The impact of government changes to apprenticeship funding bands and what further change is still needed

The last 2 years has seen a dangerous situation emerge in the UK skills sector. Senior policy makers in government have repeatedly expressed the critical role of skills in supporting economic recovery in the UK, and the importance of high-quality apprenticeships in delivering those skills. However, funding for skills has been shrinking in real terms, as static funding bands in the face of rapidly inflating delivery costs have left many colleges unable to resource course programmes, forcing providers to significantly reduce, or even entirely discontinue, their apprenticeship programmes.

More financial support is needed

The accountancy sector has been one of the shining successes of the roll-out of apprenticeship standards since the introduction of the Levy. A large majority of trainee accountants are now supported as apprentices, which has led to huge gains in social mobility, diversity and access to entry-level roles in a professional career with excellent progression and earning potential.

The days when a typical newly recruited accountancy trainee was a product of a private school and a Russell group university have thankfully been consigned to the past. Apprenticeships have truly helped to open up the profession to individuals regardless of their background. 

However, the challenge of delivering high quality apprenticeship programmes in the face of reductions in the levels of real funding means that many training providers are asking their clients to pay contributions towards increasing delivery costs. Most employers fully support the need for quality in the way their new recruits are trained and understand the need to help cover the costs that implies. But increasing numbers are now questioning whether apprenticeship programmes still make commercial sense.

It would be a shame to see a reversal of the success of recent years in encouraging employers of trainee accountants to embrace apprenticeships.

Some positive movement

As of the 1^st of August 2023, the Institute for Apprenticeships and Technical Education (IfATE) updated the Level 3 Assistant Accountant Apprenticeship Standard. The funding band for the standard has been revised and increased from £8,000 to £12,000 to reflect new content and the mandating of the Level 3 AAT qualification.

This is great news as it means that training providers such as First Intuition can continue to deliver high-quality training to learners at a time when delivery costs have been inflating so quickly.

From the employer’s perspective the mandating of the AAT qualification means that additional costs can now be covered by the funding, where in the past they would have to budget separately for these. These newly eligible costs include the student registration fee for Level 3, first-sitting exam fees plus the exam fee for a resit.

Positive movement, but more is needed

The 50% increase to the AAT Level 3 Diploma in Accounting funding band is a big step forward in the right direction for training providers to continue to be able to deliver quality apprenticeships. Until this change, apprenticeship funding bands had seen no inflationary increases, despite substantial increases in the costs of delivering apprenticeships through rising salaries and operational costs.

The increase to the Level 3 funding band follows the removal earlier this year of the non-levy reservations ‘cap of ten’. This means non-levy employers are no longer limited to a maximum of ten learners and can take advantage of hiring as many new apprentices as their business needs.

What change is still needed

Despite these welcome changes, there is a lot more the government needs to do to ensure both employers and students get the most out of apprenticeships. Some limitations of the recent changes include:

• Following from the changes to Level 3, increases to the funding bands for accountancy apprenticeships at levels 4 and 7 are urgently required to prevent providers and employers from abandoning them
• Inflationary increases to funding bands should be an automatic annual process across all apprenticeship standards so that providers are not expected to do ‘more for less’
• It is clear that the skills sector needs to be funded better, both by the government and by employers. In the short-term the government should spend the entire amount raised from the apprenticeship levy on their budget for apprenticeships which is not currently the case. This change would ensure that levy funds raised for skills development are spent on skills development as intended rather than returning a significant proportion to Treasury
• The mandating of the AAT qualification takes away choice and control from the employers to decide what qualification works best for them and their business needs
• Although some costs are covered by the updates to the Level 3 Apprenticeship Standard, others are still not, making it confusing for employers and providers

Overall, the changes made this year to apprenticeship and their funding have been positive steps in the right direction in the accountancy sector. However, far more change is needed to ensure apprenticeship programmes continue to be utilised to their full potential and that as many employers and students as possible can enjoy their benefits.

By Gareth John, Chief Executive of accountancy training provider First Intuition

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