EDUCATION AND SKILLS (EDSK)– WRITTEN EVIDENCE (YUN0065)

Youth Unemployment Committee inquiry

What has the impact of the Apprenticeship Levy been on young people looking to study an apprenticeship? If challenges exist, what remedies might you propose to directly support young people?

In January 2020, EDSK published a major report on the impact of the apprenticeship levy following its introduction in April 2017. Our report identified the following trends:

• There had been a decisive shift from lower to higher levels of training. The proportion of training at Level 2 (equivalent to GCSEs) had fallen by around 15 percentage points, whereas training at Levels 4 to 7 (equivalent to the first year of university up to Masters level) had grown by 9 percentage points. These trends were even more pronounced for levy-paying employers. Higher-level apprenticeships are typically more expensive to deliver, which has obvious implications for the financial viability of the levy both now and in future.
• The levy had also affected the age of those who start an apprenticeship. Since the levy began in 2017, there had been a drop of 5 percentage points in the proportion of young people starting an apprenticeship as older (and often more experienced) workers were attracting more of the funding. Over the last previous years, 66 per cent of higher-level apprenticeships had been started by workers aged 25 and over. What’s more, 46 per cent of ‘apprentices’ had been with their employer for at least six months before they started their training.

In other words, the bulk of the levy was being spent on existing adult workers instead of supporting young people into the workplace.

As our report in April 2021 on the secondary education system demonstrated, the number of young people on apprenticeships has in fact been a cause for concern for many years. Although they are not often discussed as an option for secondary pupils, apprenticeships in England are available to anyone aged 16 and over. The apprenticeship system has expanded dramatically over the past decade, yet the number of 16 to 18-year-olds starting an apprenticeship has remained largely unchanged since 2002. In recent years, apprenticeships seem to be declining in popularity among under 19s, with 76,000 starts in 2019/2020 compared to 131,000 just four years ago.

The number of learners of different ages starting an apprenticeship in England (thousands) [1]

Within the 16-18 age group, there are also important distinctions to be made. Aside from their overall decrease in popularity over the last few years, apprenticeships are consistently less popular among those age 16, with a mere 3 per cent of 16-year-olds on an apprenticeship at the end of 2019. Apprenticeships steadily increase in popularity by age, with 18-year-olds being the most likely to participate (7.8 per cent of the cohort in 2019).

The percentage of learners aged 16 to 18 participating in an apprenticeship [2]

Regrettably, COVID has now accelerated all the aforementioned trends. From March 2020 to July 2020, overall apprenticeship opportunities were significantly reduced by the impact of COVID on the economy, but young people were hit particularly hard. There were 60,860 apprenticeship starts across all age groups between March and July 2020 - a 45.5% drop compared to the 111,570 reported for the same period in 2019. Of the starts reported between March and July 2020:

• Learners aged 25+ made up 61.6% of starts (54.5% in 2018/19)
• Level 2 apprenticeships accounted for 25.6% of starts (36.1% in 2018/19)
• Higher apprenticeships (Level 4+) accounted for 31.4% of starts (17.7% in 2018/19)

The latest data from August 2020 to January 2021 (see below) paints a similarly worrying picture. Young people are still being pushed out, with substantial declines in the number and proportion of 16 to 24-year-olds starting an apprenticeship since August. At the same time, the number and proportion of learners aged 25+ starting an apprenticeship held steady while the provision of Higher apprenticeships has increased during the pandemic. This shows yet again how employers are continuing to use up the levy funds on existing employees (including significant expenditure on management training for middle and senior managers) rather than younger new recruits.

To conclude, the apprenticeship levy has had a severely detrimental impact on young people and COVID has only emphasised how young people are being pushed out of the apprenticeship system in favour of older experienced workers.

In terms of remedies, it is disappointing to see how few changes have been made by the Government both before and during the pandemic to improve the prospects of young people. For example, the Government recently introduced a £3,000 incentive payment for employers for each new apprentice hired from April until September, but this makes no distinction between younger and older apprentices – potentially exacerbating the existing problems.

There are several measures that could have been taken on either a temporary or permanent basis to ensure that young people are prioritised within the apprenticeship system. These include:

• Make the existing apprenticeship ‘incentive payments’ for employers more generous when recruiting young people (e.g. £6,000 to any employer who takes on an apprentice aged 16-18 or aged 19-24 if they have an Education, Health and Care plan or have been in Local Authority care, and £4,500 to any employer who takes on an apprentice aged 19-24);
• Remove Level 7 apprenticeships (equivalent to a Master’s degree) from the scope of the Apprenticeship Levy;
• Abolish employer ‘co-investment’ for SME’s (<250 employees) if the apprentice is under 25;
• Introduce a 10% co-investment rate for apprentices aged 25 and over;
• Allow employers to re-allocate up to 10% of their levy contributions towards approved pre-apprenticeship programmes such as Traineeships and rigorous voluntary and community schemes;
• Revise the public sector apprenticeship target so that it focuses recruitment on young and disadvantaged learners.

