1.6 The key challenge ahead is to safeguard the sustainability of the programme, with a focus on matching quality with quantity and ensuring ongoing value for money. The recent announcements of reform to the programme concentrated on three areas key to the programme’s continued impact and success:

· encouraging more employers, particularly SMEs, to offer Apprenticeships by enabling greater employer ownership, reducing bureaucracy and offering incentives;

· ensuring that all Apprenticeships deliver high value for employers and apprentices by relentlessly driving up standards and quality; and

· prioritising the investment in Apprenticeships where the impact and returns are greatest.

1.7 Subsequent sections of this written memorandum provide further detail about the Apprenticeship programme, covering employer engagement, quality, funding and delivery by the National Apprenticeship Service, and thus the specific questions set out by the Committee. This information applies to the all-age programme as a whole.

2. ENGAGING EMPLOYERS

2.1 Apprenticeships are jobs, and so the programme’s success depends upon its ability to engage employers and deliver what employers value for their businesses. The Government’s priority, and that of the National Apprenticeship Service, is to encourage more employers to offer good quality Apprenticeships, and that means making it as simple as possible to recruit and employ an apprentice, and making sure that employers can get the tailored, high quality training that their business needs.

2.2 There are around 160,000 workplaces across England using Apprenticeships and evidence shows that employer satisfaction with the programme is high, with employers seeing increases in productivity due to training delivered through Apprenticeships. Looking forward, giving employers more ownership over the Apprenticeship system is the best way to ensure that Apprenticeships remain high quality, relevant and responsive.

2.3 The National Apprenticeship Service has been successful at increasing participation in the programme; in the last academic year around 50,000 workplaces took part for the first time. National Apprenticeships Week 2012 saw further major announcements by large employers recruiting new apprentices.

2.4 The National Apprenticeship Service has national and local employer engagement strategies in addition to the range of bespoke initiatives for large employers and SMEs. These strategies are underpinned by a high profile and high visibility marketing and communications strategy, directly linked to their Business Plan. Both national and local strategies focus on the following three areas:

· growing the number of Apprenticeship places – by marketing to employers directly and through colleges and learning providers ; 

· ensuring employers have a wide pool of suitable and qualified candidates to choose from – by ensuring potential apprentices and their parents have the information they need to consider if an Apprenticeship is for them – and to be able to apply for one; and  

· raising reputation and progression to ensure the type of Apprenticeship opportunities we secure and fill focus more on Advanced and Higher Apprenticeships, progression into Advanced Apprenticeships and beyond into higher level skills, and to ensure we highlight the successes of apprentices in England. 

2.5 In addition, ministers and senior officials across Government, and John Hayes, Minister for Skills, in particular, have strategically targeted major employers, and those in particular sectors which could benefit from higher levels of engagement with Apprenticeships, to encourage greater involvement and address any obstacles they may face. For example, a recent set of cross-sector meetings with large employers and one-to-one meetings with major banks have led and continue to lead to new commitments by employers to begin or expand an Apprenticeship programme.

2.6 The Government has committed to help even more people to benefit from high quality Apprenticeships; as a demand led programme, this is dependent on employers coming forward to make places available. So making it easier for employers to take on an apprentice is a top priority and there is a range of new activities in train to achieve this.

Reducing bureaucracy

2.7 We are reducing bureaucracy, and streamlining and speeding up processes, with significant progress made already. For large employers (5,000+ employees) that directly contract with the Skills Funding Agency; the latter is currently running an Employer Outcome Payment Pilot.  This will test a new approach to making payments based on Apprenticeship framework completions enabling a significant reduction in the paperwork and reporting requirements.  We are also introducing more proportionate audit, inspection and monitoring arrangements and a single certification service.

2.8 To address the concerns of small employers, we are working to streamline processes so that it takes just a month for an employer to advertise for an apprentice, through from first enquiry to agreeing a training package. The Skills Funding Agency has removed health and safety requirements on providers and, where relevant, employers, that go beyond regulatory requirements. We are working with training providers to develop new service standards for supporting SMEs to be included in all new contracts for Apprenticeships delivery .

Increasing employer ownership

2.9 Giving employers more ownership and control of the Apprenticeship system is central to the Government’s efforts to increase employer engagement so more employers offer Apprenticeships, and drive up Apprenticeship quality so that every Apprenticeship involves high-quality, relevant training that employers value.

