Offering employers incentives regardless of an apprentice’s age in the Budget was completely the wrong call, writes Tom Richmond
“Our country’s future will be built by the next generation, so it’s vital that we harness the talent of young people as we rebuild from the pandemic,” said Chancellor Rishi Sunak in November last year, and he was right.
Younger workers aged 16 to 24 have accounted for nearly half of the total fall in employment during the economic slump. Previous recessions have shown it can take years for raised unemployment levels among young people to recede.
On that basis, you might assume that the Chancellor would seek to unashamedly boost the employment prospects of young people.
If that is what you were expecting from the Budget, you were in for a bumpy ride.
‘Make incentive payments permanent’
In the heyday of traineeships in 2015-16, they were creating around 24,000 opportunities a year for 16- to 24- year-olds, so they could go on to start an apprenticeship, new job or return to education.
But by 2020, the number of traineeships had fallen by half. So seeing the Treasury invest in traineeships last summer, in the spending review last autumn and now again in the Budget is a long-overdue but welcome recognition of the potential of this programme.
The additional £126 million to expand traineeships next year – including for the recently-introduced employer “incentive payment” of £1,000 – will provide enough funding to support tens of thousands of young people during these difficult times.
Going forward, there is a strong case to make these incentive payments a permanent feature of the traineeships programme in future.
‘No justification for extra cash for adults’
On the other hand, employer incentive payments for apprenticeships are nothing new. That is where we get to the not-so-good news from the Budget.
The incentives for hiring apprentices were first introduced in August and offered employers £2,000 to take on apprentices aged 16 to 24 and £1,500 for apprentices aged 25 and over.
From April to September, these incentives will become more generous at a £3,000 per hire – regardless of the apprentice’s age.
That is the wrong call.
Incentive payments can help employers build their capacity to support, mentor and supervise younger apprentices.
But there is no such justification for throwing money at employers for recruiting adult apprentices.
Indeed, it contradicts existing government policy that requires employers who do not pay the apprenticeship levy to contribute 5 per cent towards the cost of an adult apprentice’s training and assessment.
It is hard to see how offering £3,000 for recruiting adults will do anything other than undermine the interests of young people who desperately want and need their first step on the career ladder – even more so in these turbulent times.
To make matters worse, the deadweight costs of these adult subsidies are likely to be sky high – wasting tens of millions of pounds.
This precious funding could have been put to much better use by increasing the subsidies for young people to, say, £5,000 or even creating new subsidies for hiring disadvantaged young people such as those with low or no qualifications.
‘Lack of clarity on different schemes’
When sandwiched between traineeships, adult apprenticeships and the new Kickstart scheme, it is not clear how apprenticeships for younger learners are supposed to thrive in 2021.
The Budget offered no clarity on how these schemes are supposed to interact with each other.
Yet the potential consequences for the number of apprenticeship opportunities this year are obvious enough.
The overall focus on jobs and employment in this year’s Budget was entirely necessary. Attempts to generate new education and training opportunities as the economy begins to emerge from the national lockdown should therefore be commended.
Nonetheless, the Chancellor was correct to say that we must harness the talents of young people as we rebuild our economy in the coming months.
It is a great shame that one of his flagship policies might achieve precisely the opposite.