The current direction of apprenticeship reform, with the removal of level 7 funding and wider restrictions under the proposed growth and skills levy, risks destabilising employer confidence, shrinking provider infrastructure and undermining long-term economic productivity.
Defunding additional apprenticeship programmes risks alienating employers as leadership and management would be hit hardest.
Ironically, this may initially save money, but over time differing programmes would be utilised and the spend may well just shift across provision, ultimately returning budget pressure.
We have instead come up with an approach offering a more palatable transition that delivers cost savings across the entire arena, irrespective of sector or programme.
This would further safeguard public funds, while also giving the Treasury greater control over all programmes.
A balanced alternative is available. By introducing a tiered co-investment model and embedding structured mechanisms to support NEET (not in education, employment or training) reduction, the government can save money while protecting leadership pipelines, sustain provider infrastructure and expand access for young people.
Government context
Recent reforms prioritise youth participation and NEET reduction, amid significant fiscal pressure. The transition from the apprenticeship levy to a growth and skills levy, and the removal of funding for most level 7 apprenticeships, reflects an understandable focus on reallocation of public funds.
However, reform must avoid unintended structural damage to employer engagement and delivery capacity.
Employers report growing frustration regarding the removal of higher-level apprenticeships and uncertainty surrounding future levy rules.
Increased restrictions on programme availability to support workforce development risks further disengagement.
With rising operational costs and offshoring trends, removing access to leadership and management development via apprenticeships may weaken UK productivity and long-term economic resilience. Leadership and management development is at the core of nearly all LSIPs’ (local skills improvement plans) strategies, too.
Training providers have already absorbed multiple financial shocks: loss of functional skills funding, removal of level 7 funding, rising operational costs and static outdated funding bands.
Despite this, success and retention rates have improved and providers continue to invest in quality, infrastructure and compliance under the newly strengthened Ofsted regime.
Further defunding risks redundancies, provider exits and a significant contraction in national delivery infrastructure.
Tiered co-investment model
Our proposal of a phased tiered co-investment model would generate savings while preserving employer engagement and provider stability.
We propose that during the first year (2026-27), 16-18 training would be 100 per cent funded, 19-24 would be 95 per cent funded and age 25-plus would be 90 per cent funded.
The second year would be the same, except that training for those aged 25-plus would be 85 per cent funded.
We estimate this strategy would save at least £321 million.
Providers to support NEET reduction
The government aims to reduce the NEET rate by putting two‑thirds of these young people (around 600,000) in higher‑level education or apprenticeships by 2040.
This represents almost double the current apprentice numbers in participation, and makes it imperative that ministers protect and build on current apprenticeship infrastructure, not curtail it. And for that to happen, training providers need stability.
Providers above a defined turnover threshold should demonstrate a minimum percentage of provision allocated to under-25 and NEET learners. Alignment should be linked to programme areas, expertise and provider size.
The government should also fund pre-apprenticeship bootcamps and consider short-term wage subsidies to reduce employer risk during the first 12 weeks of youth employment.
It should publish provider-level data on NEET participation, sustained outcomes and progression rates to encourage transparency and sector leadership, and consider inclusion in the apprenticeship accountability framework.
Partnerships should be encouraged between large providers, community organisations and Job Centre Plus to improve access to hard-to-reach young people.
And there should be increased emphasis within inspection frameworks on inclusion, youth engagement, barrier removal and sustained employment outcomes.
A balanced approach recognises that providers must contribute to youth inclusion, while funding structures and accountability mechanisms must make that contribution viable and sustainable.
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