The majority of NHS trusts in England will spend their apprenticeship levy at a faster rate than other employers – even though most are frustrated by the policy’s “inflexibility”.

The news will be welcomed by the government as it struggles on to reach its three million apprenticeship starts target by 2020 – given that the NHS is the largest employer in the country with tens of thousands of people to train each year.

However, one significant sticking point appears to be the 2.3-per-cent apprenticeship target for the public sector, which most trusts do not feel confident in meeting.

A major survey of 175 trusts, conducted by BPP University, found that 95 per cent plan to use their levy money rather than lose it, and half (52 per cent) would spend the cash in the first year.

This compares to less than a fifth (18 per cent) of employers outside the NHS, such as those in banking, engineering and construction, and law, who say they’ll use their funds that quickly.

Four-fifths of the trusts (81 per cent) envisage spending their levy by year two, while only slightly over half of other employers (54 per cent) reporting that they will do the same.

It is gratifying to see so many in the health service embrace apprenticeships with enthusiasm

Meanwhile, 79 per cent of NHS employers plan to expand their number of apprenticeship programmes and almost all plan to offer clinical as well as non-clinical options – 89 per cent, for instance, plan to offer health care support and 85 per cent nursing degree apprenticeships.

“Many people in the NHS, especially those in clinical roles, had until recently little experience of apprenticeships,” said Professor Lynne Gell, director of nursing and healthcare education at BPP.

“So barely a year or so after the introduction of the apprenticeship levy, it is gratifying to see so many in the health service embrace them with enthusiasm.”

The findings will be taken as a boost by the apprenticeships minister Anne Milton, who is under pressure to urgently increase starts.

Figures released by the Department for Education in January revealed starts have fallen 41 per cent since the introduction of the levy in May, compared with the same period in the previous year.

For the government to hit its target there would need to be an average of at least 50,000 starts a month.

Ms Milton identified September as the month by which she expects to see a surge in starts, in an exclusive webinar with FE Week last month.

The NHS, which has a total workforce of 1.3 million, estimates its levy spend will be £200 million a year, and will achieve 28,000 starts by July 2018.

However, it appears the health service is not content either with how the levy is currently set up or the way the government is allowing it to spend its fund.

Ninety-one per cent of those surveyed said they wanted more “flexibility” in how they spend the levy and none are satisfied with the status quo.

Large majorities wanted to be able to use the levy pot for in-house training programmes outside of apprenticeships (84 per cent), programme overheads (81 per cent) and salary and headcount (82 per cent).

But while the rules are as they are, NHS trusts are focusing most of their levy funds on internal rather than external candidates.

Two fifths said they would use 80 per cent of the levy on internal apprentices.

Professor Gell said the government’s 2.3-per-cent apprenticeship target for the public sector is partly responsible for employers’ focusing on existing staff rather external hires.

What is worrying is that less than half of trusts (48 per cent) said they felt confident they would meet this target.

One of the major stumbling blocks the NHS is coming across when delivering apprenticeships is the 20-per-cent off-the-job rule – which was identified as the biggest barrier to apprenticeship recruitment in an FE Week survey earlier this month.

Three -quarters of NHS respondents said the requirement remains a problem.

Despite the sector-wide concerns about this rule, Ms Milton recently confirmed she would not budge on it.

It was mostly a week of celebration for FE providers, as five rose to ‘good’ Ofsted ratings.

Two of them achieved the feat in their first ever inspection.

However, one private provider fell to the ‘inadequate’, and another was brutally criticised in Ofsted’s first early-monitoring visit report on a newcomer to apprenticeships, prompting ministerial intervention.

Starting with the ‘good’ news: it was a great start to life as an employer provider for Specsavers Optical Superstores as it was given grade twos across the board in its first visit from the inspectorate.

The world’s largest privately owned optical group has a team who provide framework apprenticeships in optical retail, at intermediate level and standards-based apprenticeships in spectacle making at advanced level.

It trained over 500 learners last year.

Training leaders were praised for working “very closely” with Specsavers store directors to “ensure that apprenticeships meet their technical and customer service skills needs”.

Learners develop their work-related skills and improve their chances of gaining employment

Inspectors added that apprentices benefit from a “broad range” of very high-quality online learning materials, as well as high-quality off-the-job workshops, which “help apprentices quickly develop the knowledge, skills and behaviours that their employers seek”.

The other FE provider to achieve ‘good’ in its first ever inspection was Lionheart in the Community, based in London.

