Double the cash incentives so more young people do apprenticeships

23 Oct 2021, 17:07

Since apprenticeship reforms, providers have had to front up more of the costs, writes Jane Hickie

The pandemic has had a disproportionate impact on young people and their employment and learning opportunities.

Since the advent of the 2017 reforms, fewer young people have participated in apprenticeships.  

So the right balance of incentives and funding premiums are needed to encourage businesses in their decision-making process, while equally supporting social mobility. 

Before the apprenticeship reforms in 2017, 16-18 apprentices were fully funded and apprentices 19 onwards were co-funded at 50 per cent by the state.  

The government also ran an incentive scheme: Apprenticeship Grants England (AGE), where employers could apply for a £1,500 government for recruiting an apprentice aged 16-24.   

In 2016, the government also removed employer liability for class 1 national insurance contributions for apprentices. This is still available, but it has not been well advertised.  

When the apprenticeship reforms were introduced, funding rates between young people and adults were equalised and the AGE incentive scheme was replaced by a £1,000 “additional payment” incentive solely for 16-18 starts, paid to both the employer and the provider.  

This has meant that employers are less incentivised to take on younger apprentices, and providers have had to front up more costs.

And we can see it in the very worrying figures. 

In the last academic year, adult apprentices aged 25+ accounted for more than 50 per cent of all apprentice starts for the first time. Meanwhile, 16-18 apprentices accounted for just 20 per cent of all new starts.

The government could do three key things to “level up” apprenticeships. These would help to increase entry-level starts and the number of young participants, while providing crucial support for SMEs.

1.     Give cash incentives to employers 

The AGE scheme supported thousands of employers to take on young apprentices. The incentives made available through the Plan for Jobs have also been a fantastic success.  

More than 100,000 new jobs have been created so far, of which 76 per cent have been for 16-24-year-olds. This is significantly more than the starts on the much pricier Kickstart scheme.  

Cash incentives give employers flexibility to choose how they invest the grant, whether that’s an indirect wage subsidy or investment in infrastructure to support the apprentice.  

So we need a longer-term employer incentive scheme to build on the success of the Plan for Jobs.

However, after January 2022, this should be targeted at the 16-24 age group and maintained at £3,000 per apprentice.  

Apprenticeship job creation also means long-term sustainable employment, as over 90 per cent of apprentices are retained as staff.   

2.     Fund 16-18 apprenticeships from the 16-19 budget 

This would remove these apprenticeships from the scope of either co-investment or levy funding and support more employers to employ younger apprentices.

3.     Double the cash incentive for training providers 

After all, training providers are the government’s salesforce for apprenticeships. 

Training providers were previously able to access greater funding for 16-18 apprentices.

This was important, as the cost of finding, recruiting and supporting a young person in the workplace along with training and assessment is higher than supporting an adult already employed in the workplace.  

The government needs to enhance the incentives it currently offers to training providers to support young apprentices through a young apprentice funding premium.

Training providers were previously able to access greater funding for 16-18 apprentices

There is a £1,000 provider “additional payment” incentive for 16-18 apprentices. But this is not high enough to drive effective positive change. The current £1,000 training provider “additional payment” incentive should at least be doubled.

Funding premiums should properly reflect the additional investment required to provide high-quality and attractive work-based learning for young people.

With these changes, the government could show it’s walking the walk, and not just talking the talk, about boosting apprenticeships.

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