The 2017 reforms to the apprenticeship system were ambitious, and rightly so. They demonstrated two fundamental understandings: first that for apprenticeships to succeed they needed a long-term, sustainable funding source, and second that they had to be rigorous if they were to win the confidence of employers and learners. The apprenticeship levy was designed to deliver the former while a host of other measures would ensure the latter.
From my conversations with some of the country’s leading apprenticeship employers, it has become increasingly clear that several of the provisions within the 2017 reforms that were aimed at driving growth and quality are now proving counter-productive and restricting take-up.
A recent roundtable discussion on the topic hosted by Ofsted outstanding apprenticeship training provider, MBKB and attended by some of the country’s leading apprenticeship employers repeated many of the calls I have heard from industry.
What’s the rush?
While the levy has successfully driven employer-funded apprenticeships, there is a feeling among some in industry that the two-year expiration on levy funds is inadvertently encouraging the adoption of a ‘spend it or lose it’ mentality. This leads to rushed financial decisions rather than strategic workforce development.
We need a more nuanced and flexible approach to the levy. Extending the expiration period could encourage more thoughtful expenditure, aligning training initiatives with long-term business strategies.
Tailored to suit
There is also a common feeling that reform is needed to address the rigidity of apprenticeship minimum duration requirements.
The 12-month minimum length of apprenticeship, for example, while suitable for some programmes, does not necessarily align with the operational demands of others. For instance, I have heard that certain schemes, such as in retail and customer service training, would be more effectively delivered in shorter, more intensive programmes – to the benefit of apprentices, training providers and employers. Meanwhile, others are being completed too quickly.
A reform to the system that legislates for a more flexible approach to minimum length requirements would enable better tailoring of apprenticeships to specific job roles and industry needs.
Pay and progression
Poor retention rates in apprenticeships also demand attention. The feedback from industry leaders suggests that a combination of factors (including the apprenticeship wage structure and lack of clear progression pathways) contributes to high drop-out rates.
Some have argued that increasing the apprenticeship minimum wage could positively impact apprentice retention rates by providing financial stability and demonstrating the value of their contributions. In turn, this would enhance job satisfaction and commitment. This is an option, among many, that the government could consider to improve retention.
A changing world
The way forward is not to dismantle what we have built but to listen, adapt and refine. This refinement is not just about making minor tweaks; it is about ensuring our apprenticeship system remains relevant, responsive and effective in a rapidly changing economic landscape. Modifying our approach as the circumstances change is a cornerstone of good policymaking.
Continuous examination reforms in the UK since 1986 underscore a crucial lesson to policy makers: complex policies demand calculated, large-scale improvements over time, ensuring long-term benefits and stronger foundations for future generations. There is no reason this dynamic logic of policy making should not be applied to improving the apprenticeship system.
As we see a shift away from traditional emphasis on university degrees, apprenticeships stand to play a pivotal role in filling the skills gap. This will only happen if they are attuned to the evolving needs of learners and employers.
While the foundations of the 2017 apprenticeship reforms are robust, targeted amendments are necessary – and will continue to be. By refining the levy, introducing flexibility in programme lengths and addressing retention challenges, we can ensure that our apprenticeship system remains a key driver of skill development and economic growth.
And by continuously drawing on the wisdom of industry, we can sustain them as the pivotal and adaptive avenue for career advancement today’s ever evolving world requires.
Previous Job: Assistant Principal – Teaching and Learning, Barnsley College
Interesting fact: Outside of education, Rachel enjoys musical theatre
John Toon
Chair of Governors, Luminate Education Group
Start date: November 2023
Previous Job: Partner – Head of Commercial Tax, DWF
Interesting fact: One of John’s first jobs in practice was for Leeds City Council, helping investigate and then registering the titles to hundreds of back-to-back houses which used to stand where Leeds City College’s Quarry Hill campus is now
Demands on unpaid college chairs are growing. Waltham Forest College chair Paul Butler tells Jessica Hill about the importance of finding college governors who are rooted in their communities.
