DWE0021

 

Written evidence submitted by Chartered Management Institute

 

CMI is the professional body for managers, working with business and education to develop more skilled, confident and successful managers and leaders. We have a membership community of over 180,000 aspiring and practising managers, and more than 120,000 people are currently studying on one of our management and leadership programmes. We work with nearly 850 partners to deliver our qualifications, including 150 universities and 500 Further Education colleges, independent training providers and employers. Backed by a Royal Charter, CMI is the only organisation able to award ‘Chartered Manager’ status.

 

Executive Summary

  1. This submission summarises research undertaken by the Chartered Management Institute (CMI) into the productivity impact that management apprenticeships are delivering in the workplace.
  2. Combining this insight with qualitative input from Independent Training Providers partners, we suggest a considered reform package which will deliver the government’s aim of increasing starts among young people and SMEs, whilst avoiding diluting the levy or creating a £2.5bn fiscal black hole at the centre of the government’s skills and growth agenda.
  3. We argue that five years on from the introduction of the Apprenticeship Levy, what is needed is fine tuning and careful reform, building on the fundamentals achieved to date. Policy-makers need to think creatively about how we improve take-up, particularly among smaller businesses and those learners who could benefit. This requires better information and support for employers, increased data and funding transparency as well as simpler, streamlined processes.
  4. We also argue that the government must be wary of restricting what levels or occupations employers can access through the apprenticeship system. We need to retain the principle of employer choice in the system because it ensures that apprenticeships are delivering the skills that businesses actually need to improve their performance and productivity. Too many or inappropriate restrictions undermine the employer-driven aspect of the system which is important.

Management Skills for a strong economy

  1. It is widely understood that management and leadership skills drive growth through productive behaviours, delivering a strong economy. The Office for National Statistics notes that differences in management practices are positively related to improved productivity, profitability and turnover.
  2. CMI’s analysis of Labour Force Survey data finds there are 8.1 million managers in a UK working population of 32 million. That means that 1 in 4 working people are managers. The majority of these will be ‘accidental managers’, managers who have not received proper support and guidance from their employer to develop the skills required to lead in an effective manner. 69% of UK managers work in SMEs (5.2m) compared to 31% in large organisations (2.4m).
  3. Management is a definable range of skills and mindsets that have an impact on business and public service outcomes. They can be learned and applied as part of professional development and should be based on clear standards. In this sense, they are an important category of skills, with a high impact on other technical skills and on organisations, and they are specific rather than, as is sometimes claimed, ‘generic’.
  4. The Office for National Statistics found that better-managed firms maintained their productivity advantage over their rivals even during the most difficult moments of the pandemic. Just as we saw during the pandemic, the investment in these skills will be critical for businesses to navigate the volatile economic future.
  5. Management skills are a catalyst for wider innovation. The LSE has previously found when information and communication technology is adopted with good management practices it achieves a 20 per cent productivity improvement compared with just a 2 per cent uplift when adopted with poor practices.
  6. Whether productivity, profitability, resilience or innovation, management skills should be at the heart of our efforts to upskill the workforce.

CMI Research

  1. The advent of the modern English Model of Apprenticeships created an innovative new route for employers to train their employees in the structured management practices that are proven to increase productivity.
  2. In 2022, apprenticeships are higher quality and more aspirational than ever before and employer needs are now at the heart of these standards. Thanks to the shared contribution from both levy payers and government, total funding for apprenticeships in England has doubled from £1.25bn in 2010/11 to £2.5bn in 2022.
  3. New CMI modelling suggests that apprentices completing now are projected to be contributing almost £700 million a year to the economy. In total, the apprentices trained in 2019 are projected to have added £7bn to the economy by the end of 2029 for a cost of £2bn - this is a 300% return on investment. Apprenticeships are an excellent investment in future productivity.
  4. Evidence suggests that apprenticeships are delivering productivity gains, helping businesses and public services to innovate, and transforming organisational cultures around learning and development. CMI data shows:

●        Apprentices completing now are estimated to be adding almost £700m a year to the economy by the end of the decade and they are projected to add £7bn to the economy in total by then (for a cost of £2bn); 

●        This output increase is a 300% return on investment.

●        CMI data found apprentices in the private sector received on average a 17% pay increase of nearly £7,000 through their management apprenticeship;

●        and degree level management apprenticeships can lead to more than 20%  productivity gains, with private sector productivity gains estimated at 27%.

●        97% of management apprentices say their apprenticeship has increased their commitment to improving the training and development of their direct reports;

●        39% of CMI management apprentices are from a low socioeconomic background (compared to 36% in the UK labour force as a whole and 27% in higher education); and

●        71% of management apprentices come from families where neither parent went to university.

