Government failing to ensure quality and financial sustainability of apprenticeships, watchdog warns

Damning National Audit Office report pours cold water on apprenticeship levy progress, as experts say government has not ‘enticed’ employers to spend funds

The Department for Education (DfE) has failed to guarantee the financial sustainability and quality of the apprenticeship levy system, the public spending watchdog has said in a damning report published today. 

The report from the National Audit Office (NAO) warned the government was unlikely to hit its projected target of 3 million apprenticeship starts by 2020, was failing to demonstrate a positive impact on national productivity, and could struggle with financial sustainability in the future if budgets were not addressed. 

Under the reformed apprenticeship system, employers with a wage bill of more than £3 million pay 0.5 per cent into a digital account, which they can then recoup – along with a 10 per cent government top up – to cover the costs of training apprentices. 

The measure was intended to boost the UK’s poor productivity and employer investment in training, but the report found eligible employers spent just 9 per cent of available funds on new apprenticeships in the 2017/18 financial year, accessing £191 million of the almost £2.2 billion of levy funds and government top-up available.

The figures echo those revealed by a freedom of information request by City & Guilds Group earlier this week, which found employers were spending the majority of their funds on pre-levy scheme training that may include re-badged courses.

The NAO report said the DfE was currently anticipating an estimated £500 million underspend of the apprenticeship levy in 2018/19, and that where employers were spending their levy, they were investing funds in more expensive apprenticeships standards where the cost of training was roughly double what the government expected. 

Lizzie Crowley, skills policy advisor at the CIPD, told People Management: “These predictions call into question the long-term financial sustainability of the programme, because employers are spending their money on more expensive apprenticeships than the government expected.

“Even though they are only spending a small amount of their levy pot at the moment, the next few years could see the amount of money running over government budgets, with the risk of employers rebadging quite expensive development courses as apprenticeships driving up that overall spend.”

The report also flagged a substantial fall in the number of apprenticeship starts since the levy’s introduction, from 509,400 in the year before the levy to 375,800 – a loss of 26 per cent – warning that if the employer spend remains low, financial constraints could inhibit future growth. 

The government could address issues around spending by imposing financial restrictions, such as limiting public funding for certain types of apprenticeship, but the NAO predicted this would prove unpopular with employers. 

Sir Amyas Morse, comptroller and auditor general of the NAO, said: “Despite making changes to the apprenticeships programme, the [DfE] has not enticed employers to use available funds or encouraged enough potential recruits to start an apprenticeship. 

“If the [DfE] is serious about boosting the country’s productivity, it needs to set out clearly whether its efforts are on track to meet that aim.”

The NAO also accused the Education and Skills Funding Agency (ESFA), the government department responsible for delivery of the levy, of failing to take sufficient measures to ensure the quality of new apprenticeships. Of those inspected in 2017/18, the education watchdog Ofsted found a third of apprentices were being trained by providers it rated as ‘inadequate’ or ‘requires improvement’.

In another “important gap in oversight”, the NAO report said ESFA had provided only “limited” assurance that apprentices were spending 20 per cent of their time on off-the-job training, a requirement of the levy that has faced widespread resistance from employers.

Meg Hillier MP, chair of the committee of public accounts, said: “It is concerning that employers used so little of the money available for new apprenticeships last year and that the [ESFA] can’t be sure that apprentices are spending enough time on off-the-job training.  

“The government has not set out transparently how it measures the impact of the apprenticeships programme or productivity, [and] has set itself unambitious targets for widening participation among under-represented groups.” 

In response to the report, apprenticeships and skills minister Anne Milton MP said the apprenticeships levy offered “a range of opportunities to gain skills in the workplace”, and ensured long-term investment in apprenticeships.  

“The number of people starting training on our new employer-designed standards is rising year on year and we will continue to work with employers to help them develop their apprenticeship programmes,” she said.