2.10 Alongside the mainstream programme, the Government is piloting a radical new approach to the way it works with business to invest in skills. Up to £250m will be made available directly to businesses over a two year period from AY2012/13 to invest, alongside their own resources, in the development of skills and to support industry growth. Apprenticeships will be at the heart of the pilots, although employers will have the space to innovate in designing new ways to address skills needs in their sector, supply chain or local area. Funding will be awarded competitively to those projects that offer greatest benefits and value.

2.11 This is a fundamentally new approach to empowering employers more strongly as demanding purchasers of skills services, and to increasing the quality, impact and value for money of the Government’s investment in these. A prospectus for the pilots was launched on 7 February, and bidders have until 26 April to respond. The UK Commission for Employment and Skills is leading the management of the competition, and the National Apprenticeship Service and Skills Funding Agency are also closely involved and will support BIS and DfE with delivery.

Support for small businesses

2.12 There may be a number of reasons why small businesses find it harder to engage with the Apprenticeships programme:

· they may not have a dedicated HR department to manage the process, or support learning and development;

· it may be more difficult for staff to dedicate time to training and supporting an apprentice;

· it can be harder to release someone for training off the job when there are fewer remaining staff to cover; or

· small businesses may have more cash flow constraints and be less prepared to risk an initial investment to achieve long-term productivity gains.

2.13 Taking on an apprentice can appear more of a challenge to a small business, and evidence from the British Chambers of Commerce suggests that around 20% of businesses with fewer than 250 employees cite cost as a barrier, in comparison to 10% of businesses with 250+ staff. This suggests that incentive payments are an effective mechanism for initiating contact with employers not previously involved in the programme [3] .

2.14 In November 2011, we announced 40,000 incentive payments of £1,500 to encourage small businesses not currently engaged in the Apprenticeship programme to offer more opportunities for young people aged 16-24. Partly supported by additional funding through the Youth Contract, the incentives have been available to small organisations in all sectors, and for Apprenticeships at all levels, from 7 February 2012. Half of the payment will be provided around two months after the apprentice has started their framework; the second half will be paid later, to encourage completion and continued employment.

2.15 Targeting such employers with this new incentive will maximise the impact of the additional funding and further grow the Apprenticeship brand. In promoting the scheme, the National Apprenticeship Service will also seek the greatest value for the taxpayer by concentrating on the occupational sectors which generate the greatest levels of return. This is further enhanced by focusing the incentive on young people for whom the costs (both to the individual and the state) of a period not in work might otherwise have been significant. The National Apprenticeship Service’s experience also shows that a high-profile incentive scheme can have wider benefits in attracting attention to Apprenticeships as a whole.

2.16 The first £750 instalment of the incentive payment equates to two months wages at the Apprenticeship rate of the National Minimum Wage, helping small businesses to overcome the initial costs of supporting an apprentice while they settle in and start becoming productive.

2.17 Incentive payments outlined above are one way of addressing these barriers, but we are also adopting a number of other measures to make it as straightforward as possible for a small business to set up an Apprenticeship programme for the first time.

2.1 8 Recognising that working for a smaller firm often requires fulfilling a greater variety of roles, firms with fewer than 10 employees will be able to add up to two (co-funded) broader business skills units to any full framework. Small employers will be able to add to existing Apprenticeships training, tailoring frameworks to their specific needs.

2.19 Employer-led Group Training Agencies (GTAs) can play a pivotal role in meeting the particular training requirements of SME apprentices and supporting their employers’ participation in the programme. We strongly support this model and have encouraged the expansion of the GTA network via the National Apprenticeship Service funding of GTA England and its activity in this area.

2.20 The National Apprenticeship Service will streamline the support it provides to SMEs to ensure that it is tailored to the specific needs of these businesses, including a dedicated team, tailored online support and clearer messaging through a one page sales pitch for small businesses.

2.21 Taken together, these measures will help to ensure that it is easy and straightforward for small employers to engage in the programme. In addition, we have asked Jason Holt, CEO of the Holts Group of Companies (including Holts Academy), to lead a short review to identify what further measures can be taken to give SME employers more control in the system and to make it more responsive to their needs. Mr Holt is due to report to Ministers in May 2012.

City Apprenticeship Hubs

2.22 Supporting employers and addressing business need has a strong spatial dimension. We are taking additional steps to support economic growth and tackle skills needs in our major cities by supporting the establishment of City Apprenticeship Hubs. These will help employers, in particular smaller firms, and local people to make the most of the opportunities offered by Apprenticeships.

2.23 It is up to cities themselves to convene whichever mix of organisations makes sense in their area, for the Hub and any wider network. Local Enterprise Partnerships and local training providers are likely to be prominent contributors, together with other employer bodies. Opportunities include working with the National Apprenticeship Service to target the new employer incentives most effectively in creating Apprenticeships and helping local businesses to benefit from the programme. We expect initial city plans to start during the spring.

