The apprenticeship system is entering one of the most pressured periods in its history. The rapid growth of the programme means that demand from employers is now butting up against the arbitrary budget that the Treasury has given the Department for Education and now the Department for Work and Pensions. To tackle rising NEET (not in employment, education or training) levels, government plans to ‘streamline’ how employers use levy funds for apprenticeships and ‘tilt’ apprenticeship spend towards younger apprentices. We understand this desire – but how government makes the change is critical.
Done badly this is a disaster waiting to happen. Employers, young people and the provider base (the engine without which skills development doesn’t happen) will be violently ejected from the boat and into the treacherous waters of an economy that is retreating from skills, not embracing them.
Done well, and ministers could be taking the plaudits for navigating the rapids successfully, through to calmer waters where the right longer term investment decisions can be made.
The government knows that rapid defunding does not work: the cliff edge defunding of level 7 for learners over the age of 21 has had exactly the opposite financial impact of that intended. The rush to get in before the defunding deadline has tied up apprenticeship funding, not released it – exactly as we said would happen.
Sudden lurches derail planning and investment, trigger unpredictable survival behaviour, and erode employer confidence and buy-in, which relies on stability and time to adjust.
There is also a flawed assumption at the heart of the debate: that cutting adult apprenticeships will automatically create more opportunities for young people. That is not how labour markets work.
Apprenticeships – as with the wider labour market – function as a whole ecosystem. When existing staff upskill and move into higher-level roles, entry-level vacancies open up – the most precious component in the NEET reduction machine. A successful entry level opportunity for a NEET needs a good line manager and we know we don’t have enough of them.
This progression, combined with good line managers, creates the capillary effect (hat tip to Rob Nitsch at the Federation of Awarding Bodies for the metaphor) allowing the same job role, over time, to support multiple young people into gainful employment. Choking off progression and good line management chokes off opportunity for the very people you want to help.
This is why AELP is supporting the Chartered Management Institute (CMI)’s campaign to protect management apprenticeship options. We are firm advocates for other standards that could be in the firing line. For many independent training providers, these types of programmes are core to their offer. They underpin business models, cross-subsidise other provision and support investment in staff, quality and innovation. Pull funding too rapidly and providers will not be able to “pivot” and may exit. Capacity will be lost permanently.
We are hearing from members that some major employers, long-time champions of apprenticeships, are questioning whether to walk away from the system altogether and treat the levy as just another tax. If it becomes acceptable for leading brands to disengage, others will follow, then SMEs (small and medium sized businesses). Starts will fall. The reputational damage among young people will be severe and once employer confidence drains away, past experience is that rebuilding it is painfully slow.
Ending the Treasury top-slice (which AELP estimates at anywhere between £500 million and £800 million) means these are tough choices that shouldn’t need to be made. But even if funding constraints mean prioritisation is unavoidable, there are safer ways to do it.
First, be transparent. Set out the budget position and the scale of savings sought. Providers and employers can plan for tough realities if they understand them.
Second, use co-funding and tapering, not cliff edges. Step-down models over a couple of years can release funding while keeping employers engaged and giving providers time to adjust.
Third, prioritise more intelligently. Age-based incentives within standards, for example a stronger focus on under-30s, are far less destabilising than removing standards entirely. And any major shift must be sequenced with credible alternatives, such as apprenticeship units, being ready at scale. And use existing mechanisms to bend these programmes towards the NEET problem: insist on a focus on how to manage young people.
Reform carried out with the sector can strengthen apprenticeships. Reform imposed on the sector risks turning a budget squeeze into a system failure. That would be a catastrophe for providers, employers and, most of all, the young people this reform is meant to help.
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