College governors are told to ask challenging questions. But preparing interview questions to ask a highly experienced college governor is a tough ask. And Paul Butler is one of the biggest names in college governance.
Yet his online footprint is virtually non-existent: he’s not on X or LinkedIn and didn’t give much away in the only interview he’s done before this – a set-piece Q&A with the Education & Training Foundation (for whom he is a governance adviser) about his position as chair of Waltham Forest College.
Butler is slightly wary of me as a journalist. In a former role as a Department for Education civil servant, he had rigorous media training and is very careful in his use of words. He tells me that he “doesn’t see the necessity” of having an online presence.
“All my career has been focused around community and education, but I feel no need to present myself on the web in that way. I get my joy and satisfaction from the work that I do.”
Paul Butler at Waltham Forest College
Working for free
Butler’s main career has always been either in the civil service or the voluntary sector. It is hard to fathom how he has time for his many commitments. He is currently chief executive of the Selby Trust, a community hub in Harringay, and is “really excited” it has just secured levelling up funding with the council to build a new community centre and housing.
He also holds FE roles with the Education and Training Foundation and the Association of Colleges, which involves advising colleges through governance reviews and providing “mediation where there are difficult issues”. There is also his (unpaid) chairmanship of Waltham Forest College.
The position takes up more time than it used to 15 years ago when he took on his first chair role, for Leyton Sixth Form College. That’s because “there are now more expectations from government and regulators in terms of how many activities I need to get involved with as a governor”. A “marathon meeting” the night before our interview took close to three hours, although such a long session is fortunately “unusual”.
Butler “could” spend a day and a half a week on the role. It’s an admirable thing to give up your time for free, but it’s harder now for colleges to find people willing to do so. But, he has no gripes about the lack of remuneration.
He spent five years as a councillor for ACAS (the Advisory, Conciliation and Arbitration Service), which was paid, and believes that “sometimes if you professionalise a sector, it becomes extremely competitive. I’d rather we place the emphasis on people’s skills, energy, and genuine commitment to FE.”
Paul Butler, Waltham Forest College
Diversity with purpose
Butler is passionate about making FE more diverse. But for him, diversity is not necessarily about hiring more senior people from ethnic minority backgrounds. He recalls recently advising a college board in a diverse community, who told him they were concerned they had no ethnic minority representation.
There was “deafly silence” when he responded that he was “unsure why you think you have a problem”. Butler wanted the board to first question “why they want diversity”, in the same way they might consider gender balance and people with experience in HR or digital skills.
“I wanted them to think about the lived experiences and skills missing from not having those people around the table, as opposed to ‘we just need to get someone’.”
Butler then told them: “‘I’m sure you didn’t appoint me as your governance advisor because I am black’. Then they understood, because if that’s all I brought to the table then why have me?” He believes “as much effort” needs to be put into thinking about the “support structures” required to retain people from minority communities, as goes into recruiting them.
He is also co-chair of the policing panel for Enfield and Harringay and notes the problem police forces have with retaining ethnic minority officers. “Because if they feel isolated, then people will leave”. But diversity is not a problem for Waltham Forest College’s board.
Its 13 governors include a finance company chief executive, two auditors and two former directors from ETF and DfE. Around 50 per cent of the board and senior leadership are from ethnic minority backgrounds. Butler is the second oldest, with most members still being “in the heights” of their careers. Such a diverse board is “extremely unusual” in FE.
“You’re not going to survive our recruitment process if you can’t demonstrate an understanding of not just what the local economy is about, but what the community’s needs and challenges are.”
Paul Butler as a baby with his parents, Sadie (who was in the NHS) and Gilbert (a carpenter) Butler.
The brave soldier
Butler knows those challenges well, as he’s lived in Waltham Forest most of his life. His dad was a carpenter for the local council and his mum a nurse, “so pretty typical of the Windrush generation”.
Waltham Forest has many English for speakers of other languages (ESOL) learners who came to the UK as refugees or economic migrants, and in some ways, Butler can relate to that.
