The Department for Education has revealed for the first time how the introduction of the apprenticeship levy in 2017 has led to a huge shift away from small employers.

Apprenticeship starts with small and medium-sized enterprises (SMEs) have fallen 40 per cent, while starts with large employers rose eight per cent.

One of the most affected industries, according to the figures, is health and social work.

It experienced a fall of just over 50 per cent in SME starts, from 70,810 in 2016-17 – the last time the figures were published – to 34,820 in 2018-19.

In total, there were 81,300 health and social work apprenticeship starts last year, in comparison to 121,680 who started on the programme in 2016-17.

Another sector hit by the launch of the levy in April 2017 is hospitality. Its SME starts dropped by 68 per cent, from 12,460 in 2016-17 to 3,950 last year.

Starts at SMEs in the “wholesale and retail trade” and “manufacturing” industry both fell around 40 per cent over the two-year period.

The former decreased from 22,690 to 13,080 while the latter declined from 18,620 to 11,100.

The overall number of apprenticeship starts for all employers dropped by 20 per cent, from 449,830 to 366,170 between 2016-17 and 2018-19.

The findings were revealed in the DfE’s analysis which “looked at the impact of the introduction of the apprenticeship levy on employers engaging with apprenticeships”.

Mark Dawe, the chief executive of the Association of Employment and Learning Providers, told FE Week: “This analysis is very timely with IfATE launching its consultation on funding bands because while the limited availability of non-levy funding is undoubtedly a major factor, the unviable funding rates for certain standards in, for example, hospitality and adult social care go a long way towards explaining these shocking falls.”

“Neither a flatlining economy nor stuttering social mobility are going to change for the better unless both factors are properly addressed.”

The DfE’s analysis will be of particular interest to the education select committee, which held their first oral evidence session this parliament this week on the impact of, and possible reforms to, the policy.

Stephen Radley, director of strategy and policy of the Construction Industry Training Board, told the committee it had been “very challenging for the construction industry, although the experience has been very varied”.

The latest figures show apprenticeship starts at firms in the construction industry have fallen 23 per cent, from 25,230 to 19,360 at SMEs.

This contrasts with a rise at large construction firms of 23 per cent, from 6,390 to 7,830.

In January, new boss of IfATE, Jennifer Coupland, called for an additional £750 million to prop up small business apprenticeships.

The Treasury poured cold water on hopes for new funding, after it confirmed that yesterday’s budget offers no extra cash for the programmes.

But the AELP has since claimed that new skills minister Gillian Keegan has pledged “significant funding” for additional small business apprenticeships in the “coming year” following a private meeting.

The DfE’s analysis showed that public administration was the only sector to experience a rise in the number of apprenticeship starts at SMEs, although this was recorded at just two per cent – from just 630 in 2016-17, to 640 in 2018-19.

However, almost all of public administration apprenticeships (98 per cent) took place within large employers in the last year, which saw starts rise 23 per cent after the introduction of the levy, from 22,180 to 27,190.

It was also one of only four industries to see an overall growth in starts over this period.

New legislation from 2017 set public sector bodies with 250 or more staff a target to employ an average of at least 2.3 per cent of their staff as new apprentice starts over the period of April 2017 (when the levy was introduced) to March 2021.

The other sectors bucking the trend last year were information and communication (28 per cent), mining and quarrying (22 per cent), and professional and scientific programmes (nine per cent).

A Department for Education spokesperson said: “We are continuing to work with all employers including small and medium businesses to make sure more people get the skills they need to get ahead and employers have the skilled workforce they need to grow.”

It is boom time at the Chartered Management Institute (CMI), a charity with a turnover last year of £15 million, where thanks to the invention of the apprenticeship standard is set to see income more than double this year and its chief executive has received a £66,500 bonus.

CMI is approved to end-point assess seven apprenticeship standards from the level 3 team leader to the controversial level 7 MBA and already have 28,350 registered apprentices, at a levy cost estimated to be more than £250 million of which CMI would receive fee income of around £26 million.

Accounts for CMI published this year reveal the chief executive, Ann Francke, has already been rewarded with a £66,500 bonus, increasing her income to £336,000, a rise of 25 per cent on the previous year.

