Levy launch ‘horror’ story predicted following apprenticeship funding allocations


Apprenticeship providers are facing up to a “horror story” of bankruptcy and failure after receiving funding allocations that amount to a fraction of their current delivery, sector leaders are warning.

The amount of cash colleges and providers will receive in order to deliver apprenticeships to small employers between May and December was revealed by the Education and Skills Funding Agency on Tuesday (April 25) – leaving many of them fearing for their futures.

The ESFA announced earlier in April that it would be pausing the £440 million procurement process for the 98 per cent of employers not subject to the levy, after it was massively oversubscribed – news that was welcomed by many at the time.

However, many providers are dismayed by the “derisory” allocations they have received for the next eight months – with some facing cuts of more than 80 per cent compared with the previous year.

The situation is so dire that AELP boss Mark Dawe labelled it a “horror story” and the “the bonfire of the providers”.

Writing exclusively for FE Week Mark Dawe, (click here), warned that “some providers will be running out of money within weeks” and that “closures and redundancies will start next week”.

“Without immediate action and additional money allocated, the government will have managed to destroy capacity and the consequences for non-levy businesses, employees and learners will be dire,” he said.

He urged the government to “act today” if it “genuinely cares” about delivery to SMEs and “robust apprenticeship and skills policy”.

David Hughes, the AoC’s chief executive, echoed Mr Dawe’s concerns, describing the allocations as “less than colleges expected, and hoped for, and need, to meet the needs of apprentices and SMEs”.

“I have always been very worried about the emphasis on the levy, and the seeming reduction that it implies for SME delivery – particularly given that the programme has relied heavily on SMEs being the backbone of offering apprenticeships,” he said.

A Department for Education spokesperson however refused to clarify the situation, saying: “We cannot make any commitment to what will happen until after the election”.

The scale of the cuts is revealed in a letter from one angry provider, Birmingham-based Crackerjack, to apprenticeships and skills minister Robert Halfon. 

The provider, which has an ‘outstanding’ Ofsted rating and achievement rates of well over 90%, claimed its funding had been slashed by more than 80 per cent.

Its allocation for 16- to 18-year-olds for the eight months between May and December is just £79,466 – a massive 81 per cent drop compared with the £420,624 it received for the equivalent period this year.

And it has been allocated a paltry £22,770 for 19+ apprenticeships – a whopping 89 per cent drop compared with its pro-rata amount for this year.

“I wish to advise you that the allocation given to our organisation is derisory and in no way reflects our delivery record to date for 2016/17,” Chris Baker, Crackerjack’s finance director, wrote (read the letter in full here).

Read Editor Nick Linford’s view here

In a letter sent to providers this week, the ESFA said it had “worked out your allocation by calculating your share of provider earnings to non-levy paying employers” and detailed the methodology it had used.

“Within the available budget, we have cushioned your allocation in recognition of the fact that we have had to approximate your delivery to non-levy paying employers,” it added.

The letter also confirmed that “the current approach to subcontracting” would be maintained for new starts to non-levy paying employers until the end of December.

However, FE Week has been shown several emails from providers cutting ties with their subcontractor owing to a smaller than anticipated non-levy allocation.

But only providers on the new register of apprenticeship training providers would have their contracts extended.

FE Week asked the DfE for the total non-levy funding figure that has been allocated until December, and after repeated requests we were refused an answer and told they do not routinely publish total allocations, something which obviously not true.


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  1. Bob Smith

    Well said by both Nick and Mark. In all of my time in FE, I have never seen such a badly managed, poorly implemented reform agenda.

    There are so many problems still yet to come (for instance, EPA), I fear this will have a long lasting and negative impact on apprenticeships for years to come!

  2. I think some calm needs to be applied here and for the allocation process to be explained and understood more clearly.

    The allocations relate to new start activity only for non-levy paying employers for an 8 month period. I do not think that this has been factored in to some of the figures quoted above. Crackerjack are using their full 8 month delivery figure as a comparison which includes carry in and achievements, so this is not the right comparison. If they calculate their new start figure then it will probably be closer to the 80k allocation figure.

    The ESFA need to publish their headline figures, and to give a clearer explanation of their methodology. Providers then can check if they have had cuts or not. Providers will also need to factor in the proportion of levy deliver they had and it would be useful if the Government could provide the figures that they have used.

    Maybe a more important consideration is that changes in prices have not been factored in to the new allocation which may have an impact for some providers, but providers would have to model that through themselves.

    • Graham

      Agreed on all the points raised in your response. It is just a new start allocation and much more clarity on how the allocations have been arrived at would be very useful indeed – if only to understand what proportion of employers involved are non-levy paying. I’d love to see the detail behind that

  3. Margaret Geraghty

    I recognised several months ago that disaster in the sector was almost inevitable. I anticipated that there would be no place for a small private training provider such as my company. So, after 18 years of riding the funding roller-coaster, we can no longer sustain a training business that relies on funding and will close within weeks. Is this what the government actually wants?

  4. The way in which the 10% Government contribution to levy payers digital accounts is now being applied must be a cash-flow nightmare for the ESFA. Millions are being paid into levy accounts from April 2017 across the UK and the 10% top-up must be coming from a budget somewhere. If they had only paid the 10% when the cash left the levy account bound for providers, then only what was used would need to be matched. I wonder if this has tied up budgets and left the ESFA with no choice but to slash the allocations for non-levy payers?

  5. Geoff Carroll

    Think through the whole Apprenticeship Reform agenda from the Richard Review onwards. It’s all been complete bollocks whose principal aim was to save money, despite the weasel words about skills etc. Combine all this with the depletion of imported skilled labour as a result of Brexit and it’s pretty obvious many industries face meltdown. The bottom line is that no-one in government either understands or cares. I’ve been in FE and the skills sector for over 35 years and I’m happy that a) I’m working abroad (despite the downsides that has) and b) I’m hoping to retire soon!
    It’s unbelievable.

  6. Nelly B

    The perfect storm. Inept and incompetent allocation process, an election coming up, so no-one willing or capable of changing things. Colleges probably getting what they need for their own delivery whilst sub-contracting ITPs get nothing and probably going out of business. Bet it’s all smiles at FE Week.