the employers who specialise in highly-skill roles are the least likely to recruit young people and, where they do, they tend to rely on graduates.

Employers should be able to claim tax relief via Pay As You Earn (PAYE) when they commit to employing an apprentice.”

Creating more non-graduate routes into technical, professional and managerial jobs would offer opportunity and feed employers young talent. Apprenticeships are a proven way of delivering highly productive, well trained and loyal staff, access to a successful career for young people and strong benefits for the exchequer and the economy as a whole.

Yet only 15 per cent of UK employers offer them.

The commission’s perspective is that we must return apprenticeships to their founding principle — a contract between the apprentice and the employer.

They should be funded accordingly — paid for, and valued by, the employer.

Our simple proposal is that employers should be able to claim tax relief via Pay As You Earn (PAYE) when they commit to employing an apprentice, provided the apprenticeship meets quality standards, including decent pay and conditions, high quality training and the opportunity to progress.

This is a fundamental difference that positions employers as purchasers of services from colleges and training providers, while also placing the responsibility for the success of that investment with them.

Our proposal is completely consistent with Doug Richard’s recommendations in his review of apprenticeships, which the commission supported.

Led by Scott Johnson, a successful small business entrepreneur, and one of our commissioners, UKCES has had constructive discussions with employers, employer groups, college and trade union leaders on thinking through how such a model could work.

Clearly there is more detail to be considered as changes to the tax system are not made lightly.

But it is encouraging that the Chancellor’s, in the recent Spending Review, announced there would be a consultation on options for major reform of apprenticeship funding, including use of HMRC’s PAYE system.

The current system has delivered results — apprenticeships are now available in more sectors of the economy and to more people than ever before.

However, they are yet to be embedded as the new norm.

To achieve this, we need to continue to raise standards and engage more employers, especially small businesses, in providing high quality apprenticeships.

Michael Davis, chief executive of the UK Commission for Employment and Skills

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