3. ENSURING APPRENTICESHIPS REMAIN HIGH QUALITY LEARNING EXPERIENCES

3.1 Apprenticeships are a tried and tested model with a proven track record of delivering benefits to apprentices and employers alike.

3.2 The numbers of Apprenticeship starts and achievements have been increasing over recent years; critically success rates – where someone who begins an Apprenticeship successfully completes their training and achieves the required levels of competence - have also been improving, increasing from 63.9% in 2007/08, to 76.4% in 2010/11. This is a key sign of improving quality.

Apprenticeship Starts and Achievements, 2006/07 – 2010/11

* Advanced Level Apprenticeships figures include a small number of Higher Level Apprenticeships [1]

3.3 The most important indicators of quality are the benefits to employers and employers (more detail in Annex A). Evidence suggests that individuals who complete an Apprenticeship experience improved employment prospects and higher wages in employment. Those with an Intermediate Level Apprenticeship earn on average between £48,000 and £74,000 more over their lifetime than similar individuals with a Level 1 or (other) Level 2 qualification; and those with an Advanced Level Apprenticeship earn on average between £77,000 and £117,000 more, compared to similar individuals with a Level 2 qualification (see Annex A).

3.4 Employers also report substantial benefits – including increased competitiveness, higher overall productivity, reduced staff turnover and recruitment costs, as well as a more motivated and satisfied workforce. Research suggests that employers recoup the costs of their Apprenticeship within two to three years in most cases. [2]

High quality Apprenticeships

3.5 Apprenticeships must be real jobs and, as such, the nature of the training they include has to be tied to real opportunities and be led by employer demand. Quality is paramount – an Apprenticeship should represent a significant learning experience for an individual, with clear progression routes into higher learning and more rewarding work, and offering a genuine productivity gain for the employer.

3.6 Raising standards and maintaining confidence in a high quality product and a strong brand is the Government’s top priority. This means raising the bar in terms of the standards we want apprentices to achieve, and it means cracking down on poor provision, with any training provider that does not meet the high standards that employers and learners demand having their funding withdrawn if they do not improve.

3.7 The Government has taken steps to improve the quality of Apprenticeships. First, it sought to ensure that all apprentices are employed: ensuring Apprenticeships are real jobs is key to safeguarding the core qualities that set apprenticeships apart from other training. Apprenticeships offer young people and adults the opportunity to develop their confidence, skills and knowledge. Mentoring and feedback delivered through practical experience of doing the job is as important as formal training.

3.8 Second, the Apprenticeship programme is now underpinned by statutory standards. Published in January 2011, the Specification of Apprenticeship Standards for England (SASE) sets out the standards that all Apprenticeship frameworks in England must meet. SASE is designed to ensure the consistency of Apprenticeships and that all frameworks offer substantial on and off the job guided learning leading to the achievement of recognised high-quality qualifications and an Apprenticeship Completion Certificate.

3.9 Third, the Government took the decision to replace Key Skills in English and maths with Functional Skills, ensuring apprentices were supported to attain more stretching and transferable qualifications in these skills which are so vital for progression. We are now working to help training providers introduce the new qualifications.

3.10 The Government announced a further range of measures aimed at improving Apprenticeship quality in November and December 2011. In particular, it committed to:

· more robust and timely action to crack down on poor provision that does not meet standards that learners and employers demand – withdrawing funding where quality does not improve quickly; [3]

· requiring every provider to support their apprentices in progressing towards the achievement of Level 2 in English and maths. From Academic Year 12/13 all Apprenticeship providers will be required to provide opportunities to support Apprentices in progressing towards achievement of L evel 2 functional skills or GCSE qualifications and will be measured on their success in ensuring that Apprentices who have not already achieved this standard are able to complete it as part of their A pprenticeship programme   ;

· driving quality through consumer empowerment and transparency by improving employer and apprentice access to objective and comparable information on providers. Giving employers and learners better information about provider performance and about the level of government investment in their training will better enable them to act as informed purchasers of training, and be a critical tool in driving up quality and rooting out poor provision;

· supporting an independent employer-led review of Apprenticeship standards, to be launched shortly, that looks at how to ensure we are continuing to raise the quality of Apprenticeships to meet the evolving needs of employers and apprentices;

· launching a new £250m Employer Ownership Pilot, as described above, to improve the impact and value of training, as empowered employers demand high quality training better designed to meet their particular needs and those of their employees, rather than more off-the-shelf options.

