More than half of the £111 million earmarked for tripling the number of traineeships last year was handed back to the Treasury.
The Department for Education had to surrender £65 million of the pot due to several delays in running a procurement to increase training provider capacity to deliver the pre-employment programme.
Experts have expressed concern at the wasted money during a time of national skills shortages but say they are not surprised, as government officials failed to match the scale or urgency of the challenge.
They also believe other paid employment schemes, such as Kickstart, would have displaced many traineeship opportunities.
The DfE said its spending on traineeships is demand led and it is “right” that any underspend is returned to the Treasury.
Chancellor Rishi Sunak’s Plan for Jobs provided £111 million for up to 36,700 traineeships in 2020/21, including paying employers £1,000 for providing work placements for trainees. His goal was to triple the number of starts on the pre-employment programme after 14,900 were achieved in 2019/20.
But official DfE data shows that only 17,400 starts were achieved in 2020/21 – 47 per cent of the target.
Plans to rapidly grow traineeship numbers were scuppered by various delays to tenders intended to expand the provider-base – an issue that FE Week understands personally “annoyed” Sunak.
Skills minister Alex Burghart revealed the £65 million underspend last Friday in answer to a parliamentary question from Labour’s shadow skills minister Toby Perkins.
“This was because of the time involved in running a procurement to increase training provider capacity and the lag between providers developing their offer and engaging with potential employers and young people to mobilise delivery,” Burghart said.
He added: “As is usual practice, any underspends in overall departmental budgets by the end of the financial year are first returned to Treasury.”
The DfE would not say whether it fought the DfE to keep the funding and repurpose it to other skills training funding schemes.
Stephen Evans, the chief executive of policy and research organisation the Learning and Work Institute, said many young people can benefit from a traineeship “so any wasted money represents a wasted opportunity”.
“It is in part the consequence of an approach characterised by procurement delays and not matching the scale or urgency of the challenge,” he added. “The government must learn lessons from this for its planned future expansion of traineeships and create a more joined-up offer for young people and employers.”
Perkins told FE Week that the £65 million underspend shows the government “is failing to secure the training opportunities young people, adults seeking to retrain and those furthest from the labour market need at a time of national skills shortages.
“Labour warned that there would be limited appetite for unpaid traineeship posts. That’s why we urged the government to invest in supporting more employers, especially small and medium-sized businesses, to take on apprentices with a wage subsidy that could have created 100,000 new opportunities for young people this year,” he said.
A £65 million tender to expand the capacity and number of training providers delivering traineeships to 19- to 24-year-olds was originally planned to get under way in summer 2020 but didn’t conclude until February 2021.
Another procurement for expanding the 16-to-18 traineeship provider base was also not launched until September 2021. Up to £30 million was available but FE Week understands only £13.7 million has been allocated.
Some providers that have delivered traineeships since their launch in 2013, such as Babington, missed out on funding in the 19-to-24 tender.
Babington’s chief executive, David Marsh, said he was “really disappointed” to hear of the significant underspend. “Hopefully this will be better recognised in future procurement exercises so we don’t frustratingly end up with this scenario again,” he added.
Jane Hickie, chief executive of the Association of Employment and Learning Providers, said: “It’s concerning, but not surprising to see an underspend in the traineeships budget for 2020/2021, particularly given that independent providers were only able to deliver 16-to-18 traineeships from late last year.
“The lack of learner incentive means that traineeships are currently limited to those willing and able to take on an unpaid placement. A government-funded subsidy would undoubtedly drive up participation and help the government to meet their targets.”
Ministers hope to achieve 43,000 starts on the traineeships scheme in 2021/22 after investing an additional £126 million.
DfE data published on Thursday showed there were 5,600 traineeship starts recorded between August and October 2021 – a five per cent fall on the 5,900 recorded for the same period in 2020, and a two per cent drop on the 5,700 reported in 2019.
The DfE said it could not comment on whether it anticipates a further underspend to the traineeships budget in 2021/22.