Tom Richmond, Founder and Director of the EDSK think tank

Why the apprenticeship #levy is broken and how to fix it

With the apprenticeships programme set to overspend by hundreds of millions of pounds in 2020, a new report from education think tank EDSK shows that employers and universities are mis-labelling training courses as ‘apprenticeships’ as they compete to use up the funding raised by the apprenticeship levy.

The report called ‘Runaway training’ shows that these ‘fake apprenticeships’ have accounted for 50 per cent of all the courses started since the levy was introduced in 2017, and £1.2 billion of apprenticeship funding has already been committed by government to deliver these courses.

The report identifies a wide range of ‘fake apprenticeships’ that have been created in recent years. Employers have used up over £550 million of levy funding on rebadged management training and professional development courses for more experienced employees. As a result, the most popular ‘apprenticeship’ in the country is now becoming a ‘Team Leader / Supervisor’ – accounting for almost 1 in 10 apprentices.

Other roles such as ‘Senior Insurance Professional’, ‘Marketing Manager’, ‘HR Consultant’ and ‘Department Manager’ are also nothing to do with genuine apprenticeships but they continue to consume levy funds that could have been used to support new and younger recruits instead.

The report also found that £450 million has been used up by universities through a wave of new ‘apprenticeships’ up to Bachelor’s and Master’s level, even though these degrees can already be funded through the student loan system. Some universities are even relabelling their academics as ‘apprentices’ to use up the university’s own levy contributions, even though the academics already have a PhD in most cases. Many graduate training schemes for roles such as management consultants and accountants have also been relabelled as ‘apprenticeships’ to attract levy funding.

A further £235 million of levy funding has been used to deliver various low-skill and generic jobs that are now counted as an ‘apprenticeship’, including working on a shop checkout, serving drinks in a bar and being part of an airline cabin crew.

Outside of ‘apprenticeships’, these roles come with minimal training and low wages, which is why they do not meet any established definition of an apprenticeship either in this country or abroad. Even learning how to play football has now been labelled as a ‘Sporting Excellence’ apprenticeship to get access to the funding generated by the levy.

The report concludes that a new approach to the apprenticeship levy is needed to make it financially sustainable as well as deliver world-class technical education in England.

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The EDSK report recommends that:

  • The Department for Education should introduce a new definition of an ‘apprenticeship’ that is benchmarked against the best technical education systems in the world, meaning that the term ‘apprenticeship’ will only be used for courses at the international standard of Level 3 (equivalent to A-levels);
  • All low-skill and generic training courses that do not meet this new definition should be scrapped immediately;
  • The apprenticeship levy should be renamed the ‘Technical and Professional Education Levy’ and all existing ‘apprenticeships’ from Level 4 to Level 7 should be renamed ‘Technical and Professional Education’ (TPE) as well as having their funding reduced;
  • Bachelor’s degrees and Master’s-level courses that have been labelled as ‘apprenticeships’ should be excluded from the scope of the new TPE levy;
  • Ofsted should be made the sole regulator for any apprenticeships and technical and professional education funded by the new TPE levy, including provision in universities.

Recommendations

This report has shown how the apprenticeship levy generates a sizeable funding pot for employers and training providers, yet the way that this funding has been (and continues to be) used is proving controversial.

The following package of reforms seek to address the three fundamental flaws in both the levy itself and the wider apprenticeship programme that are discussed throughout the report:

  1. The failure to accurately define what is meant by an ‘apprenticeship’
  2. The lack of clarity over the purpose and goal of the apprenticeship levy
  3. Confusion over the funding and quality assurance of apprenticeships

The recommendations in this report therefore focus on addressing each of these three issues in turn under the following headings:

  1. Introducing a world-class definition of an ‘apprenticeship’
  2. Setting a new vision and objective for the levy
  3. Revising the funding and regulatory framework

By implementing the full set of recommendations described below, this report estimates that almost £1 billion would have been saved since April 2017 - approximately one-third of the total spending from the funds generated by the apprenticeship levy.

1. INTRODUCING A WORLD-CLASS DEFINITION OF AN ‘APPRENTICESHIP’

RECOMMENDATION 1: The Department for Education should introduce a new definition of an ‘apprenticeship’ that is benchmarked against the best apprenticeship systems in the world.

RECOMMENDATION 2: The Department for Education should restrict the use of the term ‘apprenticeship’ to training at Level 3 only.

2. SETTING A NEW VISION AND OBJECTIVE FOR THE LEVY

RECOMMENDATION 3: The apprenticeship levy should be renamed the ‘Technical and Professional Education Levy’ and all work-based learning from Level 4 to Level 7 should be renamed ‘Technical and Professional Education’ (TPE).

RECOMMENDATION 4: Bachelor’s degrees and Master’s-level courses that have been labelled as ‘apprenticeships’ should be excluded from the scope of the TPE levy.

