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Election Statement on Apprenticeships

Introduction

Apprenticeships make a vital contribution to our economy and society. Studies have found that apprenticeships have a positive impact on economic growth, productivity and employment. The next Government should invest in increasing the quantity of apprenticeships and improving their quality as a key component of its industrial strategy.

The apprenticeship levy and other recent apprenticeship reforms represent a major opportunity to increase the quantity and improve the quality of apprenticeships. The next Government should build on the current system and focus on steadily improving its effectiveness, rather than making a radical change in direction. But so far, the apprenticeship reforms are not working as well for small and medium-sized businesses (SMEs), as they are for large businesses that pay the levy. Higher than expected levy spending risks squeezing out funding for apprenticeships at SMEs. The next Government should ensure that apprenticeship volumes can grow across organisations of all sizes and that funding enables this.

Additionally, we need to ensure that the apprenticeship system delivers the right mix of qualification levels, including levels 2 and 3. There has been a sharp fall in the proportion of apprenticeships at level 2, and also a sharp fall in the proportion of apprentices aged under 19. The proportions of apprenticeships at higher levels and later ages have increased, as levy paying employers have chosen to use a rising proportion of their funds to support the upskilling of existing workers. The next Government should ensure that apprenticeships continue to offer a way into the labour market for young people and people from disadvantaged groups.

Our asks of the next Government

We are putting forward four asks for the next Government so we can create a fairer apprenticeship system where opportunities to succeed are available to all.

1. Ringfence the apprenticeship budget for non-levy paying SMEs and set this at a level that will enable steady growth in volumes and improvement in quality. Spending decisions by large, levy-paying employers should not prevent smaller organisations from taking on apprentices. The budget for non-levy funded apprenticeships should therefore be ringfenced and not affected by the rate at which the levy is spent.

Why it matters

A ring-fenced budget for apprenticeships at non-levy-paying SMEs would enable apprenticeships to grow across organisations of all sizes, at a rate consistent with the Government's overall ambitions for the apprenticeship programme. It would also enable SMEs to benefit from higher quality, higher cost apprenticeship standards. More apprenticeships at SMEs would contribute to economic growth, increased productivity and increased employment, particularly in geographical areas with relatively few large, levy-paying employers.

2. Simplify the digital apprenticeship service (DAS) system to make it easier for large, levy paying employers to transfer levy funding to other organisations e.g. within their supply chains. We welcome the increase in the proportion of levy funding that employers can transfer to 25%, but employers may not make use of this facility, because of the complexity of the digital system.

Why it matters

The apprenticeship levy system is designed to be driven by employers' decisions about how apprenticeships can best benefit their businesses - and therefore contribute to economic growth and productivity. These decisions should not be determined by bureaucratic costs. Making it easier for employers to transfer levy funding would result in more apprenticeships at SMEs and the development of more robust supply chains, as part of local industrial strategies. Reviewing and improving the usability of the DAS system would reduce bureaucratic costs for levy-paying employers generally (not just in respect of funding transfers).

3. Review the way in which level 6 and 7 apprenticeships are funded, so that the amount that can be funded from the apprenticeship levy is capped. Level 6 and 7 apprenticeships should not be allowed to account for a disproportionate share of apprenticeship levy spending. In the case of apprenticeships costing more than the cap, these could be co-funded, through an additional contribution from the employer and/or the apprentice.

Why it matters

Constraining the level of levy spending on the highest-level apprenticeships would help to ensure that adequate funding was available for apprenticeships at other levels. Investment in level 4 and 5 skills has been identified as a particular priority for the UK economy. In some cases, where employers are switching from training that they had previously funded to higher-level apprenticeships, this policy change would also reduce 'deadweight'.

4. Increase base funding for English and maths for 16 to 18-year-old apprentices to £750. Ensuring that young apprentices achieve the required standard in English and maths is essential, in order for the benefits of young apprenticeships to be fully realised. We believe that current funding levels are too low to enable this.

Why it matters

Since completion of English and maths is a condition of completion of the apprenticeship, providing adequate funding for the former would help to ensure that as many young people as possible completed their apprenticeships. A higher completion rate would increase the benefits to be gained from young apprenticeships - for the economy, employers and the apprentices themselves. Improving the quality of English and maths provision would make apprenticeships more accessible to young people from disadvantaged groups and help to reduce the number of young people who are NEET.

While these recommendations do not represent a comprehensive view of all changes that could be made to the existing system, we think that in totality they could make a meaningful difference to how the existing apprenticeship system operates. The levy system has not worked as originally intended, but there is some optimism to believe that by reducing complexity and promoting greater access of opportunities that the system can be radically improved.

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