· ensuring that all Apprenticeships involve a rigorous period of learning and the practice of new skills that normally extends over at least 12 months, with that being a requirement for all 16 to 18-year old apprentices from August 2012, as new contracts to training providers are issued. The National Apprenticeship Service is assessing the implications of extending this minimum requirement to other age ranges, on the principle that all Apprenticeships should include significant new learning but taking account too of the fact that older apprentices typically start from a higher base of existing skills; and

· asking the National Apprenticeship Service to work with the Alliance of Sector Skills Councils to tighten guidance for those who are developing Apprenticeship frameworks to ensure that expectations on national standards and rigour are met, and to take action where frameworks are insufficiently stretching.

Tackling poor providers

3.11 In New Challenges, New Chances we set out a strategy for tackling poor performance across the FE sector, that:

· sets tougher standards that are less complex and more transparent and these will be used as the basis for measuring performance;

· a proportionate approach to monitoring quality, with greatest scrutiny and inspection targeted at poorer providers; and

· withdraws funding quickly where a provider falls below acceptable standards – and secures alternative quality provision.

3.12 As part of driving up Apprenticeships quality, the Government has asked the National Apprenticeship Service and the Skills Funding Agency to take steps to clamp down on poor performance. As the recent National Audit Office review of adult Apprenticeships recognises, the Department for Business, Innovation and Skills has learnt lessons from Train to Gain and applied these to improve the management of the programme – with particular emphasis on the effective management of contractors.

3.13 Investigations and improvement work is focussing particularly on short durations and subcontracting, identified as key issues in ensuring quality. A substantial review is currently under way within the Skills Funding Agency and the National Apprenticeship Service to analyse and address issues of short duration Apprenticeships. Overall, internal data show that the volume of short duration Apprenticeships is now declining and among providers under review, the issue of short duration is assessed as being of minimal or medium significance in the majority of cases.

3.14 The review is responding to the variable aspects of individual cases as they arise, to ensure that timely and effective action is identified for each case leading to appropriate outcomes, such as new delivery arrangements or cessation of delivery in specific sectors/areas. The current position is as follows [4] :

· one third of all reviews are now closed;

· of these, two thirds have been closed due to providers either ceasing certain existing sub-contracting arrangements or delivery in specific sectors;

· over two thirds are considered of either medium or low significance; and

· a minimum duration of 12 months for apprentices aged 16-18 will apply to all new starts from 1 August 2012 onwards.

3.15 At present, the most common reason for closure is that providers have changed their delivery models to meet the required quality standards. In other cases, providers have either ceased sub-contracting with organisations that used short lengths of stay or have ceased delivering Apprenticeships in sectors where there was an issue of short duration. In the remaining short duration cases assessed as significant or highly significant a number of contributory factors are often found to affect quality. Sub-contracting is a particularly important feature in two of these cases. In several instances, providers have suspended starting new apprentices whilst they revise their delivery models. Major reviews are also underway with a small number of significant subcontractors and, as a result of this, a number of prime contractors have now stopped working with them. 

3.16 The Government, the National Apprenticeship Service and the Skills Funding Agency carefully monitor sub-contracting arrangements. Each year there is a requirement for colleges and training organisations that have a direct contractual relationship with the Skills Funding Agency (lead providers) to tell it who they have entered into a sub-contracting relationship with, together with the details of the amount the sub-contractor receives. This is termed a sub-contractor declaration. Lead providers are required to complete this declaration on at least an annual basis, but also to update it in year as and when it changes. For example, when the lead provider has ceased their contractual arrangement with a sub-contractor; when the lead provider has taken on a sub-contractor in year; or when the lead provider has increased an existing sub-contractors contract value.

3.17 The Skills Funding Agency collects this information from the sector, which assists direct contract holders by providing them with the national picture of the Skills Funding Agency's wider supply chain, and assists them with their due diligence checks. This subcontractor information enables lead providers to build a better understanding of the capacity of subcontractors prior to them entering into a commercial and legally binding relationship.

3.18 The lead provider retains ultimate responsibility for all aspects of the provision that it has contracted with the Skills Funding Agency to deliver, including any elements that it chooses to sub-contract, and must have a legally binding contract with each and all of its sub-contractors. A second level or further sub-contracting is not permitted, unless specific named requirements have been fully met to the satisfaction of the Skills Funding Agency. Also, it is the responsibility of the lead provider to satisfy itself that the sub-contractor has been selected fairly and has sufficient capacity, capability, quality and business standing to deliver the provision that is being sub-contracted. If there is any evidence of current or historic irregular financial or delivery activity with any of the sub-contractors that a Lead Provider is engaged with, it is the responsibility of the Lead Provider to undertake an investigation at their own cost and carry out any follow up actions, and this must be reported to the Skills Funding Agency.

