DfE forced to finally reveal true amount of apprenticeship funding returned to Treasury

Over £2bn surrendered since the launch of the levy in 2017 to 2021

Over £2bn surrendered since the launch of the levy in 2017 to 2021

13 Oct 2022, 20:19

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Over £2 billion of apprenticeship funding has been returned to the Treasury since the launch of the levy, FE Week can reveal after obtaining figures that finally show the true extent of apprenticeship underspend.

The clawback equates to 23 per cent of the Department for Education’s total ring-fenced apprenticeship budget between 2017 and 2021.

Ministers have repeatedly refused to reveal exactly how much of the annual apprenticeship budget has gone unspent after the whole system, including non-levy paying employers, has been funded. MPs, including former DfE adviser Richard Holden just yesterday, have even had requests for this information turned down.

FE Week, in partnership with the new Apprenticeships Data Insights service also operated by our publisher LSECT Ltd, has now forced the DfE to reveal the figures for the first time through a Freedom of Information request.

Tom Richmond, a former adviser to two skills ministers and now director of think tank EDSK, said: “We need full transparency over where the levy funding has gone and how effectively it has been used. On that basis, it should not have taken so long for such a simple but crucial piece of information about underspends to come to light.”

He added: “Now that we can see the scale of the underspend, it raises important questions about why the levy funding has not been fully utilised, particularly when there is still a cap on the number of apprenticeship starts in small and medium-sized businesses.”

Since 2017, businesses with a payroll of £3 million or more pay each month into a levy pot and have a rolling 24-month deadline to spend the funds.

The levy policy was designed so that large employers wouldn’t use all of their funds. The unspent money is recycled and made available to small businesses who do not pay the levy to use to train their apprentices. Unspent funds are also used to top up levy funds by ten per cent as well as pay for English and maths teaching for relevant apprentices, among other things.

But because the government refuses to share annual spending data, there are many misconceptions in the sector and national media that all apprenticeship funding that expires from levy accounts goes back to the Treasury.

The Financial Times, for example, reported in July that more than £3.3 billion of apprenticeship funding had been returned to the Treasury since 2019. But this figure was in fact the amount of funding that had expired in levy-payers’ levy accounts and did not take into consideration that part of this funding would pay for other parts of the system.

In each year since the levy was introduced FE Week has requested the true apprenticeships budget underspend from the DfE press office, and after receiving provisional figures to this effect from the department’s press office, published articles that showed £880 million had been returned to Treasury between 2017 and 2021.

The DfE has now revealed through an FOI that £424 million in 2017-18, £493 million in 2018-19, £550 million in 2019-20, and £604 million in 2020-21 was surrendered to Treasury.

The DfE said it could not share the figures for 2021-22 because its accounts for that financial year “have not been audited and published” yet.

John Cope, a board member of the Institute for Apprenticeships and Technical Education, said the figures “highlight a real issue: the need for greater transparency on how the apprenticeship levy works”.

He added that the underspend figures “need to be taken with a massive pinch of salt as they are for pandemic years when many firms were unable to trade, and the government spent huge amounts on the Kickstart scheme as well as employer incentives to take on apprentices”.

Association of Employment and Learning Providers chief executive Jane Hickie said the reasons for an underspend on the apprenticeship levy “are complex – from the ongoing impact of the pandemic on learner numbers to wider trends in the labour market”.

She also called for “much more transparency and up-to-date information from government on the level of underspend”.

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4 Comments

  1. Apprentice Teaching Assistant

    Maybe they could afford to pay apprentices a decent wage then? Look at the sector they are training in and ensure they are paid what they are worth. Definitely more than £4.81 an hour. Bring it in line with minimum wage at least! Lose the “apprenticeship minimum wage” as this is a huge reason people aren’t up skilling. They simply can’t afford to survive on an apprentice wage.

  2. Mark Burgess

    No suprise in this report to people working in industry, the Federation of small businesses or those working in FE or Training Centres. Very glad it has been highlighted in your report. Full time vocational courses apart from Traineeships and T Levels are a waste of money. Now is the time to support industry and prospective apprentices by investing in apprenticeships for all sectors particularly new technology, construction and engineering. Will help the economy, industry sectors and young people. Time to reavaluate, be bold and grasp the opportunity. The question is anyone capable of seeing the opportunity to deliver a simple apprenticeship structure to encourage employers and supprt FE / Training Centres to change the landscape in a positive way.

  3. Colin Leighfield

    A major issue is the narrowly based standards approach and the impracticability of diverse smaller businesses engaging in Trailblazers to set new ones. Even where standards are available, unless providers are able to create a large enough cohort for economic delivery, they can’t deliver. Therefore, businesses in niche activities and SMEs in particular, are frequently failed by Apprenticeship Levy. The abandonment of the framework approach, ostensibly on the grounds of quality concerns, effectively disenfranchised large numbers of businesses in areas of activity where the issue of developing specific standards was problematic and also removed the opportunity for providers to create viable cohorts with businesses not necessarily doing exactly the same thing. If there was a quality issue, the problem should have been addressed by looking at the design of frameworks, not dumping them. It is certainly true that excellent apprenticeships are being delivered and IfATE is writing good standards, but these things were happening before. The sad truth is that in the real areas of need, SMEs, school leavers, new starters and areas of social deprivation, Apprenticeship Levy has made the situation worse than it was before. The fact that the system itself is a major reason for these funds not being spent effectively is a serious cause of concern that is still not being recognised or adequately addressed.

  4. It is a concern when you see the amount of money going un-spent. Yet it’s also good to see that almost 80% of the money is being invested back into apprenticeships and even over Covid this has been maintained. I know that many apprenticeship providers have worked tirelessly to maintain delivery and equally many employers and apprentices have adapted quickly to keep programmes going. Yet that still leaves a significant chuck un-spent and it would be sensible to consider giving employers more options to invest their levy.