When he was 12, his family moved to Jamaica (where his parents are from) for several years.
Attending a school where 90 per cent of the teaching staff were black made him reflect years later on the importance of role models for young people, “to be inspirational about what they can achieve.”
Butler got to know his large extended family in Jamaica – both his grandmothers had 14 children.
Moving back to the UK several years later was hard. He recalls trying to walk back to his grandfather, a farmer, for a final farewell. He told his grandson to “turn around and walk like a brave soldier”.
“I still wish I’d had that last hug from him, because he died the year after. Those impressions count.”
Back in the UK, Butler had planned to study full-time. But because his family had been abroad for over three years, he was classed as a foreign student and had to earn money too. At first, he had to claim benefits, the first time anyone in his family had done so. “It burned me, I literally cried,” he recalled.
But “things happen for a reason”. Two weeks later, he was offered a job at the same job centre marking the start of a 16-year civil service career.
He rose through the ranks to become a DfE senior training development manager, where he had “absolute flexibility to do things and not be too concerned about resource”. (Nowadays, “resource is always an issue”.)
Butler left DfE because his office moved to Sheffield, and having just got married he was reluctant to up sticks. He moved into the voluntary sector, taking on director roles for the Council of Somali Organisations and the East London Training and Enterprise Council.
Paul Butler as a toddler
Needing time out
The most difficult moment in Butler’s life came when he ran a national charity, Path National, focused on addressing under-representation of ethnic minority groups in the public sector. There were “ongoing challenges around resources and bidding” and it was “quite a competitive environment”. But he “absolutely loved” it.
In New Year 2004, just when the charity was at the height of success, Butler recalls he and his wife looking out their front room window together and reflecting on how their eldest daughter, then 15 (now 34, and working for a law firm) would soon be taking her A levels. Their other daughter was 12 and their son was 8.
A month later, his wife was diagnosed with a brain tumour and died three months later.
It was a “nightmare”. Butler still doesn’t know how he got through it. But he was back at work within two weeks.
His first move was to buy a double freezer for the garage, so when he was home late, his daughters could sort out dinner. Now, Butler believes he should have taken more time out to heal.
He did make some work-life changes though. After taking Path National into a merger he became a consultant, which gave him flexibility to work from home.
The pandemic further mellowed his views around work life balance. Before that, he would never have allowed an employee the flexibility to move out of London and work remotely. Now, three of Butler’s senior managers work flexibly, including one who moved to York.
“Covid taught me that family life and flexibility is more important than I thought previously. That’s part of my learning.” He applies that flexible thinking to colleges too.
Learners who miss lessons to work more hours “because cash doesn’t quite stack up for them” should be helped, through “systems which allow them to then dip into other modules to do at different times”.
“I don’t think we have much choice but to embrace that [flexibility] if we’re going to retain those learners.”
Paul Butler, Waltham Forest College
Current challenges of boards
All colleges must commission an external governance review by July 2024 and every three years going forwards. Butler has been involved in three of these in the last year.
The one he’s just completed took 11 days over eight months. During that time Butler conducted interviews, including with external stakeholders, and sat in on committees that his “desk research” compelled him to observe.
He feels the biggest challenge facing college boards is “succession planning”, with too many boards having “a great number of people who retired years ago” who “may not have the currency of current workforce issues.”
Boards need “refreshing” regularly, because “things can get quite cozy if you’re not careful”. He’s also wary of colleges that merge into large groups without putting structures in place allowing them to “understand their different community needs”, particularly in the context of devolution where a group sits within two areas.
Paul Butler, Waltham Forest College
Horizon scanning
He also emphasises the importance of “visioning” for boards. “If you’re unable to horizon scan, then you’re going to be in trouble.” Reclassification means colleges can no longer borrow privately, making forward planning harder when it comes to capital projects.
Butler believes some colleges made “high risk” borrowing decisions in the past which caused “problems”. But when DfE announced colleges’ return to the public sector last year, they should have given them more “lead in time” to understand the “alternative” funding solutions available. “That could have been better planned.”