3.19 In addition, as a further mechanism to manage and monitor the use of public funds, the Skills Funding Agency has determined that all sub-contractors in receipt of Agency funding with an aggregate value of £500,000 or more need to complete the Due Diligence Assurance Gateway of the Register of Training Organisations, and it is the responsibility of the lead provider to ensure that that this is undertaken.

3.20 For the 2012-13 contracting period the arrangements relating to sub-contracting will be further strengthened, this includes by:

       requiring lead providers to update their sub-contractor declarations on at least a quarterly basis as part of their funding agreement requirements;

       the Skills Funding Agency publishing a full list of sub-contractors holding an aggregate contract value of £100,000 on its website and, where appropriate, sharing this information with sector organisations such as Ofsted; and

       the Skills Funding Agency continuing to manage the growth of sub-contracting arrangements through its formal performance management protocols.

4. TARGETING GOVERNMENT INVESTMENT

4.1 The Government’s increased spend on the Apprenticeship programme reflects the programme’s high economic returns; evidence indicates that the total economic return (consisting of benefits to learners, their employers and the wider economy) amounts to around £28 for each pound of Government investment (see Annex A). Analysis by the NAO based on different assumptions suggests an economic return of £18 per £1 of Government investment.

4.2 Apprenticeships represent a three-way investment, with benefits accruing to learners, their employers and the wider economy:

· Individuals benefit from higher wages in employment, seeing an average wage gain of around 12% at Intermediate Level and 22% at Advanced Level compared to similar individuals with lower level qualifications. [5] They also benefit from an increased chance of being in employment. This means that over the course of their lifetime individuals with an Advanced Level Apprenticeship earn on average between £77,000 and £117,000 more than similar individuals with Level 2 qualifications. Those with Intermediate Level Apprenticeships earn, on average, between £48,000 and £74,000 more than similar individuals with Level 1 or (other) Level 2 qualifications (See Annex A)

· Employers benefit from a competitive edge that manifests itself in many areas of their business. 80% of those who employ apprentices agree that they make the workplace more productive. In most cases this increased productivity leads to employers recouping their investment in the apprentice in two to three years. 81% of consumers favour companies that employ apprentices. 83% of employers who employ apprentices rely on their Apprenticeship programme to provide the skilled workers that they need for the future. [6]

· ‘Spillover’ benefits accrue to other individuals and employers e.g. through the transfer of knowledge. Apprenticeships also create a pool of skilled labour from which other firms can recruit. [7]

4.3 The Government's current and projected investment in Apprenticeships is set out in the table below.

* Skills Funding Agency Annual Report and Accounts 2010-11

** YPLA 16-19 Funding Statement, December 2011

*** BIS Skills Investment Statement, New Challenges New Chances 2011. Projection figures are given on a 19+ basis only given the demand led nature of the programme, and represent a minimum expectation

4.4 The Government is committed to securing best value for every pound of public money invested, focusing public funding where returns are greatest. At the Apprenticeships Summit on 16 November 2011, Vince Cable announced a renewed focus on targeting the programme where the investment and efforts deliver greatest returns and wider benefits - including on younger people (16-24), new employees, and advanced and higher level qualifications and particular sectors where spend will make the greatest impact.

4.5 The Department has asked the National Apprenticeship Service to target actively, through marketing and other operational levers, those learner groups, qualifications and sectors where Apprenticeships deliver greatest benefits, taking account of economic returns, skills needs and market failures.

4.6 However, Government is not best placed to determine provision at a local level. With the new freedom and flexibilities the Government has introduced, such decisions are now rightly made by training providers and employers working together on the ground, responsive to local needs.

Younger adults

4.7 Government focuses the highest levels of public investment in Apprenticeships on supporting younger learners. The 100% funding available for the training element of Apprenticeships for 16-18 year olds is founded on the principle that Government should fully support the education and training for those yet to reach adulthood. This is consistent too with the position that those under 19 cannot legally be charged fees for their learning in schools and colleges. In this respect, Apprenticeships offer a vocational alternative to the more academic route followed by many other young people e.g. through school sixth form departments and full time further education colleges. For employers, the policy reflects the relative labour market inexperience, greater learning needs and initially lower productivity of the youngest apprentices at the outset of their careers and entering the workplace for the first time. Apprenticeships will make an important contribution as we raise the participation age, in particular for those young people who learn best by doing.

