Wolf offers 3 apprenticeship policy ‘slam dunks’ for next government

Former PM skills adviser warns apprenticeships 'heading in the wrong direction' and Labour's plans will 'make things worse'

Former PM skills adviser warns apprenticeships 'heading in the wrong direction' and Labour's plans will 'make things worse'

13 Feb 2024, 13:12

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A former skills adviser to the prime minister has called on the next government to reduce the rate that employers pay into the apprenticeship levy but extend the tax to more businesses.

Baroness Alison Wolf also suggests cutting support for older apprentices while culling expensive apprenticeships in oversupplied occupations.

She described these “straightforward changes” as policy “slam dunks” in an opinion piece for the Financial Times yesterday in which she warned Labour against its plans to expand the levy to fund other forms of training.

Wolf, author of the 2011 review of vocational education, served as a part-time adviser on skills to the prime minister from February 2020 to February 2023 and is currently a non-executive director at the Department for Science, Innovation and Technology. 

She is also a crossbench peer in the House of Lords and professor of public sector management at King’s College London.

Wolf made the case for an employer levy to fund apprenticeship training in a report published in 2015 days before the government first unveiled the charge but has voiced her concerns with the design of the system since before it was launched in 2017.

She has long questioned why the government made it so that only large businesses with a payroll in excess of £3 million pay into the levy at a rate of 0.5 per cent of salary costs.

Under the system, levy-paying employers use what they pay into the levy to cover the costs of apprenticeship training. But the funds expire within 24 months if not used and go towards funding apprenticeships in small and medium-sized enterprises.

During a select committee hearing in 2016, Wolf described the system as “very odd” and suspected the design was “decided the night before” it was announced.

Wolf’s Financial Times article said the apprenticeship programme is “heading in the wrong direction on multiple fronts” because of this “flawed” unique funding system.

She wrote: “More and more apprenticeships are lengthy, high-level and expensive. Apprentices are increasingly older people who are often already employed and then get reclassified as apprentices, while openings for young people, especially the most deprived, have fallen fast.”

Government statistics back up Wolf’s claims. Starts have dropped 10 per cent overall since 2017/18 compared to 2022/23, but while under-19 starts have dropped by 27 per cent, starts for those aged 25 or older have grown 3 per cent.

Over that same period starts at levels 2 and 3 have dropped by 53 per cent and 11 per cent respectively, while starts between levels 4 and 7, which are the most expensive to deliver, have shot up by 135 per cent.

On top of this around half of apprentices drop out before completing their programme each year.

Wolf said the current apprenticeship offer “completely fails to tackle the yawning skills gaps in the economy”, citing current government estimates that just one in five apprenticeships are in a shortage occupation.

Wolf then ripped into the “strange” funding system that has led to these developments, including the mismatch, as previously reported by FE Week, between how much the levy raises compared to how much is actually distributed to fund apprenticeship training.

She explained: “Most apprenticeships are paid for by a flawed ‘levy’ on large employers. Small and medium firms are exempt. Those large employers can pay less of the tax if they take on apprentices themselves. Unsurprisingly, they have become better at this over time — hence the growth in apprenticeships for older people already working for the company, as well as in higher-level training that soaks up large levy sums.

“The result is that less money is left over for young people and SMEs. Because the Treasury treats the levy as a hypothecated tax, it refuses to top up the budget significantly for everyone else. The result? Terrible apprenticeship numbers in the occupations that the country most needs, and for the people who most want to do them.”

Wolf warned that Labour, as part of its pro-business drives, risks “making things worse” after it committed to allowing half of the apprenticeship levy to be spent on non-apprenticeship training.

“This would surely result in large companies keeping and spending even more of the levy money internally with even less going towards technical apprenticeships for young people,” she said.

Wolf said Labour should look instead to “sensible reforms” which could “spark an apprenticeship renaissance”.

“It should consider the following: a smaller levy but one paid by more companies; less support for older adult apprentices; and a cull of expensive apprenticeships in oversupplied occupations,” according to Wolf.

“These straightforward changes would transform the system at no additional cost to the Treasury. Voters would like it and the economy would benefit. Policy slam dunks like this rarely present themselves. The next government would be mad not to take advantage of it.”

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  1. Albert Wright

    What is clear is that big companies are happy to use levy funds to upskill / improve performance of older / more senior employees – and who says this should cease?

    Perhaps big companies don’t need young people doing level 2 and 3 qualifications in large numbers and don’t want to increase the number of workers but are using robots.

    Too few people finish their apprenticeship and undertake the “wrong” apprenticeships – but why is this so? Why would employers take on apprentices with skills they don’t need?

    Does the problem lie with the students or with the training providers? Are the students bored and stop or are they unable / unwilling to work hard to improve their skills or are the trainers failing to motivate the students or give the right support?

    Wolfe may be wrong?

  2. As an older engineering apprentice, I do think funding should be cut for people that do courses that are not in demand. That should also extend to university as well. I know many people who are unemployed having studied subjects such as music, business admin, theology at university and apprentice level. Don’t get me wrong, people should be allowed to study these things, but not with the funding of tax.

  3. Robert West

    The issue appears to be that the apprenticeship policy is trying to do too many things. Is it for people in work or entering work? For young people or older workers? For big companies or SMEs? In trying to be all things to all people (and businesses) it has tied itself up in knots.
    Time for a fresh re-think around what the problem is that apprenticeships – and the levy – are trying to solve.
    Oh yes, and a bit of transparency around where the levy take actually goes would be a ‘slam dunk’ for me.

  4. Phil Yeomans

    The main reason so many younger apprentices leave their apprenticeship is down to the reason they are taken on by the employer in the first place. Cheap labour.
    Too many employers are using the apprenticeship brand to take on an apprentice, which they pay less wages and pay lip service to their training requirements. The apprentice then finds a better job and moves employer, which most of the time results in their withdrawing from the apprenticeship.
    We need better quality apprenticeships and need to encourage larger companies to train the future workforce in the areas where they are needed. Currently we are creating a generation of partly trained younger workers who then find it difficult to get useful qualifications.
    Wolf is correct in the fact that it is too easy for a small employer to take on an apprentice just for cheap labour, so making sure the quality of the employer is better would improve quality of apprenticeships.