Apprenticeship Levy: is it working?

Blog posts

6 Apr 2018

Becci Newton

Becci Newton, Associate Director

Is the Apprenticeship Levy in crisis? Probably not. It is a new kid on the busy block of the apprenticeship and technical education system that is yet to be fully realised. We should give it more time before we decide if it is working.

The story so far

From the moment it was announced, there were huge ambitions for the Apprenticeship Levy. For the Government, it represented potential economic and productivity gains through increasing the availability of apprenticeships to the target of three million new starts by 2020. Likewise, many others saw a wider purpose, with contributions to social equity and mobility, and reducing barriers for under-represented and/or disadvantaged individuals.

One year on, the reviews are, at best, mixed. There has been a sizeable drop in the number of new apprenticeships starts (although year-end figures suggest a rosier position than initially feared). In addition, the number of Levy-paying businesses signed up for an Apprenticeship account is lower than might be hoped, with significant numbers predicted not to spend their training funds this year. With an underspend likely, there may be increased calls for Levy funding to be extended to support other types of training and used to break down barriers for disadvantaged groups.

Can the Levy alone be blamed for the current situation?

Some teething problems were to be expected. Large businesses have had to review training programmes and provision as well as Apprenticeship routes to decide the cost:benefit ratio for them of the Levy. Moreover, they are doing this at a time when the Apprenticeship system is in flux, aiming to shift to the employer-led system envisaged by the Richard Review. This Review envisioned that increasing employer leadership of training would drive quality and uptake, whilst identifying a need to increase employers’ commitment, via contributory funding.

It was not clear what putting employers in the driving seat would mean. Hence, policymakers seeded the system, ground-up, starting with employer-owned Apprenticeship Trailblazers from 2012, to allow policy approaches to be tested. The Trailblazers have been influential. Their work has led to incremental, but important changes to the guidance for Standards development, and a reduction on the rate of employer co-funding from a third to 10 per cent (upon which the Levy builds). While employers (through the Trailblazers) have moved forward with Standards development, a new custodian body, the Institute of Apprenticeships, has been created and a new review of vocational and technical education undertaken (the Sainsbury Review) which identifies problems with some of the newly created Standards.

Apprenticeship Standards are gearing up but not all those required are ready

As a result, the new system of Apprenticeship Standards is not fully realised. This leaves employers grappling with two types of Apprenticeship (Frameworks and Standards), and the expectation when using Standards that they will negotiate training programmes, as well as costs, with providers. While the costs of training provision are largely found by government or the Levy pot, employers must also consider salary and overheads, and the time spent on off-the-job training by their apprentices, in their calculations to use the Levy pot. Depending on the cost:benefit ratio for each company this can lead to new intakes, rebadging existing training programmes, and/or focusing Levy-funded training on existing staff – that latter option appearing to some as missing the policy point. As has also been reported, it can lead to a decision to not use the Levy pot, a particularly worrying prospect in sectors where traditionally Apprenticeships have been the norm.

Where to now?

Given the developments since 2012, we should have some confidence that policymakers will add new flexibilities to the Levy as understanding of the new system evolves. There is a huge financial, political and emotional investment in apprenticeships and a new technical education system, and no desire to see it fail.

Employer engagement at the heart of the skills system has long been a policy goal, never fully realised. Current expectations of employers are sizeable, and it is unclear how quickly employers can respond. The Levy is caught up in this maelstrom and, in its current form, may not represent the ideal solution. However, it is also too soon to really determine its effect and the impact of flexibilities that may be offered to support its transition to the mainstream.

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.