4.8 Similar principles apply in funding Apprenticeships for young adults 19-24. However, as labour market experience and learning increases, likely to be reflected in greater initial workforce productivity, it is right that the balance of investment between employer and State adjusts. Further funding adjustments are made for those 25+, where prior skills levels and experience will typically be higher still. Funding for all 19+ Apprenticeships is reduced by an additional 25% for large employers, given the greater resources and infrastructure they are likely to have to support training. Additional investment in younger learners includes the new employer incentives, as discussed above, designed to encourage small employers to take on new apprentices aged 16-24.

4.9 Other arguments for targeting Government support for younger people link to the financial constraints they are more likely to face, which result from the inability to borrow against future increased earnings. These will generally be greater for young people and those with lower skills, who typically have lower incomes and less flexibility in financing. Information barriers also affect the low skilled more – they are less able to access information and less likely to be able to rely on personal networks.

4.10 In addition, returns are typically greater where qualifications are undertaken before the age of 25, including as younger individuals have longer left in the workforce, on average, over which the benefits can accrue. [8]

4.11 The Government remains committed to introducing FE loans for those 24+ at Level 3 from AY2013/14, which will affect those taking Apprenticeships at this level. The introduction of loans is expected to provide further stimulus to quality improvement across the FE sector, as learners become more demanding and make more informed decisions about their investments. The case for loans is supported by the evidence cited above of higher returns for Apprenticeships at the advanced level, with payback starting only after completion of the course and rising incrementally after an income of at least £21,000 has been achieved.

4.12 The Government has consulted extensively with employers in developing our approach to introducing FE loans, and will continue to work closely with employer bodies to ensure that the system is effective and continues to support high levels of participation.

Higher level Apprenticeships

4.13 In the strategy for skills, Skills for Sustainable Growth, and its parallel publication, Investing in Skills for Sustainable Growth (published November 2010), the Government set out their intention to not only increase numbers of people undertaking Apprenticeships, but also to improve the quality of the programme. As the economy rebalances, we will need more highly-skilled employees. The Government recognises the important role Apprenticeships can play in helping employers meet these needs.

4.14 Higher skills increase productivity, enabling businesses to become more efficient and more innovative. The challenge for the Apprenticeships programme is therefore to improve the transparency of the pathway from Intermediate Level and Advanced Level Apprenticeships into higher learning, including but not exclusively into Higher Apprenticeships. The take-up of Apprenticeships at Advanced Level and above grew substantially in 2010/11: and are continuing to grow this year: [9]

· Advanced Level Apprenticeships (Level 3 only) grew by 75.5% in 2010/11

· Higher Apprenticeship starts grew by 47.8% in 2010/11

· Combined - Level 3+ grew by 75.1% in 2010/11

In focusing resources on supporting employers who want to recruit 16-24 year olds, we will prioritise especially those who are offering opportunities at Advanced Level and above. The National Apprenticeship Service are promoting the opportunities and benefits of progression to this level and beyond to employers, young people and their parents and will support employers to offer progression opportunities to young people who achieve their Intermediate Level Apprenticeship.

4.15 Working with the Skills Funding Agency, the National Apprenticeship Service will also prioritise allocation of available budgets through the year to providers who focus on Advanced Level Apprenticeships and support new providers such as University Technical Colleges to enter the market where they focus on the delivery of Apprenticeships at Advanced Level or above.

4.16 The Higher Apprenticeship Fund is key to our plans to expand the range of Higher Apprenticeships. Currently there are only 8 Higher Apprenticeships available. [10] To accelerate the development of new Higher Apprenticeships and to build capacity of the system to support the expansion of Higher Apprenticeships a discrete £25m fund was announced in May 2011. Following a competitive tendering, £18.7m was allocated to support the development of 28 new Higher Apprenticeship frameworks at level 4 and above with pledges from employers to make 19,000 new Higher Apprenticeship places available in sectors including construction, advanced engineering, insurance and financial services. A second invitation to bid was announced on 7 February 2012, focusing on further areas needed to support economic growth, and is expected to bring investment in the 2012-13 financial year to around £25m.

Sectors

4.17 In terms of sectors, high economic returns have been demonstrated in traditional industries for Apprenticeships such as engineering, construction and advanced manufacturing, (see McIntosh (2007) A Cost-Benefit Analysis of Apprenticeships and Other Vocational Qualifications) whilst newer industries and the service sectors also offer strong opportunities, such as in digital and creative media. It is not our intention to exclude certain sectors from the Apprenticeships programme, especially where there may be employer demand. Rather, we will seek both to maximise Apprenticeship opportunities in key growth sectors and to explore how quality and returns can be further strengthened across the programme; for example, the National Apprenticeship Service will take steps where there is evidence that current frameworks are insufficiently stretching.