RECOMMENDATION 5: The existing co-payment rate of 5 per cent for apprenticeships should be replaced by a tiered co-payment rate for all TPE programmes from Levels 3 to 6, starting at 0% co-payment for apprenticeships at Level 3 up to a 75% co-payment for Level 6 programmes.

3. REVISING THE FUNDING AND REGULATORY FRAMEWORK

RECOMMENDATION 6: The current system of 30 ‘funding bands’ from £1,500 to £27,000 should be replaced by five ‘price groups’ for apprenticeships at Level 3 and higher-level TPE programmes.

RECOMMENDATION 7: The 10 per cent ‘top up’ invested by government in the HMRC digital accounts of levy-paying employers should be withdrawn.

RECOMMENDATION 8: Ofsted should be made the sole regulator for any apprenticeships and technical and professional education funded by the new TPE levy, including provision in universities.

Sector Response to EDSK 'Runaway Training' report

Mark Dawe AELP 100x100Mark Dawe, Chief Executive of the Association of Employment and Learning Providers (AELP), said:

“For a post-Brexit economy with migratory controls, we have to say again that apprenticeships should be available to employers of all sizes to access to the full range of apprenticeship programmes from level 2 through to level 7.  We have to repeat ourselves because whatever guise Tom Richmond has taken since leaving government, he sounds like a scratched record on the subject.

“AELP totally rejects his claim that the new level 2 standards in England fall short of the ILO definition of a ‘proper apprenticeship’ and the caricatures used bear no resemblance to the reality of what is actually being learnt by the apprentice.  Level 2 apprenticeship starts have slumped by a half since the levy started and if the Prime Minister is serious about doing more for the Midlands and the North, the reforms to the levy must reverse this damaging decline. These apprenticeships are essential for sectors such as construction and social care which will help galvanise the left-behind regions.”

David Hughes, Chief Executive of the Association of Colleges (AoC) comments: 

david hughes 100 x100

“There is no doubt that a fresh approach to the apprenticeship programme is urgently needed and today’s report from EDSK adds to the debate we need to achieve that. This report unearths some of the root causes of the problems with the current setup. Sadly, we do not have a sustainable apprenticeship model. That will require clearer purpose and priorities, fairer access and a stronger funding model. We have been calling on the government for this for some time now. 

"Simply stopping level 2 apprentices will not solve the problem; in fact it would risk shutting some of the most vulnerable people out of education and training. Problems also exist at the highest levels - MBAs and other high-level training being rebadged as ‘apprenticeships’ need to be examined. Their growth has been at the expense of chances for younger people looking for their first opportunity in the workplace. 

 "Apprenticeships are vital for a modern labour market, but they must deliver high-quality transferable skills for people entering the labour market alongside better approaches to workforce development. Otherwise, they will not meet the needs of the wider workforce.”

Joe Dromey100x100Joe Dromey, Deputy Director of Research and Development, said: 

"The government was right to introduce the apprenticeship levy in order to boost investment in skills. Employer investment in training in the UK has fallen significantly in recent decades, and it is low compared to other advanced economies. 

"However, as this report rightly identifies, many employers have responded to the levy by rebadging existing training as apprenticeships, so that they can use their levy funds to cover the costs. This may be the rational thing for individual employers to do, but it poses challenges for the system. As this report - and previous Learning and Work Institute research - have warned, we are on track for a significant over-spend of the apprenticeship budget.

"In the short term, the government must act to prevent the over-spend and to ensure that the funds raised by the levy are spent on genuine apprenticeships. In the medium term, the new government should review the levy, to ensure it is fit for the future. This could involve a broader training levy which both increases investment, and gives employers greater flexibility to invest in genuine apprenticeships and other forms of high quality training."

Lawrence Barton 100x100Lawrence Barton, Managing Director of leading West Midlands training provider, GB Training, said:

“Apprenticeships in the UK continue to enjoy a resurgence, but there is much to do before they are held in the same esteem as equivalent academic qualifications. While there is a case for rebranding higher level apprenticeships, the suggestion that the term ‘apprenticeship’ should be restricted exclusively to those qualifications at Level 3 is short-sighted. 

“For many learners Level 2 apprenticeships are a crucial entry point on the road to higher qualifications. EDSK’s suggestion that all Level 2 qualifications should be scrapped is bogus. Doing away with that vital portal would be counterproductive. The UK’s labour market is already facing acute skills shortages in key sectors, including construction and social care. Our departure from the European Union - and with it a likely fall in net immigration - will increase this pressure. For this reason, it’s more important than ever to ensure unskilled workers in the labour market are equipped with the skills they need to be able to plug those gaps. Apprenticeships are central to achieving this.”

Adam Baker 100x100Adam Baker, Director, ABM UK, commented:

“While the report is damning, it's sadly not surprising. From the start, the levy has been more about up-skilling than apprenticeships and herein lies the issue. It's a case of renaming or rethinking. 

"It's vital that the reputation of the levy is protected because the spirit of it is something industry is desperate for; to do this it needs to be reworked to ensure goal posts are clear.

