Levying employers to fund entry education and training for future staff is not a new policy in the UK[1]. In the 1960s a training levy was used to fund apprenticeships overseen by a host of Industry Training Boards (generally one per sector)[2].  It is a funding model which led to some forms of creative accountancy as the levy could be reclaimed on funds spent on education and training of employees[3].

Today’s Apprenticeship Levy operates across all employers whose salary costs are greater than £3m. Its use is restricted to nationally approved courses which carry fixed funding per course. Naturally, all courses must lead to the successful achievement of an apprenticeship standard. There are 702 currently listed[4].

As with all funding streams, we have seen employers, higher and further education institutions creating new apprenticeships which meets employers’, students’ and universities’ needs and so accessing new funding pots[5].

The current apprenticeship levy sounds fine in principle but there are a few potential problems[6]:

  • Employers’ skill profiles: Many employers neither employ nor can readily create openings for apprentices. Yet they might generate large apprenticeship levy funds due to their significant salaries, which even with some ingenuity they may not be able to use internally or locally. The financial services industry, operating largely in London, for example, could claim to be such an industry. In time this will balance out to some degree as financial businesses develop apprenticeship programmes as a part of their entry recruitment schemes and operate alongside any graduate entry schemes. We will also see such hybrid entry schemes cover IT and data science along with the usual range of business services. Even with these developments, financial businesses will generate a net surplus contribution to the apprenticeship levy fund.
  • Geography of levy generation: Much of the generation of the apprenticeship levy occurs in London by employers which do not have the capability or the need to use the levy on their own staff. While there is some leeway on re-distributing the levy to other companies, this will still leave significant funds unspent[7].
  • Engagement of employers: At the heart of the whole apprenticeship levy system is the need for employers to engage in multiple ways (development of standards, provision of development openings for apprentices, the release of staff for at least 20% of their time for education and training, etc.). Some employers choose not to engage and just see the apprenticeship levy as no more than another tax. This fixed mindset closes off potential development slots.
  • Appropriateness of the standards: Great efforts have been made to ensure the standards are relevant and up to date through the employer-led panels charged with their development. There must be a concern, however, over the numbers of standards generated. A simple test is to look at the range of occupations covered by the apprenticeship and technical education programmes. This comes out at about 35% out of a total of around 370 occupations listed in the UK Standard occupational classification (SOC). In other economies, between 700-1000 occupations are recognised, which might suggest there are too many (perhaps too narrow and too specific) standards in the UK. In defence of the current number of standards, there is an element of double counting driven by a core standard being further sub-divided into a series of options or specialisms. Perhaps of greater concern is the potential underplaying of key aspects of the economy which cut across both current standards and their associated occupational maps. One example of this would be the environment, which would encompass sustainability, low carbon and decarbonisation roles, and the growth of environmental monitoring and evaluation. Admittedly, many low carbon roles are hybrid, which reveals the adaptation of other roles. A second example would be around data science, which tends to get distributed across multiple occupations and maps. Here we find Geographical Information Scientist and Technician roles seen as a part of the construction sector but which are integral to the combination of satellite and other earth observation data (seen as a part of the space sector or the geospatial intelligence market) and are fundamentally data science occupations[8].
  • Appropriateness of the assessment regime and the rigour of its application: With many education providers, a wide range of standards and employers across the UK raises a major challenge of maintaining a common set of high standards. There is no easy solution to ensuring quality, but this is vital for the future funding and support of the current regime.
  • Strategic priorities and future employment prospects: The current listing of standards and their attached levels of funding do not carry or indicate the strategic importance of the occupation (to the UK, to a sector, to a region, to a career path), nor the future employment (growth) prospects. These two pieces of information would add greatly to the current set of standards listings and occupational maps and would help guide potential apprentices and education providers.

Some possible solutions to these initial problems:

  • Pooling and transfers: Building scale as a single employer is always a challenge in setting-up a series of relationships with education and training providers, managing on-site development etc. often for just one or two people. Far better would be the pooling of employers and their levies to run location and employer specific schemes. Where there are collections of many small employers (often start-ups with relatively high growth potential) there is a need for group solutions. This could be aligned with local state employers such as hospitals, universities, local authorities and schools. The Oxford-Cambridge Arc[9] which covers five counties (Oxfordshire, Cambridgeshire, Bedfordshire, Buckinghamshire and Northamptonshire) would appear to have the potential to operate a series of pooling and cluster arrangements to maximise the potential of the apprenticeship levy.
  • Brokerage: In order to lead and facilitate the pooling and transfer arrangements to best use the apprenticeship levy in an area, there is a need for a single brokerage body. One of the roles of such a brokerage body would be to create as many sustainable apprenticeship programmes as possible. Each programme could have its own leadership shared between an employer and an education and training provider.
  • Contributing employers: Currently the generation of the levy is restricted to those employers with a salary bill of £3m. This could be modified to include a greater number of small firms (say employing 25-50 staff) and also the levy could graded with larger employers paying a higher levy (say 0.5% being increased to 1% at 250 employees).
  • Core occupations: Some occupations are gateways to others, and there should be a bias towards funding those occupations (standards) which lead to the greatest number of outcomes and future career progression opportunities.
  • Minimum critical mass: It would be useful to tag each of the standards with the number of successful candidates and current number of registrations. A critical mass of candidates is needed in order to run a successful further or higher education programme and this number must be available over at least 3 years. In addition to the throughput numbers it would also be useful to engage the education and training providers offering the programmes, together with the employers.
  • Curriculum content changes: As the standards are reviewed and change over time, it would be useful to flag the implications of the accepted changes on both schools, FE and HE curricula.

Notes

[1] Pemberton, H. (2001) The 1964 Industrial Training Act: A failed revolution. Paper presented in the new researchers’ section of the conference of the Economic History Society, Bristol. 12 pages

[2] Department for Business, Innovation and Skills (2015) Combined Triennial Review of the Industry Training Boards. Department for Business, Innovation and Skills, London. 192 pages.

[3] Senker, P.J. (1992) Industrial Training in a Cold Climate: Assessment of Britain’s Training Policies. Avebury, Hampshire. 199 pages

[4] See the Institute for Apprenticeships and Technical Education website – www.instituteforapprenticeships.org

[5] Office for Students (2019) Evaluation of the Degree Apprenticeship Development Fund. Report by Warwick Economics and Development. 59 pages

[6] Many of these issues are raised in: Kuczera, M. and Field, S. (2018) “Funding of apprenticeships and the levy in England”, Chapter 4 in Apprenticeship in England, UK. Pages 59-73. OECD Publishing, Paris; Evans, S. and Dromey, J. (2019) Bridging the gap: Next steps for the apprenticeship levy. Learning and Work Institute, Leicester. 19 pages; CIPD (2019) Addressing employer under-investment in training – the case for a broader training levy. CIPD. 25 pages

[7] IPPR and the Greater London Authority (2019) Apprenticeships in London’s construction, retail and hospitality sectors: an executive summary of the London Progression Collaboration feasibility study. IPPR, London. This paper notes of the £2.6 billion raised by the levy across the UK in 2018/19, £588mn of this was raised as a result of London-based employers.

[8] See the occupational maps on the Institute for Apprenticeship and Technical Education website – see [4] above

[9] Ministry of Housing, Communities and Local Government (2019) The Oxford-Cambridge Arc. Government ambition and joint declaration between Government and local partners. Ministry of Housing, Communities and Local Government, London. 30 pages