At last night’s meeting, Waltham Forest governors discussed how their college is “bursting at the seams”. Whereas previously it might have borrowed to “buy a new site”, this is “currently challenging [and] we need greater clarity about what those [borrowing] processes are.”
Paul Butler, Waltham Forest College
Reviewing the chair
Butler is “not friends” with his principalJanet Gardner, although they “could have a coffee and chill”. He believes in keeping that professional distance, because “I’m also accountable to the rest of the board”.
Butler also believes that to dish out scrutiny, a chair should be able to receive it in return. So he gets his board to review his own performance regularly – an exercise that not all boards undertake.
When asked what he’s most proud of in his career, Butler squirms and says the question “sounds like one of those LinkedIn things that people post”. He evades answering. But it is evident that Butler has much to be proud of.
Faith has always been important to him, and it shows in his commitment to values. “Integrity, honesty and inclusivity – those things will be always close to my heart.”
Ofsted will go ahead with four proposed changes which will make its post-inspection complaints process “quicker” and “increase transparency” following a consultation with the sector.
It follows the inspectorate admitting its current policy wasn’t working, as first revealed by FE Week, amid widespread criticism.
The consultation, which ran from June to September, received more than 1,500 responses from providers in all sectors it inspects.
In a report published today, that watchdog said this was an increase of over 150 per cent from a consultation it ran on the same subject in 2020.
Of the respondents, 934 were from schools and 85 were from further education and skills providers.
The changes include “enhanced” on-site “professional dialogue” during inspections to address any issues and the scrapping of its internal review process.
They will come into effect from January and April next year.
Ofsted’s chief inspector, Amanda Spielman, said the inspectorate had piloted enhanced professional dialogue and allowing providers to contact Ofsted the day after the inspection “and these worked well”.
“I’m confident these changes will help resolve complaints more quickly, reduce the administrative burden on those making a complaint, and increase transparency in the process.”
Enhanced on-site professional dialogue
Ofsted said it would provide all inspectors with guidance on “developing and formalising” enhanced professional dialogue during inspections.
Under the change, inspectors will be asked to check with headteachers at specific stages of the visit “where appropriate”, including at end-of-day meetings and the final feedback session.
It said this would help inspectors “address any queries, misconceptions or concerns as soon as possible”.
It added that responses to the proposal were “very positive”, with 84 per cent of FE and skills respondents agreeing it should enhance professional dialogue during visits.
This will be rolled out from January.
Contacting Ofsted the day after inspection
Providers will be given an opportunity to call Ofsted the day after the end of an inspection visit if they have “unresolved issues”.
Previously the watchdog said this may include raising informal concerns about the process and its “likely outcome”, or queries about what happens next.
Ofsted said that “noting the comments received and wanting providers to be confident in contacting us”, it believed the call should be with an experienced inspector who is independent of the inspection in question.
“Where appropriate, this inspector may contact the lead inspector to help understand the context of any issues raised”.
Of the FE and skills providers who responded, 84 per cent agreed with the proposal.
It will also come into effect in January.
New arrangements for finalising reports
This change will see a new first step in the complaints process, with two routes, introduced.
Heads can either highlight “minor points of clarity or factual accuracy”, which will be considered “promptly” before the report is finalised.
Or they can submit a formal complaint.
Ofsted said some respondents acknowledged “the benefits” of separating existing processes and that most cases “are likely to involve providers raising minor points”.
But some were concerned they would not be able to make a formal complaint if they already chosen to highlight only minor points.
The watchdog said it would offer “clarity” so that providers could understand how the new arrangements will work “in new policy documents in due course”.
Three-quarters (78 per cent) of FE and skills providers agreed with this change.
It will come into effect from April.
Ofsted internal review process scrapped
The watchdog will scrap internal reviews of how it handles complaints, which currently form step three of its process.
Under the new scheme, providers concerned their complaint did not correctly follow the right process will be able to go directly to the Independent Complaints Adjudication Service for Ofsted (ICASO).