Is the structure of apprenticeships fit for purpose? Should additional flexibilities be built in?

Even if the quantity of apprenticeships available to young people increases, it is important to note that there are serious on-going problems with apprenticeship quality in England. For example, despite there being a minimum requirement of 20% off-the-job training for all apprentices at all levels, the latest government survey of apprentices showed that only 30% of apprentices received formal training for at least one day a week and 18% reported receiving no formal training at all. As a result, we would urge the Committee to be extremely cautious about making apprenticeships more ‘flexible’ i.e. relaxing the rules placed on employers and training providers because there are already significant weaknesses with the quality of apprenticeships that have still not been addressed.

In terms of flexibilities regarding the apprenticeship levy itself, our major EDSK report in 2019 recommended allowing employers to use some of the levy money for other forms of training beyond apprenticeships – but only if the Government clamps down on the blatant misuse of the ‘apprenticeship’ brand. Remarkably, the Government has left it up to employers to decide what could be labelled as an apprenticeship, despite several recognised international definitions being freely available at the time. Some employers have exploited this weakness by inappropriately labelling training courses as ‘apprenticeships’ (in order to access the levy funding) when they are nothing of the sort. Between them, three categories of ‘fake apprenticeships’ were allocated over £1.2 billion of levy funding in the first two years of the levy’s operation and accounted for 50 per cent of all the ‘apprenticeships’ started over this period.

1. Low-skill and generic roles (allocated £235 million of levy funding from 2017 to 2019)

These roles include working on a shop checkout, basic office administration, serving drinks in a bar and being part of an airline cabin crew. Outside of ‘apprenticeships’, such roles are advertised as offering 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, cricket or rugby has now been labelled as a ‘Sporting Excellence’ apprenticeship to get access to the funding generated by the levy. These examples support a recent National Audit Office investigation, which found that the government “recognises that some employers use apprenticeships as a substitute for training and development that they would offer without public funding” (known as ‘deadweight’).

2. Management training and professional development courses (£551 million)

As the apprenticeship levy operates on a first-come-first-serve basis, rebadging management training and professional development courses for more experienced employees is a far more effective strategy for drawing down the levy funds than offering apprenticeships to new young recruits in skilled occupations. At the same time, non-levy employers have essentially been given unfettered access to 95 per cent subsidies for management and professional development ‘apprenticeships’. As a result, the most popular ‘apprenticeship’ in the country is now becoming a ‘Team Leader / Supervisor’ – accounting for 1 in 10 apprentices and consuming £134 million of levy funding from 2017 to 2019. Meanwhile, the ‘Chartered Manager’ and ‘Department Manager’ training courses consumed around £100 million each. Other roles such as ‘Retail Manager’, ‘Senior Insurance Professional’, ‘Marketing Manager’ and ‘HR Consultant’ are self-evidently not entry-level positions but they continue to consume the levy funds that could instead have been used to support young people.

3. Bachelor’s degrees and Master’s-level programmes (£448 million)

The introduction of the levy has generated a surge of new ‘apprenticeships’ up to Bachelor’s and Master’s level, yet Ofsted was already reporting in 2018 that “graduate schemes are in essence being rebadged as apprenticeships”. The most costly higher-level apprenticeship has been the ‘Accountancy / Taxation Professional’ course at Level 7 (equivalent to a Master’s degree), which used £174 million of levy funding from 2017 to 2019 by claiming to cover roles as diverse as Financial Accountants, Management Accountants, Tax Accountants, Tax Advisers, Tax Specialists, External Auditors, Internal Auditors, Financial Analysts, Management Consultants, Forensic Accountants and Business Advisors. For a single ‘apprenticeship’ to cover such a breadth of respected and well-paid jobs is questionable, to say the least. In addition, the ‘Senior Leader apprenticeship’ - aimed at CEOs, CFOs, senior military officers and Heads of Department among others - can include an MBA, which explains why it quickly became a major source of revenue for business schools and consumed over £45 million in just two years. Inappropriate rebadging of training courses also extends beyond the world of business and finance. The ‘Academic Professional apprenticeship’ – designed by 23 Higher Education institutions including the University of Oxford, the University of Durham and Imperial College London – is an overt attempt by these organisations to relabel their university academics as ‘apprentices’ to use up the university’s own levy contributions. The fact that you typically need a PhD to be accepted onto this levy-funded training course confirms that it bears no relation whatsoever to any genuine apprenticeship.

Given the extent of ‘fake apprenticeships’, we believe it would be very unwise for the Government to loosen the rules on what levy funding can be spent on. To be clear, our report recommended that higher-level training and management courses should continue to attract some levy funding but at a much lower subsidy rate than, say, a high-quality apprenticeship aimed at young people. In other words, the levy could indeed be made more flexible, but only if the Government ensures that the levy funding is heavily weighted towards high-quality rigorous apprenticeships for young people.

4th June 2021