Further to our previous article, a new report from the House of Lords Youth Unemployment Committee has called for changes to the way in which apprenticeship levy funds are allocated.
Apprentice Levy
Funding for apprenticeships comes from an apprenticeship levy, which came into force on the 6th April 2017, under which employers with annual wage bills above £3 million set aside the equivalent of 0.5 per of their payroll.
How apprenticeship levy funds are allocated has been somewhat controversial at times however. One area that came in for particular criticism early on, for example, were so called "MBA apprenticeships", which were higher level 7 apprenticeships which were equivalent to a Masters level qualification. They were launched in February 2018, as part of the level 7 senior leader apprenticeship scheme, which allowed apprentices to achieve a Master’s degree in management, either an MA, MSc, or MBA.
These MBA apprenticeships were heavily criticised. Lizzie Crowley, skills adviser at the Chartered Institute of Personnel and Development (CIPD), for instance, argued that: “There’s a real risk of abuse to the system and re-badging of existing training schemes internally to reclaim the levy money. The government needs to keep an eye on those types of apprenticeships to ensure they are offering the development planned.” In fact, research carried out by the CIPD at the time found that 46% of employers who paid the levy planned to re-badge their training as a means of recouping money that they had paid out under the levy.
Accordingly, given the criticism, MBA apprenticeships were axed, as were PHD apprenticeships.
Further Reform Of Funding Allocation Called For
Whilst acknowledging the reforms that have already been made to apprenticeship levy funding allocation , however, the House of Lords Youth Unemployment Committee has called for further reforms.
In its report entitled, 'Skills For Every Young Person', the House of Lords committee called for:-
- Two-thirds of apprenticeship levy funding allocation to go towards young people and lower level courses
- To go further than just axing MBA and PHD level apprenticeships, and to axe funding for degree level apprenticeships as well
- The introduction of a maximum salary to qualify for apprenticeship levy funding
- A lower threshold than the current £3 million payroll for paying the apprenticeship levy, so that small and medium-sized enterprises (SME's) also contribute as well
The commitee concluded that apprenticeship levy funding should prioritise the needs of young people and that without these proposed reforms, there was a distinct risk that the apprenticeship system could run out of money. Indeed, in a report back in 2019, the National Audit Office (NAO) warned that there was a “clear risk” that the system was financially unsustainable.
In its 2019 report, the National Audit Office stated: "There is a clear risk that the budget may be insufficient should demand pick up in the way that would be needed for the programme to meet its objectives. Government would then need to choose between providing more funding, inhibiting growth in apprenticeships or reducing the level of public funding for some apprenticeships."
Speaking on behalf of the House of Lords Youth Unemployment Committee, Lord John Shipley, a Liberal Democrat peer, stated to FE Week that the apprenticeship levy system “should not be prior prioritising degree apprenticeships over young people getting on to the apprenticeship ladder at a lower level......What we’re trying to get at is that there are large numbers of young people who are leaving school, who are not getting career development with the skills they need, and the country needs.”
Nevertheless, a spokesperson for the Department for Education defended the use of degree apprenticeships, telling FE week that they provide employers with "the opportunity to strengthen the skills of their workforce and allow people of all ages and backgrounds the chance to earn while they learn."
