A year on from the Levy, what are the implications?

 A year on from the Levy, what are the implications for apprenticeship recruitment?

About a year ago, we organised a roundtable to discuss the levy, with representatives from a range of large employers and providers covering a range of sectors, including KPMG, Amazon, Optimity and others. It provided an interesting insight.

We all anticipated that the changes would create some difficulties. Not only was funding for apprenticeships being fundamentally changed with the introduction of the levy, but the move to standards, the near abolition of qualifications in favour of End Point Assessments and changes to funding for small businesses meant that almost the entire apprenticeship system was being changed. Simultaneously.

 If, like me, you are a fan of Yes Minister, you can’t help but hear Sir Humphrey congratulating his minister for being ‘courageous’.

Anticipating these challenges, our roundtable focused on the anticipated legacy of the levy. The significant increase in funding, the drive to engage employers of all types to engage more actively rather than seeing apprenticeships simply as ‘free training’ as well as a real commitment to increase the quality and quantity of apprenticeships seemed to make any implementation challenges worthwhile. One year on, the evidence suggests that the bumpy road of implementation is creating major issues, and is not currently equipping companies, individuals, or the UK as a whole for challenges of the next few years. So, where are the challenges?

The apprenticeship levy has replaced training budgets

Many companies – and who can blame them – have viewed the levy as a tax that needs to be reclaimed. This should, in theory, drive more training thereby delivering the very essence of the levy. There are two major issues here. The Levy has simply replaced training budgets in many companies and staff are being directed exclusively to apprenticeships. No matter what the problem, the answer is an apprenticeship. This approach may allow companies to reclaim their levy tax but can lead to an inefficient and unproductive means of delivering learning.

At a time when multi-media learning has come of age and is helping individuals to access learning that they need at the time they need it, the apprenticeship levy is driving structured long terms programmes such as Management Degrees with a minimum of 20% of training time being off-the-job. This runs the risk of driving down productivity; learning is aligned primarily to programme structure, not business priorities. There is another issue too – as Apprenticeships can only address content defined in standards, there is a significant time lag built in to the introduction of new training programmes.

One example we encountered recently with some engineering clients was battery technology. This area is moving incredibly quickly, but is not covered adequately in current standards. To train people through an apprenticeship means a group of employers need to come together, the Institute for Apprenticeships (IfA) need to approve the concept, the standard needs to be drafted, the IfA need to approve it, agree funding levels, training organisations need to create content and End Point Assessment capacity established. This process can take from two to five years.

"49,000 less young people have been able to enter the world of work with an Apprenticeship programme than a year ago"

Apprenticeships are for young people - right?

Now, I’m not arguing that apprenticeships should be exclusively for young people – there is a strong rationale for helping people acquire new skills across the board, but the essence of an apprenticeship is about helping a young person acquire the skills that will form the foundation of their careers. Any system that does not deliver opportunities for young people, or worse still, blocks their access to these programmes must be wrong.

Many large employers are using their levy to up-skill existing staff. There is a clear need to increase skills across the UK’s workforce to help address productivity issues, but this is almost to the exclusion of young people.  The publication of statistics showing that the total volume of apprenticeships was down by 60% and then 40% for the first two quarters of the the levy are only part of the story. When you move beyond the percentages, this means that 49,000 less young people have been able to enter the world of work with an Apprenticeship programme than a year ago. Put another way, if the trend continues it’s the same as shutting 478 school sixth forms this year*. Whilst opportunities for young people have been cut so quickly, the number of over 25s taking advantage of the new apprenticeship standards has risen by 19,000.

Whilst some of the largest levy paying employers in the country continue to do excellent work with young people, the vast majority are using their levy pot in a different way. Furthermore, the near absence of funding for SMEs at the same time has created this collapse in opportunities for the next generation.

Global examples of best practice – including our European neighbours – deliver outstanding apprenticeship to help young people at the beginning of their careers. The apprenticeship levy currently appears to be used to send middle management back to University.

"Companies’ need to upskill their staff today to address business needs or introduce new technology is business critical and should be treated as such. Forcing this provision into an apprenticeship to reclaim the apprenticeship tax is counter-productive."

 A skilled labour market fit for the future

 Survey after survey has highlighted the issues of productivity and access to a skilled workforce across the UK. Brexit is only going to make this need more acute. The factors set out above make it very clear that the apprenticeship programme is not helping to address these issues. In fact, at the very time when we need to be creating a workforce for the future, all the evidence says we’re doing exactly the opposite.

The evidence? One of the best indicators is to look at labour market data. The Office of National Statistics confirmed in January that the number of vacancies has reached a record high for the fourth month in a row. Employers across the economy are not able to find the skills and talents they need. Whilst there is still no overall wage growth, evidence from the REC now suggests that employers are increasing starting salaries in a bid to get applicants. At a time when UK productivity is falling behind, upward pay pressure will make this situation worse.

 So, what should be done?

 Despite these challenges, progress is being made. The changes have reduced the number of learners on many low-quality apprenticeships and the levy has encouraged some organisations to look at their apprenticeship levy and use it constructively to address both future and current skills needs. This appears to be the exception, however, not the rule. So, is government spending delivering an apprenticeship system that will provide skills for the future? Here are three recommendations to help deliver a more responsive system to do just that.

  •  Free up management and hi-tech education from the restrictions of the levy and apprenticeships.

Companies’ need to upskill their staff today to address business needs or introduce new technology is business critical and should be treated as such. Forcing this provision into an apprenticeship to reclaim the apprenticeship tax is counter-productive.

  •  Provide access to apprenticeship funding for Small Businesses.

Every month that passes is a month where small business aren’t able to use apprenticeships to bring in their talent for the future.

In the long term, lack of skills. In the short term, wage inflation.

  •  Education and Training for Young and Old.

Ensure that young people can access apprenticeships. With the massive reduction in funding for 16-18 year olds, the apprenticeship system is not delivering the next generation of talent. Whilst incentives can distort the market, a simple requirement to spend at least 50% of apprenticeship funding helping young people start their career is now needed.


*Sixth Form Colleges association state that the average school sixth form has 209 students