Ofsted will also introduce periodic reviews of how it handles complaints.
Its consultation report said many respondents said this would make the process “easier to navigate” and “reduce the stages that they have to go through”.
But some noted that ICASO’s role was to “review whether the complaints process was carried out properly, not to review the inspection itself”.
Ofsted said it welcomed the “independent scrutiny” the changes will bring, and believed that removing the internal process would “reduce the burden” on providers.
Of the FE and skills providers which responded, 88 per cent agreed with this change.
At this year’s AELP autumn conference, ESFA director for apprenticeships and bootcamps, Kate Ridley-Moy said that while she recognised challenges with the qualification achievement rate (QAR), it had to stay. It is the standard measure of success rates across all qualifications, she argued, adding that her team were looking at other measures to support understanding of the QAR. Let’s unpack this, and hopefully give Kate and her team some useful insights.
A level playing field?
The QAR for apprenticeships measures the number of people who fully complete an apprenticeship as a percentage of all leavers, with some added complications for cohort years. This is not the same methodology as for qualifications like A levels, where the calculation is the number of passes as a percentage of all people who took the exam. If we were to measure apprenticeships on the same basis as A levels, we would be celebrating very high success rates (97 per cent, in fact, according to Gillian Keegan).
Further, many of the reasons people don’t fully complete apprenticeships are entirely beyond a provider’s influence. Redundancy, illness and lack of time to complete the 20 per cent off-the-job training requirement are all regularly given as reasons for leaving, as well as more positive ones like promotion or role changes.
At HIT we track leave reasons very carefully to focus our efforts on reducing the number of leavers. For example, detailed tracking of one of our programmes revealed that some people were losing interest early. Our curriculum team surveyed the apprentices, made slight changes to the sequencing of delivery, and the number of leavers dropped.
Meaningful data
Next, QAR is averaged across all of the programmes a training provider delivers. This is not very meaningful to employers or prospective apprentices.
The success rates for our level 4 brewer programme are among our highest, at over 80 per cent. Most who take that apprenticeship are under thirty, have their sights set on a defined career and a good level of education, including English and maths.
Compare this with the fifty-year-old adult care worker who desperately wants to improve their skills but struggled at school, and as well as caring professionally has both younger and older generations of their family to care for.
Many such learners drop out mid-way because the pressures on them are just too much, but our tracking shows that they always (and I mean always) leave having developed useful knowledge and skills for their role.
Dysfunctional skills
Finally, people rightly should be able to continue studying English and maths in their adult lives, but why are apprenticeships the only programme of learning where a pass in these subjects is a condition of success?
An apprenticeship is about occupational competency proven over time. If the apprentice can become competent without having passed functional English and maths, then it is that competency that matters.
QAR squared
So to improve QAR, let’s have two versions alongside each other: one with all leavers, and another with just those that are within the influence of the training provider.
We should be held accountable for making adjustments if learners lose interest. It’s our responsibility to have effective initial assessments and honest conversations if a learner is unlikely to complete an element of the programme. And it’s simply unacceptable not to get close enough to learners to understand the risk factors that might cause them to leave.
But holding providers accountable for learners being made redundant or promoted does the whole sector a disservice. Discounting these leavers, HIT’s QAR success rate for 2022/23 would be 70 per cent, above the government 67 per cent target.
If QAR truly aims to improve the skills system for everyone, the only way is to develop a better understanding of the reasons people don’t finish their apprenticeships. The ESFA should therefore work with providers and employers to improve its inadequate list of leave reasons.
I’m sure our own extended list is similar to that used by other providers, but until the choices available on the ILR reflect this then the rather un-useful ‘other’ category will be what the ESFA see on our returns.
A bus driver strike has forced over a thousand college learners to study remotely this term, leading to a rise in mental health concerns and at least one safeguarding incident.
The pay dispute between Unite the Union members and bus company Go North East has left students stranded at home while colleges scramble for minibuses, taxis and extra bus services to get select groups to campuses, clocking up thousands of pounds in extra costs.
