Devolve apprenticeship funding to local leaders, says Wolf

Former PM-adviser sets out plan for fixing apprenticeship howlers

Former PM-adviser sets out plan for fixing apprenticeship howlers

16 Jan 2025, 22:00

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Whitehall should devolve apprenticeship funding powers and ditch an “entirely inappropriate” Amazon-style online market to better attract small and medium-sized employers, an influential peer has said.

Baroness Alison Wolf also wants Labour to divide its proposed growth and skills levy into an apprenticeship levy and a separate workforce training levy, which all businesses, not just those with a £3 million or more payroll, pay into at different rates.

She proposed a series of reforms in a policy paper for the Social Market Foundation which labels the current apprenticeship system a “failure.”

The crossbench peer, who advised Number 10 on skills from 2020 to 2023, highlighted how the apprenticeship levy had diverted money to the training of older workers already in jobs.

Wolf also evidenced how the levy “strongly incentivises a move towards expensive high-level apprenticeships in non-skill-shortage areas, including many which are ‘apprenticeships’ in name only, delivering what is effectively professional development”. 

Trends include how only 23 per cent of apprenticeships now go to people under 19, compared to 41 per cent in 2008, while the proportion of over-25s has ballooned from 24 per cent to 49 per cent.

Only 20 per cent of apprentices are in skill shortage areas, and small and medium enterprises now account for only 29 per cent of apprenticeship spending as they are “squeezed out by bureaucratic and funding barriers”.

Apprenticeships are currently organised as a national, centrally-run, web-based system – the digital apprenticeship service – with no direct involvement of local or mayoral authorities, or employer organisations, a model which Wolf describes as “that of a market, and not just any sort of market either: it is, rather, that of a country-wide online retailer like Amazon”.

She added this “rigid and often impenetrable national system” without local infrastructure is “completely inappropriate, especially for SMEs”.

Apprenticeship funds are also limited for the SME sector, dependent on predicted levy underspends and Treasury controls, and handed out on a short-term basis.

Root of the problem

At the root of apprenticeship “failure” is confusion about what apprenticeships should be, according to Wolf, who argued an apprenticeship “is about learning a new occupation” and not ongoing workplace training, but the UK system “conflates the two”.

There is a “real danger” the government will “simply continue the policy confusion” by relabelling the apprenticeship levy as a growth and skills levy if it continues with a single catch-all pot, she said.

Wolf also fears if the minimum 12-month duration rule is relaxed and shorter foundation apprenticeships are introduced it “could easily reinforce the temptation for employers to distort effective workplace training by squeezing it into an apprenticeship straitjacket”.

The fix: Devolution and two levies

The peer said rather than just renaming the overall levy and periodically changing how the money can be used, the government should split the levy into one for apprenticeships and one for workforce training. 

This division would “greatly simplify future policymaking and the introduction of improvements specific to one or the other”. 

To encourage businesses to hire young apprentices, ministers should impose a freeze on all level 7 apprenticeships, ring-fence a portion of the levy for 16 to 21 year olds, and reduce the proportion of training costs which the government covers for apprentices aged 25 or older to around 50 per cent.

She also supported calls to restrict apprenticeship funding to university graduates and to automatically entitle all 16 to 18 year old apprentices to training paid for in the same demand-driven way as classroom-based learners. 

Wolf said apprenticeships should be locally administered to respond to skill needs and draw on local employer and educational networks – similar to successful systems in France, Switzerland and Germany. 

She proposed funds for apprenticeship training should be distributed to mayoral combined authorities. 

Labour appeared interested in devolving apprenticeships while in opposition but has shown no sign of implementing this idea since entering government.

Wolf said allocations could initially follow current expenditure but areas with buoyant demand would then be eligible for additional funding in future years, and those that fail to spend their allocation would face cuts.

An “alternative local authority grouping” would take on this funding role in non-MCA areas. 

Levy reform is a ‘moral imperative’

Wolf also said apprenticeship training providers should be organised at devolved local level, so there is a “list of providers, and employers can access this locally”.

Meanwhile, there should be a national, government-led programme for occupations where numbers are small.

Wolf said this should lead into a single, integrated system, which brings all employers into the same payment system, rather than running separate ones for large businesses and SMEs.

The levy rate should, over time, be cut for big companies. All employers would then pay, bringing in many thousands of additional contributors, but on a sliding scale. 

At the same time, the “complex business” of offsetting individual levy dues via apprentice training costs should be abolished. 

“The levy should be just that – a general levy which underpins and pays for general access to free training for all apprentices,” Wolf said. “Fixing the levy is not just an economic imperative – it’s a moral one.”

A Department for Education spokesperson said: “Ensuring people have the skills they need for the future is crucial to this government’s number one mission to grow the economy.

“We’ll be asking more employers to step forward and fund level 7 apprenticeships themselves to ensure apprenticeships support those who need them most, while also meeting the needs of individuals, employers, and the economy.

“Further details will follow, informed by Skills England’s recommendations on priority skills needs.”

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2 Comments

  1. JustSaying

    The extracts you produce in this article from the paper presents no new news findings for anybody working in the sector. This does not therefore provide a new basis to embolden a claim that apprenticeship funding should go to local leaders.

    It is obvious that the content of apprenticeships can and should be criticised, as well as the funding rules that apply to them. However, it is perhaps ironic that many now would not be as critical of the digital apprenticeship system portal which manages to operate satisfactorily, despite its civil service origins! Indeed, perhaps it is a great compliment that this is considered comparable to such an outstanding and ground-breaking success impacting on all sections of society such as Amazon !

    Advocating that devolving apprenticeships to regions is a recipe for success perhaps lines up with advocating the nationalisation of railways to be run by civil servants is the answer to all our travel woes! The extension of devolved powers goes way beyond regional mayors now, and the administrative cost of managing apprenticeships if devolved, would be an enormous wasteful draw on resources. This would only be seen as good news for the swelling ranks of homeworking civil servants with a post Covid aversion to the workplace. Yet they know the workplace very well apparently when it relates to SME employers!

  2. When you strip away the window dressing this is a tax increase on business but devolving responsibility away from the architects!

    ASB is a great example of this – if funding can’t flow across borders, then expect further education funding to become a game of political football played at a local level, with a referee favouring the team wearing the same colour kit as the Government of the time.

    Just plucking a town out of the blue: Luton, in the South East Mids LSIP area, sits on a little LSIP peninsula surrounded on three sides, with the Hertfordshire LSIP to the East and South & the Buckinghamshire LSIP to the West.

    If you live a short distance south, east or west of Luton, you might get shut out of studying in Luton. If the funding can’t flow across LSIP borders (look at ASB as a case in point…), budget protectionism will be the priority for local purse holders and efficiency, effectiveness, inclusion and common sense will be the casualties.

    That aside, recognition that apprenticeship should be directed more at new entrants is welcome – just beware how big business might try to lead on dictating and defining what ‘new’ means and unions should keep an eye out for a rise in short term contracts…