“Don’t panic” or “we’re all doomed”? What do the latest apprenticeship figure tell us?

25 January 2018

“Don’t panic” or “we’re all doomed”? What do the latest apprenticeship figure tell us?

New data shows the number of Apprenticeships fell 26% compared to the same time last year. This followed a 59% fall in the previous quarter, the first period covered by the Apprenticeship Levy, which followed a spike during the last quarter of the pre-Levy system.

So, now we have six months of data for the new system, what does this all mean for the Government’s target of three million Apprenticeships by 2020, and the apprenticeship programme more generally? In Dad’s Army style, here’s my take on both.

We’re all doomed

One reading could be that employers have looked at the apprenticeship system and don’t like what they see. Resolution Foundation analysis suggests around two thirds of Levy payers have registered on the governments digital portal, and new registrations have levelled off. Perhaps the remainder will simply treat the Levy as a tax and write it off?

At the same time, the combination of new funding rules and disruptions to the provider market resulting from troubled procurements may have put off employers, including those not paying the Levy. For example, smaller employers now need to contribute 10% of the cost of an apprenticeship – for some the first time they have had to pay (in addition to an apprentice’s wages). Will they (re)engage or is it once bitten, twice shy?

All of this means we’re now quite far off track from a straight line path to the Government’s target of three million apprenticeship starts by 2020. To catch this up there would need to be an acceleration in apprenticeship numbers to levels not seen in modern times. Is this plausible?

Finally, there’s what those employers engaging with the system are doing with their Levy funding. The data shows a sharp rise (from a low base) of Higher Apprenticeships, and declines in Level 2 and 3 Apprenticeships, as well as falls in the numbers of young people taking Apprenticeships. This was both predictable and predicted, including by Learning and Work Institute. This could lead to the same amount of Levy funding buying fewer Apprenticeships (as the rates for higher Apprenticeships are generally higher), risking the three million target further, as well as limiting opportunities for progression and social mobility.

Don’t panic

On the other hand, it was both predictable and predicted that it would take employers time to engage with and understand the new system.

The smaller fall this quarter compared to last may reflect the beginnings of increased engagement. This could take us back to pre-reform apprenticeship levels, but perhaps of higher quality because they are employer led? Perhaps there could even be a spike as we get towards mid 2019 and employers’ Levy contributions are about to expire (after two years unused they go to the Treasury).

Similarly, if apprenticeship training is of good quality, surely smaller firms will pay 10% of the cost once they get used to this requirement – it will pay back many times over (though they may need convincing of this).

That could get the Government back on track for its three million target (and just in time for Brexit, allowing the government to argue employers have stepped up to the plate in meeting future skills needs).

At the same time, it is well known that poor leadership and management is a key part of the UKs productivity shortfall compared to other countries. So growth in Higher Apprenticeships would be a good thing if it represented an increased volume and higher quality training in those skills (it’s too early to tell that yet).

Ultimately the government needs to make sure there’s sufficient funding and incentives to also increase training at lower qualification levels and end the historic inequality that most training goes to those that already had the most – there needn’t be a trade off if the funding is provided, we need to improve skills at all levels.

Time to abandon the three million target?

Ultimately, we should not be blasé about the latest figures, nor should we throw the baby out with the bath water.

I have an old fashioned view that Governments should generally stick to their manifesto pledges (though the Conservative manifesto referred to three million Apprenticeships for young people…). So I’m loathe to suggest abandoning it.

However, I think it should have equal prominence alongside measures of quality and reach, such as the proportion of young people taking an apprenticeship and the pay and job outcomes for those that complete one. The three million target gets all the airtime because it’s easy to measure, whereas quality and access are more challenging. Picking a small number of quality measures (such as the proportion of apprentices still in work a year after their apprenticeship and their earnings) and publishing these alongside starts figures might help with that. And in the future let’s have quality and reach figures, rather than starts targets.

Linked to this, the government needs to do far more on quality and access, rather than just stating that they are important. We’ve published proposals including an annual quality and access audit, an Apprentice Premium, and a two tick process so the Institute for Apprenticeships only signs off new standards when the employers in that sector have agreed them and they’ve been benchmarked against the best in the world. There’s lots of other ideas out there too, but we need political and policy maker engagement with them.

Apprenticeships are a great way to combine earning and learning. Their expansion is to be hugely welcomed as, in my view, is the introduction of the Apprenticeship Levy. The government needs to have the courage to admit that further reforms are needed to make the system work for people and employers – this would be a sign of strength not weakness.

Otherwise we risk missing both the target and the point.