Go North East staff walked out at the end of September after workers rejected a 10.3 per cent pay rise offer as neighbouring Go North West workers are paid 20 per cent more. The strike is set to run until the end of December.
College representatives told FE Week that classes have had to be reorganised to focus on theory so courses could continue online.
East Durham College has a contract with another local bus company Arriva, but with the strike ongoing at Go North East, demand for Arriva buses has skyrocketed.
The strike has led to students resorting to walking miles to college, or to an Arriva bus stop, which are more sporadically located away from the Go North East bus routes and away from college campuses.
East Durham College campus director Alfie Wilkinson said one 16-year-old attempted to walk 13 miles to college one morning but after his phone died from using Google Maps, the college declared a safeguarding incident when family members could not contact him.
“He tried to get a bus and two buses went past without stopping,” Wilkinson said.
“We had members of his family and college staff out looking for him because he didn’t turn up for college. We didn’t find him until three o’clock.”
A spokesperson for Arriva told FE Week that it was running duplicate journeys as a result of increased demand, but added: “We do not have any plans to introduce additional services at this time.”
The college is also forking out £5,000 for taxis for the most vulnerable students, such as young carers and vulnerable learners with educational health and care plans.
It has provided taxis for nine learners so far, implemented a shuttle bus for 76 students, and paid drivers’ overtime. The college is even offering to pay mileage to parents who can drop off multiple students.
“We haven’t got a bottomless pit, but we are committed to putting in the finances to safeguard the education of the students,” Wilkinson said.
Holly Ackroyd, an 18-year-old who studies level 3 animal management at East Durham College, lives 20 minutes from the facility but has been stuck at home doing virtual learning as she lives on a Go North East bus route.
“It’s stressful. This is my most practical year and I’ve literally just missed out on all of it,” she told FE Week.
The college told Ackroyd to book a taxi, but she said getting a booking was like “trying to fight with someone on Black Friday”.
“Before the strikes, I got a taxi home from college, and it cost me around £16. Now it’s around £28.”
At neighbouring New College Durham, deputy principal Alison Maynard has identified 996 students who have no way of travelling to the college, which is “seriously impacting their studies”.
The college is now privately sourcing transport for around 500 priority students who need practical lessons, those in IT poverty, those who have assessments before Christmas, and students involved in performance shows and catering in the campus restaurant.
“We are in discussions with the Department of Education on how to recoup the costs of the transport,” she added.
The effort will be extended beyond the holiday period for GCSE mock exam participants. For the rest of the cohort, the college has switched to remote learning, but that also comes with issues.
“We are seeing students becoming disengaged and reporting an increase in mental health issues,” Maynard said.
Local MP Grahame Morris told FE Week: “Our FE providers should be commended for finding practical solutions to support their students, but they simply should not be forced into this position.”
Unite general secretary Sharon Graham said: “Go North East’s utter unwillingness to improve its pay offer in the slightest shows its blatant disregard for the wellbeing of its workers and the communities they serve.”
The government’s independent advisory pay body is considering scrapping the apprentice minimum wage rate.
The Low Pay Commission this week announced that it will “say more on this” issue once it has “considered new evidence” from a Department for Education survey and the body’s own commissioned research.
It admitted there was “widespread support” for the change which mean apprentices would be entitled the relevant hourly minimum wage depending on their age.
The commitment came after chancellor Jeremy Hunt’s autumn statement raised the minimum hourly pay rate for apprentices from £5.28 to £6.40. The 21 per cent increase will take effect from April 1, 2024.
Hunt also uplifted the national living wage by 10 per cent, from £10.42 to £11.44 an hour. This will apply to 21-year-olds for the first time, who will see an increase from £10.18 this year to £11.44 next year. National minimum wage rates for 18 to 20-year-olds will also bump up by £1.11 to £8.60 per hour.
In a summary of its pay recommendations, the commission said that “many stakeholders continue to tell us that the apprentice rate is too low”. The incoming apprentice minimum wage is more than £5 lower than the national living wage, and some £2 below the national minimum wage for 18-20 year olds.
