The Chancellor’s skills announcement today – £820 million for a youth guarantee and a £725m apprenticeship budget uplift over three years – lands with an impressive thud, but nowhere near enough momentum. With almost one million young people adrift from education, employment or training, and a desperate need for more skills for the growth we need, it’s at least a recognition of the scale of the crisis. Yet it still feels more like a headline than a plan.
In 2017, employers agreed to a new tax – the apprenticeship levy – on the understanding that it would help them invest more in training and stop non-training employers freeloading. The government has since reneged on that deal. Levy receipts are now far exceeding what is returned to the apprenticeship budget.
During the next three years, the levy will raise around £3.34 billion more than it does today. The £725 million announced is therefore only 21 per cent of what employers reasonably expected to see flow back into training.
While Treasury officials may be quietly satisfied with this sleight of hand, AELP feels obliged to point out the consequence: government is effectively pressing the brakes by choking off levy-funded training while wondering why its accelerator – the youth guarantee – is failing to speed up growth or bring NEET numbers down.
Entry level jobs need to exist
Progress for young people ultimately depends on being offered that crucial first rung on the employment ladder. New initiatives can’t make a difference if entry-level jobs aren’t there. Employers are willing to play their part, but government policy is making that harder.
The underhand skimming off of the levy is just one part of how government is making this worse. Last year’s Budget saw the introduction of increased National Insurance contributions for employers. This year we’ve seen above inflation increases to the minimum wage.
Ministers must not be surprised if in the coming months and years they find that employers’ priorities drift away from opening up opportunities for young people – especially as they’re being given less time to spend allocations without clarity on the other “aspects” of the growth and skills offering they can use the levy to fund. A credible NEET strategy starts by backing the employers who want to invest in young people and by unlocking the levy funds that already exist for that purpose.
Remove growth caps to unlock capacity where it’s needed
There are other vital changes government can make, notwithstanding what I have just said, that will make things better. Currently, the 16–19 funding model makes it harder for providers to respond to rising NEET levels, with rigid growth caps and slow, centrally controlled allocations preventing expansion. Demand can shift in weeks, yet the funding system moves at the pace of years. A review is on its way, but if the government wants a system that is genuinely agile and innovative, it must fund it to behave like one. Growth funding should track real-time need, allowing providers to scale quickly, adapt their models, and test new approaches without being penalised for taking sensible risks.
This matters because capacity is already stretched. The youth guarantee and automatic FE places will only succeed if the system has the space to absorb the larger secondary-school cohort coming through.
Parity of provider types will deliver that extra capacity
If the government wants to harness the full power of the organisations eager to help tackle this crisis, it must ensure ITPs have the same powers as FE colleges. When ITPs have equal visibility, equal access to national initiatives and a guaranteed place in policy design, the system can expand its ability to respond. That means ending their routine exclusion from key funding schemes and removing rules that stop ITPs and colleges working together.
This parity will give policymakers a richer set of solutions and increase frontline capacity overnight – delivering the additional capability the youth guarantee and wider reforms need.
Employers and providers (of all types) are already doing the hard work and want to expand; they just need the government to stop putting barriers in their way. If ministers back them with the right funding, flexibility and parity, then the country has a fighting chance of turning this around. Without that, we risk another year of drift while too many young people remain stuck on the sidelines.
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