"For the FM industry and many others which rely on technical skills, the levy needs to at least in part force businesses to look at ways of attracting young people." 

The levy's failure at attracting new talent is part of the reason that ABM UK has taken matters into its own hands. The facilities solutions provider has just kicked off year three of its Junior Engineering Engagement Programme (J.E.E.P.). The programme aims to tackle misperceptions amongst children and their parents of the facilities management (FM) industry and create a pipeline of future technical talent.

The third year will build on the enormous success of the programme which has been delivered by ABM and partners to over 280 students since 2017. In addition to this figure, the J.E.E.P. Teacher Pack has also been downloaded by thousands of teachers for self-delivery.

Adam Baker continued: “Research from final module surveys revealed that there was a 14% increase in students considering engineering and facilities management as a career and a 24% rise in the understanding and importance of apprenticeships.

“Seeing feedback like this shows us that the programme is working. Our goal is to change perceptions of apprenticeships and the FM industry across the UK and we’re in it for the long haul!”

Adrian Anderson 100x100Adrian Anderson, Chief Executive, University Vocational Awards Council (UVAC), said:

"Runaway Training and Fake Apprenticeships? No, just an ill judged and ill informed report from the EDSK"

"The authors of Runaway Training give little consideration to the wider purpose of the Apprenticeship levy, the rationale for the Apprenticeship reforms, or indeed the skills needs of the UK economy.  The Apprenticeship levy was introduced because employers in England were under-investing in the training and development of their new and existing employees.

"This lack of investment in training was and is a principle reason for the UK’s productivity gap.  Through the Trailblazer process employers have developed, under the auspices of the IfATE, the Apprenticeships at levels 2 to 7 which their sectors need."

Sara Roberts, Learning Delivery Director at AVADO, said:

"The claims from the EDSK think tank report that many apprenticeships on offer are ‘fake’ is misleading. Whilst undoubtedly, some employers will attempt to play the system to pay low wages without offering any real training, this is a small minority.

"The levy has in all likelihood reduced the numbers of these apprenticeships, as there are many new requirements set by the Levy including:

  • 12-month minimum,
  • 20% out of office training, and
  • an end point assessment for any scheme funded by the Levy.

"The report’s purported solution to ‘poor quality’ courses will worsen many of the issues they identify in the report, preventing many young people and lower-skilled workers from accessing this vital educational pathway.

"Furthermore, the claim that funding for more senior workers takes away from young people doesn’t stand up to scrutiny. In today’s ever-evolving economy, workers with many years’ experience may still find themselves in need of new skills and training. The intended function of the Levy was both to help young people to work and to counter the skills gap which — if left unaddressed — could cripple the UK economy. 

"This report comes only 2 years into the introduction of the Levy. The courses run for a minimum of 12 months, with many running up to 18 months or more. It is therefore impossible for any long-term analysis to have been conducted, or even for a solid amount of raw data to be available. Whilst we feel that the Levy has yet to reach its full potential, all positive change takes time.

"At AVADO, we’re working with some of the most forward-thinking employers, who are committed to ensuring that the levy opens up opportunities across their businesses, for all their employees. For instance, in our partnership with Zurich Insurance, we have created a data academy which addresses a skills gap that UK employers have already identified, and educating across all levels of the workforce."

Tom Richmond100x100Tom Richmond, Director of EDSK and a former advisor to ministers at the Department for Education, said:

“Despite being set up with the best intentions, the apprenticeship levy is now descending into farce. Instead of supporting the government’s efforts to improve technical education for young people, the evidence shows that some employers and universities are abusing the levy by rebadging existing training courses and degrees as ‘apprenticeships’ for their own financial gain.

“If the government wants apprenticeships to be taken seriously by young people, parents and teachers, they must protect this historic brand by scrapping all the ‘fake apprenticeships’ and benchmarking our training programmes against the best in the world. Not only will this save hundreds of millions each year, it will provide more opportunities for young people to train as genuine apprentices, especially those living in the most deprived areas.”

Tom Richmond is the founder and director of the EDSK think tank. Tom is a former advisor to ministers at the Department for Education, first under Michael Gove and then Nicky Morgan. He has also been a teacher for six years and worked in three different think tanks in Westminster.

EDSK (short for ‘Education and Skills’) is a think tank that aims to design new solutions to the major challenges across our education and skills system, including primary schools, secondary schools, colleges, apprenticeships and universities.

EDSK’s advisory board is made up of experienced and respected voices from across the education and skills sector:

  • Professor Andy Westwood, Professor of Government Practice at the University of Manchester
  • Professor Ewart Keep, chair of Education, Training and Skills at the Department of Education at Oxford University
  • Professor Becky Francis, Director of the Institute for Education
  • Jonathan Simons, Director at Public First and former head of education at the Policy Exchange think tank
  • Mark Lehain, Director of ‘Parents and Teachers for Excellence’ and a former headteacher
  • Sarah Waite, founder of ‘Get Further’ and a former advisor to the Shadow Secretary of State for Education

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