Both employer and worker representatives told the commission the rate “discourages young people from choosing apprenticeships”.
The summary recognised there was “widespread support for removing the apprentice rate”, so it will “say more on this in forthcoming advice, once we have considered new evidence from DfE’s apprenticeship evaluation survey and our own commissioned research”.
But for now, the commission recommended keeping the apprentice rate aligned with the 16- to 17-year-old minimum rate.
The “large” 21 per cent increase it recommended “will go some way to reducing the gap with the NLW while maintaining a reduced rate for those employers who need it”, the commission added.
Apprentice representatives said the rise was welcome, but pointed out it is still “barely half” what the Living Wage Foundation says is needed to “even survive”.
“Whilst we welcome this first step towards a fairer, more equal share for apprentices, we see it as just that. A first step,” said a spokesperson for the National Society of Apprentices.
“We think the apprentice minimum wage has had its day. At its introduction, it was there to make sure we got paid ‘something’. The apprenticeship system was in tatters after decades of neglect.
“Now, however, the apprentice minimum wage pushes apprentices into poverty and debt.”
Hopes for increased FE and skills spending have been dashed, as analysts warn of cuts to unprotected budgets following this week’s autumn statement.
Chancellor Jeremy Hunt’s decision to prioritise spending on tax cuts – rather than increasing government department budgets – could lead to real terms cuts of around 3.4 per cent in the coming years.
That estimate, from the Institute for Fiscal Studies (IFS), would affect non-protected government spending, such as further education and skills budgets within the Department for Education. Historically, spending on schools, the armed forces, and the NHS have been protected from cuts.
Bee Boileau, IFS
Bee Boileau, a research economist at the IFS, said that while high inflation has increased tax revenues, it also means fixed departmental budgets are worth less in real terms.
“The government could have used the tax proceeds from higher inflation to compensate departments. Instead, they announced £20 billion of tax cuts.”
Boileau said current plans “imply big cuts to the level of public investment” beyond 2025 and that increasing budgets at next year’s spending review would jeopardise the affordability of tax cuts announced this week.
“The outlook for unprotected departments looks pretty tight. We expect those to fall by 1.8 per cent annually in real terms. Those are budgets for local government, further education, courts and prisons for example.”
However, when accounting for increased funding for the NHS and top-ups to devolved nations, “it looks like cuts for unprotected English departments are of the scale of 3.4 per cent a year in real terms,” Boileau added.
High inflation is already eating away at the sector’s spending power, most notably impacting on staff pay, as well as creating recruitment and retention challenges now acknowledged by Ofsted, the FE Commissioner and even DfE ministers.
The pay gap between school and FE teachers is currently £9,000.
Earlier this year, the Association of Colleges was only able to make a pay award recommendation of 6.5 per cent following an injection of £185 million this year and £285 million next year added to 16 to 19 student funding.
DfE’s further education budget of £6.4 billion, plus £1.2 billion for capital, was increased at the last spending review in 2021.
However, the IFS has previously reported that funding increases in FE only partially reverse real terms year-on-year cuts since 2010, and the AoC said inflation and the “changing economic circumstances mean some of the benefits have not been realised”.
Following the autumn statement, AoC chief executive David Hughes said the government’s spending plans “look worrying for colleges”.
Real-terms cuts to budgets “will mean pressure on DfE to cut funding in further education, a sector which has lived through a decade of funding neglect, and one which needs significantly more funding to tackle the pressing issues of teacher recruitment and retention, predicted student growth and qualification reforms,” he said.
Cash raised by the apprenticeship levy is set to dramatically surpass previous predictions and hit £4 billion by 2024-25, new forecasts from the government’s spending watchdog have revealed.
It means the gap between employer receipts generated from the levy and what is distributed for public spending on apprenticeship training will grow even wider, with one expert labelling the disparity as a “gaping chasm”.