These vested interests are showing little concern for the best interests of apprentices

A spokesperson for CMI said the bonus was agreed by a “remuneration committee” and was “in recognition of the successful growth in learners, chartered managers and invoiced revenues in line with the organisation’s mission and purpose as set out in CMI’s Royal Charter”.

But the astonishing growth in management apprenticeships funded from the levy, as first predicted by FE Week in 2016, has not proven universally popular.

So CMI has been working hard to keep policy makers onside, spending £2.315 million last year, 15 per cent of all expenditure, on what their accounts call a “representational role and public relations”.

They spent even more in 2018, £3 million, and have launched over 12 reports, such as one called ‘The value of chartered managers’, as well as sponsoring roundtable events at Conservative Party conferences.

CMI also hold regular events in parliament to lobby MPs, such as earlier this month in which their twitter feed said it was “great to have our MP Barry Sheerman here to celebrate management apprenticeships today” and there was “much excitement about the value of management apprenticeships”.

A spokesperson for the charity claimed the expenditure on public relations was “not lobbying and it covers the direct and overhead costs for all thought leadership and research which is critical to delivering CMI’s mission”.

CMI produces data of their own and claims it shows the over 4,000 starts on the senior leader (MBA) apprenticeship is “driving up social mobility, levelling-up regional skills and boosting productivity”.

But the lobbying appears to have failed to impress the secretary of state for education, Gavin Williamson, who said last month he was “not convinced the levy should be used to pay for staff, who are often already highly qualified and highly paid, to receive an MBA”.

Williamson went on: “I’d rather see funding helping to kick-start careers or level up skills and opportunities. That’s why I’ve asked for a review of the senior leader apprenticeship standard to ensure it is meeting its aims.”

The spokesperson for CMI responded, saying: “De-funding higher level management courses or other drastic steps, taken in isolation without looking at the whole apprenticeships programme in the round, risks damaging our ambitions on addressing skills shortages, as well as reducing the quality of provision and training opportunities across the country.”

But Tom Richmond, former adviser to the former skills minister Matthew Hancock, produced his own report in January, which claimed the levy was descending into farce.

Richmond took particular aim at hundreds of millions being spent on “rebadging management training and professional development courses for more experienced employees”.

In response to figures in the latest set of CMI accounts, Richmond said: “It is disappointing to see that, for all its good intentions, the apprenticeship levy is now being openly exploited for commercial gain. Far from improving the productivity of UK plc, it appears that the startling growth in ‘management apprenticeships’ is just lining the pockets of senior executives at the CMI as well as some training providers.

Richmond added: “These vested interests are showing little concern for the best interests of apprentices or taxpayers, yet they are consuming hundreds of millions of pounds that could have been used to help young people start a career in a skilled job or occupation.

“Gavin Williamson was right to voice his concern about the rapid emergence of MBAs within the apprenticeship system. Even so, our recent EDSK report called on the government to go much further by scrapping fake apprenticeships such as rebadged management training courses, as this will ensure that the levy funding prioritises younger recruits instead of existing employees.”

The government has embarked on a very last-minute mission to find out if students could fail to secure the mandatory T-level industry placement.

A tender to evaluate the controversial component of the new post-16 technical qualifications went live last week, with fewer than six months to go until students take their first class.

The Department for Education’s procurement documents said the timing makes this evaluation “particularly vital”.

It will focus on support measures announced last May to help providers and employers deliver T-levels, which included flexibilities in the mandatory 315-hour industry placement so learners could split the placement across two employers, and special allowances for certain routes: learners on the construction route, for instance, can complete a charitable project for 105 hours of their placement.

This seems to show that there are still concerns about gaps in provision

That’s in addition to £55 million in capacity and delivery funding handed out in 2019/20, after the DfE released £60 million in 2018/19, and adjustments in the 16-to-19 discretionary bursary fund “to account for the additional costs students might face due to participating in industry placements”, like travel and subsistence.

One of the questions intended to be answered by the evaluation is: “Are there any routes where sourcing placements is still challenging, or placements are not deliverable? If so, why?”

Three T-levels – in the digital, construction and education routes – will start in September 2020, with more being rolled out every year until 2023.

As the evaluation contract end date has been set as October 31, the DfE will not know what further support will be required until learners are already sitting the qualification.