4.18 The National Apprenticeship Service takes a balanced approach to sectors, developing new markets whilst ensuring that existing employer demand is met and sufficient opportunities are created to ensure sufficient learners and employers can access and gain value for money from the Apprenticeship budget. The National Apprenticeship Service maintains a sector ‘plan’ for all major sectors which is developed and deployed jointly with the leading sector bodies and employers.  The National Apprenticeships Service has run sectoral marketing campaigns, created and deployed jointly with sector skills bodies, and based on an analysis of labour market intelligence for the sector and targeted to respond to the specific skills needs in that sector. This has led to tailored, sector specific marketing campaigns in the Public Sector, Construction, Logistics, Engineering, Hospitality, Retail (in 2009/10) and Logistics, Financial Services, Creative and Cultural, IT, Retail, Manufacturing and Engineering (in 2010/11). They have also used their ‘sales force’ to broker the introduction of Apprenticeships across all of the major public service sectors from 2009 to 2011. The National Apprenticeships Service is currently working with National Skills Academies and Sector bodies such as Construction Skills to ensure that the Government’s SME incentive payments create new opportunities in the sectors where they will deliver the greatest economic impact.

4.19 As well as stimulating demand in this way, the National Apprenticeship Service also takes an active role in ensuring that the supply side is able to respond. One means of doing this is to sponsor the development of new frameworks where there is proven employer demand and demonstrable return for the state. The National Apprenticeship Service is currently using the Higher Apprenticeship Fund to develop, with sector bodies and employers, 20 new Advanced and Higher Frameworks in the following sectors: Energy Engineering (renewables) Research and Development, the Creative Industries, Emergency Healthcare, Lifelong Learning, Logistics, Insurance and Banking, Professional Services.

4.20 The Government is supporting the development of a new degree-equivalent Advanced Manufacturing Higher-Level Apprenticeship by establishing the STEM Strategy Board led by UK Commissioner Nigel Whitehead. SEMTA, Proskills and Cogent are working together with the National Apprenticeship Service and the UK Commi ssion for Employment and Skills  to produce a broad framework that will aim to grant professional recognition from the appropriate bodies.

Supporting routes into Apprenticeships for disadvantaged young people

4.21 We want to make sure that young people with the potential to rise to the challenge of an Apprenticeship get the opportunity to do so, and enjoy the rewards that ensue. Targeting young people who are NEET, or at risk of being so, helps get them started on a positive career and can save the money that would otherwise be spent on dealing with the long-term effects of unemployment, ill-health, crime etc. It is right that employers choose the best person for their job, and that Apprenticeship places are prized and sought-after. However we are taking action on several fronts to help young people equip themselves to compete, and to support progression into Apprenticeships through better organisational arrangements.

4.22 In August 2011 the Government launched the Access to Apprenticeships pathway within the programme, for young disadvantaged people who need a little extra boost in moving into employment as an apprentice. An alternative way of beginning an Apprenticeship, rather than a separate programme, it offers short-term help to polish skills such as English and maths, and establish a workplace track record as a keen, reliable member of staff, with the clear objective of moving participants into a paid job as quickly as possible, where they can complete their Apprenticeship in the usual way. Access to Apprenticeships will provide up to 10,000 places in the first year with a similar amount likely in following years, subject to review.

4.23 The 2011 Budget announced a £105 million boost to funding for adult Apprenticeships, which enables us to support an additional 40,000 places over the spending review period and enhance our capacity to help 19-24 year olds who are NEET. Apprenticeship providers with proven expertise in recruiting and succeeding with this client group were targeted for the additional funding. With this as a catalyst, the National Apprenticeship Service and the Department for Work and Pensions have developed joint working arrangements to promote awareness of Apprenticeships throughout the JCP Adviser network and encourage and support progression into Apprenticeships as the preferred next step from measures like Work Trials and Work Experience - enlisting new employers to the programme as well as additional apprentices.

Equality and diversity

4.24 The National Apprenticeship Service has responsibility for delivering the Apprenticeships programme, and increasing the numbers and diversity of Apprenticeship applicants is a priority. The National Apprenticeship Service is currently exploring new ways to promote access and success for under-represented groups. Through the Apprenticeship ‘offer’ in the Education Act 2011 we are making sure that young people in certain groups, including young disabled people up to age 24, will have their Apprenticeship training funded as a priority, when they have found a place.

