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The Budget should reform apprenticeships to drive skills growth

Mark Bremner
February 27, 2024

The forthcoming Budget in March might represent the last significant fiscal opportunity before the anticipated election later this year, offering the government its final moment to enact meaningful reforms within this session of Parliament. Surveys by Public First have indicated that increased funding for apprenticeship programmes holds particularly high appeal among voters, being preferred over twice as much as additional childcare support within educational spending enhancements, for example.

Given the heightened financial burden on most university graduates due to the student loan system revisions in 2022, it is not surprising that the appeal of apprenticeships and further education as a cost-effective alternative continues to grow.

Nevertheless, it's concerning that there was a 3 per cent decrease in apprenticeship starts during the 2022-23 academic year, translating to 157,800 fewer compared to the period before the implementation of the apprenticeship levy—a stark decline of over 17 per cent from the 2016-17 statistics.

With a growing consensus around the value of apprenticeships as a more affordable educational route, it's essential to reform both the levy and broader apprenticeship framework to enhance participation, increase the availability of placements, and more effectively tailor courses to the demands of individual roles, thus ensuring the success of further education in skills development and training.

A straightforward step towards this goal involves eliminating the five per cent co-funding requirement for small and medium-sized enterprises (SMEs), so that the government covers 100 per cent of costs rather than the current 95 per cent. This measure would not only facilitate a higher uptake of apprenticeships by reducing the financial strain on small businesses, but it would also alleviate the administrative complexities and bureaucratic hurdles associated with co-funding compliance. Simplifying the system would mitigate the challenges of navigating the apprenticeship framework.

Furthermore, providing a £1000-per-employee incentive for upskilling training to levy-paying businesses would encourage ongoing professional development. Such flexibility would heighten engagement and serve as a gentle introduction to the apprenticeship program, potentially leading to more formal apprenticeship commitments, and at the very least, would facilitate further training in a country where 94 per cent of workers will need reskilling by 2030.

It's essential to reform both the levy and broader apprenticeship framework to enhance participation Quote

These reforms need not rely on punitive fiscal measures or severe budget cuts but can be supported through fully dedicating apprenticeship levy funds towards apprenticeship initiatives. Investigations by FE Week revealed that the levy generated approximately £415 million more than was expended last year, with the government retaining the surplus. Additionally, between May 2019 and June 2022, over £3.3 billion was reverted to the Treasury due to stringent policies on retrieving unspent funds. With only four per cent of employers fully utilising their levy allocations, a significant portion of these designated funds is redirected to unrelated policy areas rather than into further education where it’s needed.

As the projected revenue from the apprenticeship levy is expected to reach £4 billion by 2024-25, the discrepancy between funds raised and spent on apprenticeships is likely to widen. Rather than undermining the levy's purpose and diluting its impact on apprenticeship funding, systemic reforms could unlock significant opportunities for individuals seeking the skills and training that further education aims to provide.

Additionally, the current one-year minimum duration requirement for apprenticeships does not uniformly guarantee quality, limits flexibility, and often fails to appropriately cater to the diverse needs of learners and employers. We propose a more adaptable framework that adjusts apprenticeship durations based on level, ranging from six months for Level 2 to 24 months for Levels 6 and 7, offering a tailored approach that aligns with the varying demands across sectors and roles. For those on lower levels, it allows faster progression and a more efficient route towards a qualification whilst allowing apprentices on the higher levels greater time to gain from the training and enhance the skills learnt through the programme.

Enhancing the apprenticeship system and optimising levy funds is not a cure-all for further education challenges. However, adopting a more flexible and accessible strategy, especially for SMEs, presents a significant opportunity in the upcoming Budget to promote apprenticeship growth.

Mark Bremner

Mark Bremner is the CEO of MBKB, an Ofsted Outstanding training provider 

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