Half of levy-funded apprenticeships are ‘fake’

Half of the apprenticeships started by employers and universities since the launch of the government levy in April 2017 are ‘fake’, according to analysis by education think tank EDSK which says urgent reform is needed to ensure value for money

In its first full year of operation, the apprenticeship levy raised £2.7bn, from the 0.5% levy on the pay bill of UK employers with annual wages of over £3m. This is expected to rise to £3.4bn by 2023-24, but there have been repeated warnings in recent months that the funding is about to run out.

EDSK points out that since the commencement of the levy, the proportion of training at level 2 has fallen by around 15%, whereas training at levels 4 to 7 has grown by 9%. Higher-level apprenticeships are typically more expensive to deliver, with implications for the financial viability of the levy.

There has also been a drop of 5% in the proportion of young people starting an apprenticeship. Over the last two years, 66% of higher-level apprenticeships have been started by workers aged 25 and over.

Almost half (46%) of apprentices have been with their employer for at least six months before they started their training, leading EDSK to claim the bulk of the levy is being spent on existing adult workers instead of supporting young people into the workplace.

EDSK’s research has identified three categories of ‘fake apprenticeships’ which it says have been allocated over £1.2bn of levy funding and account for 50% of all the apprenticeships started over this period.

The think tank says £235m has been spent on what it calls low-skill and generic roles, such as working on a shop checkout, basic office administration, or serving drinks in a bar. It claims these do not meet any recognised minimum level for apprenticeship training, and would normally be viewed as roles offering minimal training and low wages.

Some £551m has been allocated to management training and professional development courses, which EDSK argues is simply a rebadging of existing provision.

As a result, the most popular ‘apprenticeship’ in the country is now becoming a ‘team leader / supervisor’ – accounting for one in ten apprentices and consuming £134m of levy funding since 2017. ‘Chartered manager’ and ‘department manager’ training courses have consumed around £100m each.

EDSK claims these are self-evidently not entry-level positions but they continue to consume the levy funds that could instead have been used to support young people.

A further £448m has been allocated to a surge of new ‘apprenticeships’ up to bachelor’s and master’s level, which would qualify for student loan applications.

EDSK’s report stated: ‘For the apprenticeship levy to be used up on university degrees that can already be funded through the student loan system is hugely wasteful.

‘Nevertheless, labelling these degrees as “apprenticeships” is appealing to employers because they can draw down a large amount of levy funding for every “apprentice” (up to £27,000 depending on the programme).’

The report says the most costly higher-level apprenticeship has been the ‘accountancy / taxation professional’ course at level 7 (equivalent to a master’s degree), which has used £174m of levy funding since 2017.

Recommendations

The report makes a number of recommendations. These include the Department for Education (DfE) developing a new definition of an ‘apprenticeship’ and restricting the use of the term ‘apprenticeship’ to training at level 3 only.

The apprenticeship levy should be renamed the ‘technical and professional education levy’ and all work-based learning from level 4 to level 7 should be renamed ‘technical and professional education’ (TPE). Bachelor’s degrees and master’s-level courses that have been labelled as ‘apprenticeships’ should be excluded from the scope of the TPE levy.

EDSK says the existing co-payment rate of 5% for apprenticeships should be replaced by a tiered co-payment rate for all TPE programmes from levels 3 to 6, starting at 0% co-payment for apprenticeships at level 3 up to a 75% co-payment for level 6 programmes.

The current system of 30 ‘funding bands’ from £1,500 to £27,000 should be replaced by five ‘price groups’ for apprenticeships at level 3 and higher-level TPE programmes, and the 10% ‘top up’ invested by government in the HMRC digital accounts of levy-paying employers should be withdrawn.

EDSK says that by implementing the full set of recommendations it estimates that almost £1bn would have been saved since April 2017 – approximately one-third of the total spending from the funds generated by the apprenticeship levy.

Tom Richmond, director of EDSK and a former DfE adviser, said: ‘Despite being set up with the best intentions, the apprenticeship levy is now descending into farce. Instead of supporting the government’s efforts to improve technical education for young people, the evidence shows that some employers and universities are abusing the levy by rebadging existing training courses and degrees as “apprenticeships” for their own financial gain.’

A spokesperson for the DfE said: ‘Our reforms mean apprenticeships are better quality, lasting for a minimum of 12 months with at least 20% off the job training. In 2017, we introduced legislation so training cannot be called an apprenticeship unless it meets those basic criteria and the minimum quality requirements set by us. The Institute for Apprenticeships and Technical Education approves all apprenticeship standards to ensure they meet high-quality requirements.’

Runaway Training: why the apprenticeship levy is broken and how to fix it

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