The National Union of Students’ vice president for further education Juliana Mohamad-Noor said: “Tendering for some evaluation work just a few months from their beginning seems to show that there are still concerns about gaps in provision.”

But the union, Noor says, is “glad to see the government looking at how to make placements flexible” and they hope to see bursaries are used “to ensure cost is no barrier”.

A DfE spokesperson called the evaluation “routine” and added that since the launch of an industry placement pilot in 2017/18 they have commissioned several evaluations of placement delivery, as well as a further review of the available support.

The industry placement has become the most controversial element on the level 3 qualifications, with Scarborough Sixth Form College saying they dropped out of delivering the digital route last year partly because of the difficulty they had in securing sufficient numbers of placements.

Boston College principal Jo Maher previously told FE Week her provider had not signed up for T-levels as they had found placements “a challenge for rural areas” like theirs.

Fellow Lincolnshire principal Janet Meenaghan, of New College Stamford, has also said making placements work in the area was “really, really difficult” because a lot of the county’s businesses were either small or micro, many with just one or two staff members.

An earlier review of the support measures put in place by the DfE in 2018/19, including the £60 million for the capacity and delivery fund and £5 million invested in the National Apprenticeships Service to link employers with providers, is due to be
published this spring.

The initial T-level rollout was delayed by 12 months in 2018 amid worries about its pace, yet at that time the then-education secretary Damian Hinds refused a request by the DfE’s permanent secretary Jonathan Slater to delay their start from 2020 to 2021.

Bidders have until Monday, March 16 to express an interest in the new tender. The successful bidder will be selected in the week beginning April 27. The contract value is unknown.

A learner find firm is attempting to broker a subcontracting deal for 16 to 18-year-old trainees who have already completed their placement at football clubs.

Prime providers that take up the offer from Develop Your Staff (DYS) would break government funding rules, according to an auditor.

An email from DYS, sent to providers with direct access to funding, asks: “Do you have any underspend on your 16-18 traineeship funding contract which needs spending?”

Of the five unnamed providers looking for access to funds, one of them “delivers sport traineeships and delivers nationally, great links with football clubs and fantastic success data”.

“They also [have] 65 unfunded learners based around London, all completed. Their prime ran out of funding so they were unable to process.”

Another is “seeking around £30,000 for their unfunded learners, they are based in Yorkshire and deliver sports and construction and in addition to the £30,000 they require, they would be looking at enrolling an additional 15 candidates per month”.

DYS’ hunt comes amid a consultation on radical Education and Skills Funding Agency rule changes. It states that “entering into subcontracting arrangements for financial gain” is not acceptable.

The consultation includes a dedicated section on subcontracting of sport related provision, as it is an area that the ESFA is “particularly concerned” about.

“While we recognise that it [subcontracted sports provision] provides access for some learners who might otherwise be disengaged, there have been cases where weaknesses in oversight arrangements have given cause for concern,” the ESFA has said.

“Problems have arisen as there is generally also a sports club involved as a third party in the programme which may provide specialist coaching, and the boundaries between the funded education programme and the associated coaching activities become blurred.”

Just last month FE Week revealed how a different training provider was offering a reward of just under £30,000 for simply adding their data on achieved learners to a government funding claim.

Existing ESFA ‘funding and performance management rules’ state that it is “vital” that all directly funded organisations must “properly monitor and control all subcontracted delivery”.

While DYS would not itself be in breach of any government funding guidelines, an experienced individual learner record auditor, who did not wish to be named, told FE Week that any provider who entered into a subcontracting arrangement after learners had already competed their traineeships would be breaking the funding rules.

Danny Scargill, the managing director of DYS, would not provide the names of the providers he is trying to broker subcontracts for, but he insisted the ESFA extract quoted by FE Week is “simply part of the commentary: it is not a rule”.

He said: “The providers we are working with, certainly in relation to our post, are not directly funded. We are simply helping to coordinate supply with demand.

“It is not a breach of the rules for any providers to use consultants to help accelerate their funding spend, certainly when there are critical situations or unexpected issues.

“A couple of the providers advertised have unfunded learners, learners who could ultimately be disadvantaged due to the providers losing funding from their primes. We have stepped in to help them with our large network of clients. I am sure you would agree that this not something that should be criticised.”

