HTQs should be at front of Labour’s growth levy queue, say researchers

Higher technical qualifications “should be a strong contender” for funding from Labour’s expanded skills and growth levy, say policy and research experts at Public First.

Modelling by the consultancy firm, shared exclusively with FE Week, shows pushing employers to boost investment in level 4 and 5 courses through the levy could generate up to £12.3 billion in lifetime earnings.

Labour has pledged to replace the existing apprenticeship levy with a “growth and skills levy” that would allow businesses to spend up to 50 per cent of their contributions on a wider range of training qualifications.

The party’s proposed new body, Skills England, will be tasked with creating a list of approved qualifications on which businesses can flexibly spend their levy money. 

Public First’s modelling, based on existing wage return research, set out to explore the impact of Labour’s levy changes.

It found higher technical qualifications (HTQs) are already available in the subjects Labour has said it will prioritise, align to occupational standards set by employers and can be taken flexibly, including by those in work, as they are “well suited” to a modular approach.

Public First also said previous government-commissioned reviews, including the 2018 Augar review of post-18 education, highlighted level 4 and 5 provision as a “missing middle” that could help meet demand for technical skills and boost productivity.

The consultancy firm’s modelling worked by breaking down spend of the apprenticeship levy by levy payers for the financial year 2021-22. Of the total DfE apprenticeship budget for that year of just over £2.4 billion, just under £1.6 billion was spent by levy payers on apprenticeships, with just over £800 million then recycled to non-levy payers.

Assuming employer spending behaviour does not change under the new growth and skills levy, Public First’s model finds “substantial benefits” from using the flexible levy portion to fund greater uptake of HTQs, with a benefit-cost ratio of 15:1.

It said if all £800 million of the levy not spent by levy payers was spent on HTQs, the “total lifetime economic return of such newly trained individuals could reach £12.3 billion”.

Under a more realistic scenario that Labour uses, a phased approach with 30 per cent of the flexible levy directed to HTQs “could result in 58,000 new qualifications and £7.8 billion in lifetime economic gains”, according to Public First.

This modelling assumes Labour would backfill the apprenticeship budget for non-levy payers, to ensure that spending on non-apprenticeship qualifications does not displace the overall number of apprenticeship starts.

Public First director Mike Crowhurst said: “Level 4 and 5 have long been the ‘missing middle’ in our skills system. Encouraging employers to use levy funds for these qualifications could stimulate demand for them and produce significant wage gains for workers – helping to deliver Labour’s goals on economic growth.”

There are around 163 HTQs currently approved for delivery by the Institute for Apprenticeships and Technical Education.