Three cheers for apprenticeships, two for the apprenticeship levy

In this article, Andy Forbes, Head of Development at the Lifelong Education Institute, celebrates apprenticeships but expresses concerns about the apprenticeship levy. Despite its significant funding impact, four urgent issues need to be addressed.

National Apprenticeship Week is here again, providing an opportunity for us all to celebrate the achievements of the half a million apprentices working hard in all kinds of sectors across the whole country.

Over the last twenty years there has been a welcome revival of the apprenticeship system, along with a growing endorsement from across the political spectrum of the crucial role it plays in meeting the nation’s skills needs.

The Lifelong Education Institute is more than happy to join this applause for a training pathway that reaches parts traditional education can’t reach, engages such a wide range of people of working age in relevant, meaningful work-based training, and fosters productive relationships between employers, employees and training providers. It is an essential part of modern adult education.

But it’s hard to be as enthusiastic about the system that has funded it since 2017, the apprenticeship levy. The one big positive is that it has raised a large amount of additional money from employers to fund much needed skills training, currently estimated at over £4 billion. To put this in context, total annual spending on 16–19-year-old students is around £7.5 billion, so the levy is a very significant resource. However, there are four big problems with it that urgently need to be addressed.

Challenges and Concerns with the Apprenticeship Levy

Firstly, higher and degree apprenticeships are gobbling up an ever-larger proportion of the overall levy budget. The latest figures show that over a third of new apprentices started on higher and degree apprenticeships, and because these are typically longer programmes funded at higher bands, this represents a far higher proportion of the total spend. These students tend to be older, on higher salaries, and more likely to have gone on to a university degree course in any case. In effect, the levy is providing a loan-free route to getting a degree, so it’s no surprise it’s growing in popularity. But is this sucking resource away from more disadvantaged groups who need access to training?

Which brings us to the second problem. The rise in higher apprenticeships is being accompanied by a steady fall in the proportion of intermediate (level 2) apprenticeships, down from a pre-levy peak of nearly 400,000 to just over 100,000. Level 2 apprentices are far more likely to be younger, poorer and in lower-skilled jobs, and for them the apprenticeship route is a vital training ladder to get into better paid, more secure employment. This ladder appears to be losing most of its rungs.

Thirdly, the decline in intermediate apprenticeships is also linked to the barriers small firms have in taking on apprentices, a daunting exercise given the bureaucracy involved in navigating the levy system, not to mention the time needed to find and select young people. Without HR departments, most small firms rely on providers to help them do both, but there is no extra funding for this, so many just don’t bother. As small and medium sized enterprises (SMEs) are where the vast majority of us work, this is surely an unintended – and undesirable – outcome.

Fourthly, not all the levy funds raised go into apprenticeships. The Treasury sets an Apprenticeship budget at each spending review, which over the past couple of years has been well below the amount raised. Between 2017 and 2022 the levy raised £580 million more than was spent; this year, alone it’s likely to be an eye-watering £1.4 billion more. In effect, only two thirds of apprenticeship levy receipts are being spent on apprenticeships.

So, a big hooray for apprenticeships and for the funding boost the levy has provided. But a big sigh for the way in which the operation of the levy risks undermining apprenticeships as a life support for low-skilled workers and busy small employers. It needs fixing, urgently. Hopefully by Apprenticeship Week 2025, the next government will be starting to tackle this challenge.

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