Scargill added: “We provide a particularly beneficial service in this sector. When a training provider loses funding, learners are always the people that suffer. They are left in limbo and are often unable to complete qualifications that they have started. This should not happen and, in some circumstances, we can help those learners by finding alternative funding streams that would otherwise be unavailable to their training providers.

“The funding allocation system that is currently in place is not perfect but we are helping to perfect it. With our assistance (and similar from other brokers) the market for learners continues to increase and learners have a safety net where their provider loses funding.”

DYS’ website states that it has “no upfront fees for our telemarketing service”…“we simply charge a fixed fee per candidate found”.

Scargill would not reveal how much his firm makes from placing each learner with a provider.

A college has delayed signing off on its 2018/19 accounts as forensic investigators shed light on its unexpected £6 million deficit for the first time.

Independent auditors were drafted into Gateshead College late last year after the shock shortfall was discovered.

Principal Judith Doyle and chair John McCabe have since left their positions.

While full details on the cause of the deficit are still not known, the college has confirmed that the investigation has now concluded.

A spokesperson told FE Week: “The forensic investigation instigated by the board established that the financial position is not as the board understood it to be at the start of July last year because the income position was overstated and the expenditure was substantially understated.

“This meant the college’s projected out-turn and the 19/20 budget were inaccurate.”

They stressed that the report “does not suggest that there has been any misappropriation of college funds”.

FE Commissioner Richard Atkins intervened at Gateshead College when the shortfall was first revealed. His report will be published “in due course”.

In the meantime, the college’s accounts have been delayed. They are expected to be finalised by the end of March or early April, the spokesperson said.

Experienced FE leader Andy Cole was appointed as Gateshead College’s interim principal in February following the resignation of Judith Doyle – who was the highest paid college leader in 2017/18.

He told FE Week: “In the short time I have been here I can see that this is a vibrant college providing excellent education, training and outcomes for its students and fulfilling an important role in the regional economy.

“We need to do all we can to maintain this by implementing a swift and effective recovery plan to restore the college’s financial health in the shortest possible time and I’m working closely with the board, the executive team, wider college staff and the relevant stakeholders to make sure that this happens.”

John Hogg, a former deputy FE commissioner, was drafted in to replace McCabe – who commissioned the independent audit into the deficit – as chair in January.

Shortly before Cole came onboard, Gateshead College launched a redundancy consultation and put 26 jobs at risk to help “address some short-term financial pressures the college is facing at the moment”.

Ofsted then downgraded the college from ‘outstanding’ to ‘requires improvement’.

Inspectors said the information leaders provided to governors about the college’s finances over recent months had “not been sufficiently accurate to enable governors to hold leaders to account for the management of resources and the college’s significant financial deficit”.

Gateshead College received a financial notice to improve from the Education and Skills Funding Agency in January after it had “been assessed as experiencing serious cash flow pressures”. The college is currently in formal intervention.

A new three-year financial plan has since been agreed on, and it is hoped to return Gateshead College to surplus by 2020-2021.

It recorded a surplus of £748,000 in 2017-18, according to its latest accounts.

A college campus that was controversially closed last summer has been sold for £3.55 million, just five years after £5 million was spent on a refurbishment.

The news comes as published accounts for Birmingham Metropolitan College also reveal property revaluations have contributed to a £23.7 million deficit last year.

The college told FE Week that it has now exchanged contracts for its site in Stourbridge with boarding school Old Swinford Hospital.

A spokesperson for the college said they are “satisfied that we achieved best value”, despite the sale price being £1.45 million less than the makeover costs in 2015.

The Stourbridge sale, which triggered strong local opposition including from MP Margot James, was decided on by BMet as it bid to pay back debts which had totalled £8.9 million to the banks and £7.5 million to the Education and Skills Funding Agency by May 2019.

The group’s recently published 2018/19 accounts show that it generated a deficit of £23.7 million in 2018/19. However, £18.6 million of this was owing to “impairment loss” of its assets.

A BMet spokesperson explained that the “value of the assets on the college’s balance sheet relates to historic value associated with a collection of assets that does not reflect the current market value.

“In layman’s terms the college has not had any cash loss because of impairing assets – it’s all book loss.”

