Budget 2024: Vote-winning apprenticeship reforms go begging

This budget was a missed opportunity to introduce greater flexibility, reduce the burden on small business and liberalise the use of levy funds

This budget was a missed opportunity to introduce greater flexibility, reduce the burden on small business and liberalise the use of levy funds

7 Mar 2024, 17:30

The spring budget may have been the last substantial fiscal policy event this side of the upcoming general election. Sadly, further education was alarmingly absent from the policy changes on offer. Some 200 new apprenticeship places a year for British film and a £50 million pilot for apprenticeships in the advanced manufacturing, green and life sciences sectors are far from the fundamental reform we need.

In a budget designed to help win the next election, further education has been considered a distraction from the issues the public cares about. This is despite Public First surveys indicating that increased funding for apprenticeship programmes isn’t just supported by voters but is in fact preferred over twice as much as additional childcare support within educational spending, for example.

The value of apprenticeships as an affordable educational route is clear. Those starting a university degree in the past financial year are expected to graduate with a staggering £45,600 of student debt.

And yet apprenticeships have declined dramatically since the levy was introduced. The number of starts has fallen by 157,800, including a near halving of the number of people starting apprenticeships in small and medium-sized enterprises (SMEs) in the four years since its implementation.

Change is now down to the next government. Whatever party forms that government, unlocking skills through apprenticeship reform must be a priority. With estimates that more than 30 million workers, over 90 per cent of the workforce, will need reskilling by 2030, increasing the uptake of apprenticeships and less formal skills development is necessary for a dynamic, innovative economy to continue growing and for raising stagnant levels of productivity.

A key move towards achieving this objective is removing the five per cent co-funding obligation for SMEs. Government must finance the entire cost to encourage more SMEs to participate in apprenticeship programmes. Easing the financial burden and streamlining the process by reducing the administrative burden associated with complex co-funding rules will make the system more user-friendly and minimise the hurdles SMEs face.

Further education has been considered a distraction

Additionally, offering levy-contributing businesses a financial incentive of £1,000 per employee for training could promote continued professional growth and development. This approach would make it easier for companies to engage with the apprenticeship system, potentially leading to formal apprenticeship agreements or, at a minimum, encouraging more staff training.

The Chartered Institute of Personnel and Development (CIPD) has reported a 19 per cent decrease in employer training and development investment over the past 13 years, with per-employee investment now half the average of the European Union. Reversing this decline and driving up investment in employee training is essential to improving productivity and growth.

These changes should not depend on harsh cuts in funding to other parts of the apprenticeship system but could be financed by fully allocating apprenticeship levy funds to apprenticeship programmes, as originally intended. Research by FE Week indicates that last year, the levy generated around £415 million more than was spent. From May 2019 to June 2022, more than £3.3 billion in revenue was returned to the Treasury because of strict rules on using unspent levy funds.

With the apprenticeship levy’s income expected to hit £4 billion by the 2024-25 fiscal year, the gap between the amount collected and the amount invested in apprenticeships is set to increase. Comprehensive reforms are needed to open up the vast economic opportunities further education can provide.

Beyond the kind of budgetary interventions that went begging this week, there is a lot more a serious potential government should offer. For example, the one-year minimum-length requirement does not guarantee quality, but it does hamper adaptability and frequently falls short of addressing the varied demands of both learners and employers.

Instead, a flexible model that modifies the minimum duration on a sliding scale according to level, from six and rising to 24 months, would enable greater accessibility. It would also suit the distinct needs of various industries and roles more effectively and see apprentices climb the ladder of opportunity more efficiently.

Rigid, inflexible rules are holding further education and skills development back. A government that was serious about growth and productivity would have begun to change those this week.

The sector awaits.

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