Employers ‘not using apprenticeship levy as intended’, warns Ofsted

Education watchdog raises concerns over rebadging, mismanagement and ‘dilution of quality’

Money raised through the apprenticeship levy is not being spent as intended by employers, according to a scathing rebuke from the UK’s education regulator.

In its annual review, Ofsted said it continued to be concerned about ‘rebadging’ of existing training schemes to utilise levy funds, as well as the broader quality of providers. Many employers have become apprenticeship providers since the introduction of the levy in 2017, in order to administer their own schemes and maximise their returns from the funding.

“We have seen examples where existing graduate schemes are in essence being rebadged as apprenticeships. This might meet the rules of the levy policy, but it falls well short of its spirit,” said the Ofsted report.

Ofsted also raised concerns about the quality of apprenticeship schemes, highlighting “early warning signs of a dilution of quality”, with monitoring visits by inspectors finding common issues around poor governance, low-quality teaching and insufficient off-the-job training.

Amanda Spielman, chief inspector of Ofsted, said the problem was about capacity, not just funding.

“Our monitoring visits to some of the new, often small, providers that are springing up in response to the new apprenticeship levy model have revealed a lack of operational capacity and also weaknesses in governance and scrutiny,” she said.

“Some of our biggest providers also continue to be a real cause for concern. We saw one provider that had swiftly recruited apprentices over the past year for apprenticeships that were simply not fit for purpose, alongside other high-profile cases of mismanagement and some significant falls in standards.”

Last year the government pulled its funding from the largest UK adult learning provider, Learndirect, following an Ofsted report that found 70 per cent of apprentices trained with the company failed to meet minimum standards required for their course. The firm had received apprenticeship contracts worth £158m.

The report found level 2 apprenticeship starts had declined by more than a fifth (21 per cent) since last year, from 78,500 to 62,000.

Meanwhile, the number of people starting higher level apprenticeships has been growing year-on-year since 2011/12, and for the last four years has been increasing at a rate of around 10,000 learners annually, fuelling concerns in some quarters that levy funds may be supporting MBAs and other executive or managerial training rather than school-leavers.

“We welcome more apprenticeships at higher levels, particularly when there is clear progression in an occupation from level 2 to degree level,” the report said. “However, despite this rise in higher level apprenticeships, we are concerned that in many cases, levy money is not being spent in the intended way.”

A Department for Education (DfE) spokesperson said the government’s apprenticeship reform had “put control back into the hands of employers”.

“By working with employers to develop new, higher quality standards we can ensure that young people are getting the training they need to get a great job while businesses can be confident they are getting the skilled employees they want.”

Separately, a report by FE Week claimed to have seen statistics from the Institute for Apprenticeships (IfA) that predicted an overspend in the apprenticeships budget of £500m by the end of the 2018/19 financial year. While the sum set aside for 2018/19 was £2.25bn, IfA reportedly predicted £2.75bn would be spent.

The shortfall was said to be the result of excessive per-start spending on expensive management apprenticeships.

The IfA told People Management the figures were just one of a range of funding scenarios, but declined to comment further.

A spokesperson for the Department for Education said the figures had been taken “completely out of context”, were “inaccurate” and “did not correlate with any of our figures”.

Lizzie Crowley, skills advisor at the CIPD, said if they were accurate, the statistics revealed the worrying impact that the rapid rise in management-level apprenticeships could have on the overall funding pot.

“Although it's recognised that leadership and management issues are a major skill issue for many businesses, long and costly management apprenticeships are not the best way to plug this gap,” she said.

“We also know that many managers are already highly qualified, and are generally older, and high expenditure in this area could lock out younger and less qualified people, as well as SMEs, from access to structured skills development.”

Mark Dawe, chief executive of the Association of Employment and Learning Providers, raised concerns about the availability of funding for SME employers and said a separate budget for non-levy employers was “urgently needed”. “We now need an open debate on how the levy operates,” he said.