The Office for Budget Responsibility (OBR) published its annual “economic and fiscal outlook” this week after the chancellor delivered his autumn statement. It now predicts that apprenticeship levy receipts will reach £3.9 billion in 2023-24, which is £300 million more than was forecast at this point last year.
Economists in the independent government agency, funded by the Treasury, predict that receipts will then hit £4 billion the following year, which is again £300 million higher than first estimated.
At that point, the Department for Education’s set budget to spend on apprenticeships in England will be just £2.7 billion, while the devolved administrations will receive around £500 million. It means the Treasury will be withholding around £800 million worth of cash generated from the apprenticeship levy in 2024-25.
The £2.7 billion budget was set at the spending review in 2021, which decided spending plans for the next three years to the end of 2024-25. A Treasury spokesperson told FE Week the department “does not tend to adjust the budget even if levy receipts rise or fall over the spending review period”.
The figures come weeks after FE Week revealed how the Treasury was accused of using the apprenticeship levy as a cash cow and was short-changing employers who contribute to the tax.
Simon Ashworth, director of policy at the Association of Employment and Learning Providers, said the OBR’s new figures show how the “growing gap between apprenticeship levy receipts and the apprenticeship budget is quickly becoming a gaping chasm”.
He added: “The rise in the expected levy receipts is no small fry, and once again increases the surplus between the levy take and the overall levy budget. According to OBR forecasts, this gap will get bigger and bigger in future years and is starting to look more like a windfall tax on employers, rather than a mechanism to invest in vitally needed skills training.”
Uplifting DfE budget ‘politically difficult’
Since 2017, UK businesses with a payroll of £3 million or more pay 0.5 per cent of their annual pay bill into a levy pot which is used to fund apprenticeships for both large and small businesses.
The Treasury then decides on a ring-fenced budget to give the Department for Education enough to spend on apprenticeships in England. The devolved governments of Scotland, Wales and Northern Ireland receive corresponding allocations via the Barnett formula, although this is not ring-fenced for apprenticeships.
Amounts raised by the levy have grown over time, driven by increases in companies’ pay bills – meaning more pay the tax – due to wage inflation.
Imran Tahir
Imran Tahir, a research economist from the Institute for Fiscal Studies, said he isn’t aware of any legal mechanism stopping the government from increasing the DfE’s apprenticeship budget after the 2021 spending review in light of the rise in levy receipts, but it would be “politically difficult”.
“If the government announced it was just increasing money for the DfE, then other government departments would complain even if there is this seemingly rational argument that the apprenticeship levy is collecting more, and therefore, the budget should be increased.”
He added that even though the tax is called the “apprenticeship levy”, the money that’s raised “isn’t hypothecated in the sense that it doesn’t determine the apprenticeship budget – this is separately set by the Treasury”, meaning the “name apprenticeship levy is slightly misleading”.
The OBR’s latest forecasts show that the apprenticeship levy will rise to £4.1 billion in 2025-26, £4.3 billion in 2026-27, £4.4 billion in 2027-28, and then £4.6 billion in 2028-29.
Figures for 2021-22 and 2022-23 show that 99.6 per cent and 96 per cent of England’s apprenticeships budget was spent, respectively.
Experts fear there could soon be an overspend amid soaring numbers of higher-level apprenticeships that are most expensive to deliver. FE Week understands there are discussions between Downing Street, the Treasury and the Department for Education about potentially restricting the use of levy funding for level 6 and 7 apprenticeships.
Tahir said there are “very important decisions” to be made by the government at the next spending review across the education budget, “particularly around how they set apprenticeship funding going forward”.
Skills consultant Aidan Relf said: “Politicians are talking up apprenticeships in an almost unprecedented manner but there’s no serious attempt to join the dots in terms of the UK’s woeful track record on productivity or skills shortages. It’s no wonder that the Treasury sees a large top slice of the levy as easy pickings.”
He added that for Labour – which has pledged to widen the apprenticeship levy so that it funds other forms of training, if it wins the next election – the OBR figures “make their ambitions more realisable but other competing priorities mean that hard choices aren’t necessarily avoidable”.