The spokesperson said that overall, BMet is making “significant strides in reducing its level of debt and in 2018/19 the college reduced its operating deficit by half” – from £6.251 million in 2018 to £3.323 million in 2019. 

“In 2018/19 the college continued to monitor against its financial recovery plan with an aim to return to good financial health,” they added.

Stourbridge College, which dates back over 100 years and joined BMet in 2013, was closed following a review by the FE Commissioner.

Its 900 learners were transferred to Dudley and Halesowen colleges, and some staff were also absorbed by the two colleges in September 2019.

BMet’s accounts show that it received a combined £2.4 million from Dudley and Halesowen for the transaction.

In addition, BMet is expecting to receive a further £500,000 from Dudley associated with the disposal of its Arts and Design Centre.

Despite closing down the Stourbridge site to balance its books, the accounts state that the net proceeds from the sale will be used to “invest in the future” of BMet’s James Watt campus.

It will also go some way to “further reduce” its £8.9 million debt with Lloyds Bank.

While BMet’s accounts have been signed off as a “going concern”, its auditors said there was a “material uncertainty”.

“The college is dependent on the continued support of its bankers for the continued provision of loan facilities and the Education and Skills Funding Agency for short term cashflow support,” they state.

“These events and conditions indicate that a material uncertainty exists that may cast significant doubt on the college’s ability to continue as a going concern.”

Old Swinford Hospital is a £12,000 a year state boarding school founded in 1667.

Negotiations to buy the Stourbridge site from BMet got underway in October, following heightened concern that it could become housing.

The school teaches students from years 7 to 13, where parents pay for boarding at an annual cost of £11,940. The DfE pays for the tuition.

Closing schools and colleges at this stage in the spread of the coronavirus epidemic could do “more harm than good”, Boris Johnson has warned.

On Thursday the prime minister reiterated advice that education settings “should only close if they are specifically advised to do so”.

It comes after the government’s emergency COBRA committee agreed to move from the “contain” to the “delay” phase of its response to the pandemic.

However, the government is advising colleges to call off any international trips with students under the age of 18 they have planned.

Sir Patrick Vallance, the government’s chief scientific adviser, said that while it’s “true that there’s some effect in closing schools” the effect is “minimal”.

“Actually, you’d have to do it for 13 to 16 weeks or longer, and you don’t have to be a very advanced mathematician to work out that the chances of keeping children not speaking to each other or playing with each other over 13 to 16 weeks is zero,” he said.

“Therefore, you have to be very careful to make sure you take the right measures that will stop this, rather than things that might end up with children, for example, going to stay with grandparents at a time when they might be most vulnerable.”

Dr Chris Whitty, the chief medical officer, also said it was important to “do the right things at the right time. This is going to be a long haul. It’s critical we do not start things in advance of need.”

The move to the “delay” phase of the government’s response comes after the number of cases in the UK rose to over 450.

It was warned earlier this month that this phase of the government’s plans could include school and college closures. France and the Republic of Ireland announced earlier this week that all of its schools and colleges would close. Italy, Japan and parts of China made similar decisions earlier this month.

The Association of Colleges has issued guidance for its members.

“The Department for Education have confirmed that we have now moved into the delay phase in an attempt to manage the Coronavirus outbreak. As it stands, colleges will stay open,” it says.

“For AoC that means, until further notice, all our events, sports’ fixtures, network meetings, Policy Group meetings, and any other meetings required in the normal provision of our services, will proceed as planned.

“If staff have self-isolated, or tested positive, then of course they will not participate in any of these activities.

“If you have a confirmed case within your college visit https://www.gov.uk/health-protection-team. They will assist in next steps, including helping to organise a deep clean of the college. This is not for suspected cases, for confirmed cases only.

“Keep checking official Public Health England guidance for up-to-date info, advice and guidance.

“We will of course inform staff, colleges and partners immediately if this position changes. Until then, it’s business as usual.”

On Monday, the government announced it will allow apprentices to have a “break in learning” if they cannot be assessed due to the coronavirus.

You can read the government’s guidance for education settings here.

New skills minister Gillian Keegan has pledged “significant funding” for additional small business apprenticeships in the “coming year”, the Association of Employment and Learning Providers has claimed.