4. 2 5 For advice on disability issues, we consult a Reference Group of external experts, including disability organisations. We have also commissioned independent research to produce practical recommendations on other ways that we could help disabled people get into Apprenticeships and complete them successfully.

5. DELIVERING THE PROGRAMME

5.1 Working together, the Secretaries of State for BIS and for Education determine the overall strategy and the policy context, funding levels and volumes for the Apprenticeship programme as part of their responsibilities for pre- and post-19 education and training. This is co-ordinated through the single joint BIS/DfE Apprenticeships Unit. All significant decisions affecting the programme as a whole are shared between the two Departments. John Hayes is joint Minister for Apprenticeships, also working across the two departments. So responsibility for ‘joining up’ the programme applies at policy level as well as delivery level through the National Apprenticeship Service.

5.2 A single apprenticeships agency, formally accountable to both departments, was considered the most appropriate model to deliver an all-age programme. The information below sets out in more detail how the National Apprenticeship Service works with the two departments, and the impact of these arrangements.

Role and Responsibilities

5.3 The National Apprenticeship Service was launched in April 2009 with a remit of end-to-end responsibility for the leadership and delivery of the Apprenticeship programme, within the policy context set by BIS and DfE, and accountability for delivery of the Government’s ambitions for Apprenticeships. This includes championing Apprenticeships; engaging with employers, training providers and other key stakeholders; and ensuring Apprenticeship quality.

5.4 An annual letter to the Chief Executive of the Skills Funding Agency sets out the key priorities and the National Apprenticeship Service is required to develop and implement an annual Business Plan with specific outcomes and deliverables in line with those priorities.

5.5 The National Apprenticeship Service operates as a discrete and separate national service with its own distinctive Apprenticeship brand, housed within the Skills Funding Agency. It has its own Chief Executive directly accountable to Ministers in BIS and DfE and 320 FTE staff, 150 of which operate as a sales force across four geographical areas in England. The National Apprenticeship Service has full operational authority in order to deliver the Apprenticeship programme and leads on planning and managing Apprenticeship growth, marketing and promotion, and determines unit costs and funding rates for Apprenticeships. The Chief Executive is also responsible and accountable for the National Apprenticeship Service’s administration and running costs budget.

5.6 Since April 2011, the National Apprenticeship Service has also had responsibility and accountability for Apprenticeship funding. To ensure that employers and training providers can access a single, co-ordinated service across the age ranges, the National Apprenticeship Service has a Service Level Agreement with the Skills Funding Agency. The Agreement covers the provision of allocations, contracting and performance management with providers and employers for the delivery of Apprenticeships. The Skills Funding Agency provides the National Apprenticeship Service with agreed performance data to enable the National Apprenticeship Service’s monitoring and management of delivery and funding.

5.7 The National Apprenticeship Service’s Chief Executive’s performance is subject to the usual SCS Performance Management arrangements. Performance is reviewed regularly by both Departments against objectives set in an annual Performance Agreement.

5.8 The National Apprenticeship Service’s operational performance is monitored formally through quarterly Ministerial Reviews and joint BIS/DfE official level reviews. These reviews are informed by reports provided by the National Apprenticeship Service’s on delivery, performance and risks. There are a number of additional regular mechanisms for monitoring and discussing the National Apprenticeship Service performance, including the BIS Joint Management Board which receives a detailed monthly report used to inform ongoing oversight of Apprenticeship delivery and associated issues and risks; and the DfE Senior Management Review Group focused on 16-18 Apprenticeship delivery performance, funding and risks.

5.9 The National Audit Office’s review of adult Apprenticeships published on 1 February commented positively on the oversight and management of the Apprenticeship programme. The National Audit Office concluded that there was improved management of the Apprenticeship programme and appropriate governance arrangements for the National Apprenticeship Service on behalf of both sponsor departments.

The National Apprenticeship Service delivery record

5.10 World Class Apprenticeships: Unblocking Talent, Building Skills for All, Chapter 4 - A New Delivery System [1] identified functions, set out below, for the National Apprenticeship Service within its role of end-to-end responsibility for Apprenticeships. There has been significant success in setting up and building the capability of the National Apprenticeship Service, as a discrete service within the Skills Funding Agency, and there has been good progress in discharging these functions, the detail of which is being reported separately by the National Apprenticeship Service in its written evidence. The following examples provide an indication of the significant success of the National Apprenticeship Service in fulfilling its remit since its launch in 2009.