Criticisms of Apprenticeships

  1. Apprenticeship and Levy policy is too often discussed in a vacuum, as if it should deliver all the ambitions for the skills system, rather than just one part of the system. Instead, we should focus on how that one part can be made to operate most efficiently and effectively alongside other elements of the system.
  2. The positive economic impacts of apprenticeships have been underplayed. As both major political parties focus on a growth agenda, to miss this element of the success of apprenticeships is an enormous oversight. If the economic benefits of apprenticeships are underplayed, there are risks that any reform that dilutes their impact, or even worse, removes the Levy and the £2.5bn (and rising) per year it is contributing to future skills.
  3. Lack of transparency. More money is being raised from the Levy than is being spent by Levy payers. This is by design and intended to fund provision for non-Levy payers, typically SMEs. However, it is a problem that there is no transparency over how much this money is and where it goes because it suggests this money is being lost to the training system. Better data is needed on who pays the Levy, who benefits and its organisational and wider economic impact, in addition to its impact on access and participation - although this lack of transparency is not in itself an argument against the fundamental model.
  4. There have been calls for apprenticeships to be limited to certain skills levels, or for the Apprenticeship Levy to be turned into a general skills levy. These changes would dilute the impact of apprenticeships and unpick the gains that are being made. It would reduce the number of apprenticeships without additional funding. It would also mean that more levy funds are used by the 3% of employers who are levy-payers undermining the aspect of the system that supports all employers.
  5. The Apprenticeship Levy is not the main barrier to the take-up of apprenticeships. The focus must instead be addressing issues within the wider system:
    1. Capacity constraints, in terms of funding but also administrative time, for both large and small businesses, although this is more acute in SMEs;
    2. Lack of information, advice and guidance for businesses and individuals and a complex application process; and
    3. The risk involved for employers and education providers in taking on those less ready for work or learning and/ or needing additional support, given their increased needs and chance of dropout.
  6. Restricting employer choice on apprentice level or occupation would not directly address these challenges. It could in fact damage some of the progress that has been made to embed high-quality training, to provide progression opportunities and to improve much-needed skilled capacity in the public and private sectors.

Positive Reform Agenda

  1. A positive reform agenda would increase data and funding transparency, reduce bureaucracy and streamline processes, and reduce the risk for providers and employers in taking on those from under-represented groups by providing both employers and apprentices with additional support.
  2. Employers, providers and government also need policy stability and a clearer framework for how to evaluate the impact of apprenticeships on productivity measures and economic outcomes, not just access and take-up.

Our key recommendations:

  1. Clarity and Transparency
  1. Government should define an ‘English Model of Apprenticeships’ and enshrine it in law. It should be standards-based, accessible to all ages at all levels, employer-led and Levy-supported, with clear definitions around the purpose and evaluation criteria (and reporting) for apprenticeships policy: productivity, improved public services and social mobility.
  1. Widen the scope of the system
  1. Introduce Apprenticeship Accelerators to catalyse take up of apprenticeships. Local, sectoral and regional Apprenticeship Accelerators would increase take up of apprenticeships by providing SMEs with the wrap-around advice and guidance that many lack today. Recognising that different businesses will need different support, these could be led by Business Representative Organisations such as the British Chambers of Commerce, or through sector collaborations, Combined Authorities or education and training providers.
  2. As the system proves its value over time (with increased take-up and more businesses benefitting from apprenticeships) and the system reaches its limits in terms of resource, the government should consult on widening the Levy at a lower rate for more employers, to be introduced alongside wrap-around advice and guidance and/or wage subsidies. Government should also introduce auto-enrolment on the Apprenticeship Service for all companies with employees registered for PAYE with HMRC, with regular communications on apprenticeships sent via HMRC.
  1. Introduce an Apprenticeships Opportunity Fund
  1. Government should deliver a ring-fenced budget funded by Levy transfer, expired Levy funds, an additional charge on large employers or a grant from government, to improve much needed support for underserved groups/ businesses to access and progress through apprenticeships.

Methodological note

Research based on CMI Managers Voice survey of 808 apprentices that had completed their End Point Assessment (EPA) on or before 16th May 2022, conducted between 20th May and 3rd June 2022. It is accepted standard microeconomic theory that in the private sector, firms are profit maximising, and therefore wages adjust to changes in productivity; increases in wages follow increases in labour productivity. The average increase in wages of CMI apprentices by the end point of the apprenticeship (2019-2021) was used as a proxy for the increased labour productivity within employers. A weighting factor of 1.66% was applied as an assumption to estimate the total value of output increase for employers. This was applied to DFE apprenticeship completions weighted by numbers of apprentices experiencing wage increases from the CMI apprentice survey (91%). Three productivity increase scenarios were generated using, 0%, 1% and 5.20% productivity growth rates. From this data and assumptions the CMI apprenticeship value model was developed.

https://explore-education-statistics.service.gov.uk/data-catalogue/apprenticeships-and-traineeships/2021-22

https://obr.uk//docs/dlm_uploads/CCS0222366764-001_OBR-EFO-March-2022_Web-Accessible-2.pdf

 

October 2022