The Department for Education handed £96 million of apprenticeship funding back to the Treasury last year, new figures show.
Of the department’s £2.554 billion total apprenticeship budget in the 2022-23 financial year, £2.458 billon, or 96 per cent, was spent.
It marks an increase in the underspend the department recorded in 2021-22, when just £11 million of its apprenticeship funding went unused.
The rise in underspend follows an increase to the overall apprenticeship budget between those years: it rose from £2.466 billion in 2021-22 to £2.554 billion in 2022-23 to ease pressure being caused by soaring numbers of higher-level apprenticeship starts, which are the most expensive to deliver. There were also no employer cash incentives in 2022-23.
In response to a written parliamentary question from Lord Storey, DfE minister Baroness Barran stated that in the last two financial years, on average, 98 per cent of the English apprenticeships budget was spent.
She said that any underspends in overall departmental budgets by the end of the financial year are returned to the Treasury.
Barran added that as employers choose which apprenticeships they offer and when; annual spend of the apprenticeship budget is “subject to employer demand”.
The underspend for 2022-23 means that £2.178 billion of apprenticeship funding has been handed back to the Treasury by the DfE in the six years since the UK-wide apprenticeship levy was launched in 2017.
These underspend figures are for England only. The devolved administrations also receive funding from the levy to invest in their skills programmes separately.
The DfE’s apprenticeship budget is used to fund training and assessment for new apprenticeship starts in all employers. It means that levy payers’ unspent funds are used to support additional costs and apprenticeships in smaller employers.
The Institute for Apprenticeships and Technical Education warned that the apprenticeships budget was heading for an overspend back in 2018. A National Audit Office report a year later said there was a “clear risk” the programme was not financially sustainable under current arrangements, and costs of training apprentices were around double what was expected in 2015.
But pressure was eased when the Covid-19 pandemic hit in March 2020 and numbers of new starters fell.
The government has committed to increasing England’s apprenticeship budget by £200 million to £2.7 billion by 2024/25.
See this week’s edition of FE Week for more analysis.