Young people are being ‘crowded out’ of apprenticeships as the majority of levy funding is going to people already in work, a report has found, calling for changes to the levy system to ensure it delivers its objectives of providing a route to work for school leavers.
In its report, the Resolution Foundation welcomed the fall in what it described as ‘lower quality’ apprenticeships in low-paying sectors since the apprenticeship levy was introduced.
But it raised concerns that these were being replaced by higher-level apprenticeships going to older and more established employees, putting pressure on the apprenticeship budget and reducing the funding available for programmes for school leavers.
The report revealed that there were 25 per cent fewer apprenticeship starts in 2017-18, after the levy scheme was introduced, compared to 2014-15. This was primarily driven by a fall in GCSE-equivalent programmes, which almost halved from 290,000 to 161,000 in that time.
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The report said many of these lower-level apprenticeships, particularly those in sectors including retail, health and social care, business administration and customer service, offered “poor value” because they spent less time on formal training and those undertaking them were more likely to be unaware of their status as an apprentice.
But at the same time, the number of higher education-equivalent courses (Level 4 and above) grew from 20,000 to 48,000. This included the number of degree and master’s-level courses growing from just 100 to 11,000 by 2017-18, and then again to more than 19,000 in the first three-quarters of 2018-19.
The report said it was “crucial to recognise that the apprenticeship system is still not performing well enough against its core objective” of providing young people an alternative route into work.
Kathleen Henehan, research and policy analyst at the Resolution Foundation, said: “Rather than being a cause for concern, the recent drop in apprenticeship starts has been driven by a welcome fall in many low-value apprenticeship programmes.”
But she added that there had been “a marked rise” in the number of higher-level starts as employers use the system to upskill existing employees.
“Policymakers should stick to their guns on quality improvements but ensure apprenticeships deliver their core purpose by requiring firms to spend half of their apprenticeship funding on new starters and half on workers aged under 30,” Henehan said.
Lizzie Crowley, skills policy adviser at the CIPD, said the report rightly highlighted that the apprenticeship system as it currently stood wasn’t functioning as well as it should as a route into the labour market. “The apprenticeship levy and the growth of those quite high-level master’s and degree-level apprenticeships, and the cost of those, means that young people are being locked out of the system,” said Crowley.
She added that at its launch, the government was “very clear” that one of the aims of the levy was to provide opportunities for young people. “Although young people are accessing apprenticeships, there has been a shift to higher-quality provision, which is welcome, [but] on the whole most of the money is not being spent on providing opportunities for young people,” she said.
Crowley added that not only does the levy system fail to provide any incentives to spend funds on lower-level programmes, but that it did not provide enough flexibility for businesses rightfully keen to get as much value as possible from the levy funds they invested.
However, Lady Cobham, director general of The 5% Club, said many employers would disagree that the fall in low-level apprenticeships was to be welcomed. “Indeed, for many of them, being able to train new starters is their lifeline to replace an ageing workforce, gain new digital skills and plug a skills gap that will only grow after Brexit,” she said.
"We agree that reform is needed to ensure that training is of the quality and type needed by industry.
“Employers need to be better able to determine the type of training so that it is fit for their business. For some sectors, that will mean retraining existing workers but, for many, that means investing in young people."