The not-for-profit organisation was rocked by the sudden collapses of First4Skills and Talent Training last year, but has since come out of the debacle on the other side.

At the time of inspection, LITC was training 450 adults through advanced learner loans.

Leaders were lauded for “successfully establishing a very welcoming environment” which meets the needs of the local community “very well”.

“Close links with employers and community groups support learners to develop their work-related skills and improve their chances of gaining employment,” Ofsted added.

“Learners are ambitious and the vast majority of them remain in employment, gain employment, or move into higher and further education after completing their course.”

The most glowing report came in for Leeds City College, which was given a grade two overall but ‘outstanding’ in three of the nine headline fields.

The chief executive and his team have “addressed successfully and swiftly” the main areas for improvement from the previous inspection on the 20,000-learner college.

“Staff have been highly effective in developing a curriculum that responds to the priorities of local employers for high-level skills and provides a route into employment for the most disadvantaged members of the community,” inspectors said.

‘Good’ news was also delivered to Cumbria County Council and Calderdale Metropolitan Borough Council this week as both adult and community learning providers rose from a grade three to a two.

“Senior leaders have been relentless in successfully eliminating the weaknesses identified at the previous inspection,” inspectors said about Cumbria, while at Calderdale, “managers rigorously monitor the performance of staff; this has resulted in improved quality and outcomes for learners”.

Senior leaders have been relentless in successfully eliminating weaknesses

On the flip side, Team Enterprises Ltd, based in Merseyside, went from a grade three to a four.

This small provider trained just shy of 300 apprentices and adult learners last year, but “too many” of them did not achieve their qualifications and complete their programmes.

Teaching, training, learning and assessment are “weak”, Ofsted said, adding: “Consequently, too few learners acquire new vocational knowledge, skills and understanding.”

Team Enterprises Ltd is currently on the government’s register of apprenticeship training providers but as a result of the grade four, which was given across the board including in apprenticeships, the ITP can now expect to be taken off of the list and be unable to deliver the provision in the future.

One of the most brutal Ofsted reports ever seen in FE was meanwhile published about Merseyside’s Key6 Group.

The monitoring visit report of the new apprenticeship provider said training was “not fit for purpose” and apprentices complained they were “not learning anything new”.

The report was so bad that skills minister Anne Milton had to immediately step in to stop the provider from taking on any new apprentices, which FE Week revealed yesterday.

It was also bad news for Thomas Rotherham College, a former sixth form college in south Yorkshire which converted to a 16 to 19 academy in November.

It went from a grade two to a three, and governors were slammed for being “distracted by their considerable work in securing the sustainability of the college through joining a multi-academy trust”.

As a result, “they do not provide sufficient challenge to leaders to ensure that the urgently needed improvements to A-level outcomes are made,” inspectors said.

Two other providers kept their grade two ratings this week following short inspections: The TTE Technical Training Group, a private provider based in Middlesbrough, and Wilberforce College, a sixth form college in Hull.

 

GFE Colleges	Inspected	Published	Grade	Previous grade
Leeds City College	06/02/2018	16/03/2018	2	3

 

16-19 academy	Inspected	Published	Grade	Previous grade
Thomas Rotherham College	17/01/2018	13/03/2018	3	2

 

Independent Learning Providers	Inspected	Published	Grade	Previous grade
Lionheart in the Community Limited	06/02/2018	15/03/2018	2	–
Key6 Group Limited	15/02/2018	15/03/2018	M	M
Team Enterprises Limited	30/01/2018	13/03/2018	4	3

 

Adult and Community Learning	Inspected	Published	Grade	Previous grade
Cumbria County Council	30/01/2018	12/03/2018	2	3
Calderdale Metropolitan Borough Council	20/02/2018	12/03/2018	2	3

 

Employer providers	Inspected	Published	Grade	Previous grade
Specsavers Optical Superstores Limited	06/02/2018	14/03/2018	2	–

 

Short inspections (remains grade 2)	Inspected	Published
The TTE Technical Training Group	13/02/2018	15/03/2018
Wilberforce College	06/02/2018	12/03/2018

The Department for Education is backing HMRC’s decision to collect VAT on subcontracting management fees.

The tax office has launched a major investigation into subcontracting to find out why primes have not been applying a mandatory 20-per-cent charge to their top-slices.

The crackdown, which involves a team of around 20 special investigators, has rocked a sector which may now face tens of millions in additional costs.

Many confused providers, who until recently had no idea about the rule, have engaged tax experts to calculate potential liabilities, though colleges are clinging to the belief that they may yet be exempt, and the Association of Colleges is backing them up.