It comes a day after the Treasury confirmed to FE Week that Rishi Sunak’s budget did not include any new cash for apprenticeships despite the accompanying red book document stating that “government will ensure that sufficient funding is made available in 2020-21”.

AELP chief executive Mark Dawe says he has since met with officials in both the Treasury and Department for Education, and they have promised that fresh funding is coming.

“Immediately after the budget, AELP had confirmed in person by the Treasury, the apprenticeships and skills minister and senior DfE officials that there will be significant funding for additional SMEs’ apprenticeships for the coming year and in the spending review,” his newsletter to members said today.

“We have to trust that this is the case given where I have got the commitment from and, therefore, celebrate that AELP’s call for support for SMEs has been listened to and is one of the few new announcements of extra money in the skills system.

“I have agreed to meet with the Treasury again in the near future to further discuss this and other matters.”

Dawe added: “Having had almost an hour and a half with the minister today, what I can confirm is she is a massive champion for worked based learning, apprenticeships and the range of work that the ITPs do, as long as it is quality and demonstrates benefit to the learner and employer.

“But we have to be robust, demonstrate the quality of what we do at all levels and in all sectors.”

No figures for how much this extra funding will total have been revealed so far.

Both the DfE and Treasury have told FE Week that no decisions on the spending review have been made yet.

The AELP has repeatedly warned that levy shortages meant small to medium enterprises were being cut out of apprenticeship funding.

In January, new boss of the Institute for Apprenticeships and Technical Education, Jennifer Coupland, called for an additional £750 million to prop-up small business apprenticeships.

When making her plea she said the levy has led to small businesses cutting their training by ten per cent, while levy-payers have increased theirs by 20 per cent.

She added that the £750 million would cover the cost for about 85,000 apprenticeships which non-levy payers cannot fund.

New DfE data released today found that small and medium sized employers, those with fewer than 250 staff fell over 100,000 (42 per cent reduction), compared to a rise of over 16,000 for large employers (8 per cent rise).

The IfATE first projected that the apprenticeships budget would soon be overspent in 2018. The National Audit Office has since also warned that current funding for apprenticeships is unsustainable.

Hopes for new apprenticeship funding have been swiftly crushed after the Treasury confirmed that today’s budget offers no extra cash for the programmes.

In January, new boss of the Institute for Apprenticeships and Technical Education, Jennifer Coupland, called for an additional £750 million to prop-up small business apprenticeships.

And optimism for the funding was raised this afternoon when chancellor Rishi Sunak’s budget document said: “The government will ensure that sufficient funding is made available in 2020-21 to support an increase in the number of new high-quality apprenticeships in small and medium-sized businesses.”

It prompted Association of Employment and Learning Providers chief executive Mark Dawe to say: “At last! After months of persistent lobbying the government has taken a significant step today to fulfilling the prime minister’s promise last summer that apprenticeships should be properly funded.”

But a Treasury spokesperson has since told FE Week there will not be any new funding coming from them.

He made clear that the “sufficient funding” for 2020-21 would be in comparison to 2019/20, and it is affordable within the Department for Education’s 2019 spending round settlement.

The spokesperson said the majority of the funding is being made available through an extension to non-levy contracts until the end of October, to support SMEs transition to the digital apprenticeship service, as previously announced by the DfE.

The DfE confirmed last month that all apprenticeship starts will be managed through the digital apprenticeship service from 1 November 2020.

Only larger employers with an annual total pay bill of over £3 million who pay the apprenticeship levy can currently draw down funding for an unlimited number of starts from the online service.

The long-awaited transition for SMEs began in January, but small employers have been capped initially and can only make reservations for up to three apprenticeship starts.

Today’s budget document states that the government will “look at how to improve the working of the apprenticeship levy” in the build up to this year’s spending review, to support large and small employers in “meeting the long-term skills needs of the economy”.

When making her plea for extra apprenticeships funding, Coupland said the levy has led to small businesses cutting their training by ten per cent, while levy-payers have increased theirs by 20 per cent.

The extra £750 million requested would cover the cost for about 85,000 apprenticeships which non-levy payers cannot fund, she told the Financial Times.

The IfATE first projected that the apprenticeships budget would soon be overspent in 2018. The National Audit Office has since also warned that current funding for apprenticeships is unsustainable.