The DfE, however, is one body with its mind made up.

“The rules are clear – VAT must be paid on management fees,” a spokesperson said.

The rules are clear – VAT must be paid on management fees

HMRC rules state that while vocational training is exempt from the tax, management services in subcontracting relationships are not.

Julian Gravatt, the deputy chief executive at the Association of Colleges, believes the department’s statement “oversimplifies a complex situation” and wants its members to tread with caution.

He recognised that management fees charged by colleges are “taxable in principle”.

But he also pointed out that paragraph 4.4 of VAT notice 701/30 muddies the water. It indicates that supplies of education and vocational training by “eligible bodies” including colleges can be “exempt” from VAT.

He stressed that eligibility for payment “depends on some fine distinctions”, and each case needs to be “judged on its circumstances”.

“Education and training are underfunded,” he added. “No-one will benefit if HMRC officials overstretch themselves in interpreting complex legislation.”

FE Week has sought clarification from HMRC, which was unequivocal in its response.

“The provision of education and services that are closely linked and essential to that education are exempt, if provided by an eligible body such as a college,” it said, adding that management services are not regarded as “closely related services” and are therefore subject to VAT.

FE Week understands that HMRC plans to investigate up to six years of unpaid VAT and will attempt to claim all of it back.

No-one will benefit if HMRC officials overstretch themselves in interpreting complex legislation

This could rise to 12 years if evidence is found that prime providers knew about the charge and failed to apply it anyway.

Substantial fines are also likely, according to one VAT expert.

Evidence seen by FE Week suggests the VAT rule is unknown to most providers, and has not been applied for years, meaning that hardly any of it has been paid.

West Nottinghamshire College, which subcontracted nearly £17 million in provision last year, has been liaising with its financial advisors and is “confident” its subcontracting arrangements “meet the requirements for VAT accounting”.

Eastleigh College, which subcontracted over £17 million worth of training in 2016/17, said it has always taken “external specialist advice” and its view on VAT and HMRC compliancy “has not changed”.

Neither would confirm if they have ever charged VAT on management fees.

Around a £1 billion of funding is subcontracted every year across the ESFA post-16 funding streams, which FE Week estimates would generate around £40 million per year in VAT for HMRC.

The largest college provider of apprenticeships in 2016/17 will have to cut more than 100 jobs in an effort to make £2.7 million in savings.

West Nottinghamshire College is blaming it on changes to subcontracting rules.

It had contracts to deliver apprenticeships and traineeships worth £19.8 million last year, but the overwhelming majority of this was subcontracted.

The college has now admitted it will be a “significantly smaller apprenticeship-provider going forward”, due to changes in the apprenticeship system brought in last May, including new subcontracting rules.

“Budget pressures caused by a reduction in the number of apprentices and on-campus students –which is consistent with the national trend – means we must take decisive and necessary action to ensure we remain on a stable financial footing moving forward,” said Dame Asha Khemka, the college’s principal (pictured above).

This would mean “reducing our staffing levels to balance income with expenditure”.

“We have already taken a range of measures to reduce our operating costs but, regrettably, job losses will be unavoidable,” she admitted.

The college said in a statement that it needed to save around £2.7 million, and was currently consulting on proposals to reduce staff numbers by 100 full-time equivalent posts.

According to the new rules for contracting and subcontracting, which came into force last May, lead contractors can no longer subcontract entire apprenticeship programmes.

Instead they must “directly deliver” at least some of each programme.

The rules state that “the volume of training and/or on-programme assessment that you directly deliver for each employer must have some substance and must not be a token amount to satisfy this rule”.

And all subcontracting arrangements must be agreed with the employer before the start of an apprenticeship programme.

In addition, many providers that were previously subcontractors are now able to contract directly with employers to deliver apprenticeships.

Much of the college’s apprenticeship provision to date has been “delivered on a subcontracting basis” through a “network of private training providers with sector-specific expertise”.

“This highly successful approach has formed a key part of its apprenticeship strategy and enabled the college to expand its offering,” it said in a statement.

It said it expected to see “this model of delivery disappearing altogether over the next two years” with “all provision coming directly from the college instead”.

As reported by FE Week last year, the college subcontracted 82.4 per cent of its apprenticeship provision in 2015/16, which earned it £3.2 million in top-slicing fees from provision worth £15.5 million.

At the time it appeared confident it could weather the funding changes: Andrew Martin, the college’s deputy principal said they were an “enormous opportunity to expand apprenticeship provision”.