3 Delivery and funding
Bridging the gap—NAS, SFA and simplifying
delivery
34. The apprenticeship programme
represents a significant investment on the part of the Government.
In 2010-11 the programme cost the public purse £1.2bn.[48]
In England, the Department for Education and the Department of
Business, Innovation and Skills allocate funding for the provision
of 16-18 year olds and 19+ apprenticeships respectively. The National
Apprenticeship Service co-ordinates this funding by covering a
proportion of the cost of training apprentices as determined by
the relevant Sector Skills Council, dependant on the age of the
apprentice (this is discussed in paragraph 42 of this Report).
NAS acts as a single point of contact for employers so that the
funding appears seamless despite originating from different sources
and involving a large number of organisations.[49]
35. Some witnesses argued that the
current funding structure was a source of inefficiency for the
funding of apprenticeship training. Professor Alison Fuller and
Professor Lorna Unwin explained that:
Funding for apprenticeships is diluted
through multiple steps in the funding allocation chain—BIS?SFA?NAS?Providers?Employers?Apprentices—along
the way, other organisations take a slice (e.g. Apprenticeship
Ambassadors Network, Sector Skills Councils, UKCES, Awarding Bodies,
ATAs, GTAs). The money pays for a range of administrative tasks,
for the cost of qualifications, assessment and accreditation,
inspection, and for wages. For example, Awarding Bodies benefit
greatly from apprenticeship. In the past, they provided significant
levels of curricula and pedagogical support to their 'centres'
(e.g. FE colleges), but this has declined in recent years.[50]
36. Taking the issue further, the
Managing Editor of FE Week, Nick Linford, asserted "the main
inefficiencies [...] come from a very extended supply chain in
terms of delivery" [51]
and that merging NAS and the SFA would go some way to solving
this problem:
Let us start by appreciating that
the National Apprenticeship Service say that they have end-to-end
responsibility for apprenticeships, and yet they have no responsibility
for the funding and compliance. [...] I would have single responsibility,
absolute clarity about who is responsible, but not leave the independent
role to monitor quality with the body that deals with compliance
and funding. That has to be more independent. How can the funding
body be responsible for saying whether they spent the money well
or not? That has to be done independently.[52]
37. When we discussed this with
the Minister, he agreed that the funding structure was not perfect
but was keen to highlight recent improvements. He told us that
progress had been made, particularly for large employers:
I have set about that by simplifying
the system and by producing a toolkit for employers to guide them
through the system. We are piloting, for large employers, a much
simpler funding regime so they do not have to deal with weekly
or monthly funding; big employers do not want to have to do that.
So we are setting about making the system more navigable, less
burdensome, and less bureaucratic at the same time as we are engaged
in this passionate evangelism.[53]
38. People 1st warned that the current
structure deterred the employment of some apprentices. However,
it welcomed the SFA's objective of simplification:
Unless the system and funding criteria
becomes less confusing employers are unlikely to take up this
incentive. However, the SFA work with larger employers on the
Simplification Pilot will hopefully reduce unnecessary bureaucracy
for larger national employers.[54]
The Chief Executive of the Association
of Employment and Learning Providers, Graham Hoyle OBE, agreed
and expressed optimism for the future. He told us that "funding
is complicated, but at the present time we and the Skills Funding
Agency are looking at making that much simpler. This follows the
expectation of a reduction in bureaucracy and so on, which, of
course, we all support".[55]
39. We discussed these issues with
NAS and the SFA, specifically asking whether they should be merged.
The Chief Executive of NAS, David Way, told us that the SFA had
wider responsibility than just apprenticeships and that it was
important that they were kept separate. He argued that NAS was
"responsible for performance, the development of programmes
and the money", while the SFA was "responsible for a
much wider skills budget".[56]
The Chief Executive of the SFA, Geoff Russell, however, told us
that "the distinction between NAS and the [SFA] is almost
one without a difference. It is an external distinction; it is
about brand".[57]
Comparing the SFA to a private company, he went on to explain
that the separation was important for accountability and control:
It is important, as in any company
that sells different products, to have one division focused on
that product and to have the ability to say, "This is the
product we want; this is how it should look; this is what we are
going to price it at", without having somebody else from
some other part of the organisation saying, "We don't like
that".[58]
40. The Minister conceded that more
needed to be done. He told us that:
We also need to make the system
more navigable for employers, less burdensome, less bureaucratic,
and less irksome, particularly for the SMEs. [59]
In supplementary evidence, the Department
set out the progress made in reducing bureaucracy for businesses:
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.[60]
It also told us of its plans to reduce
bureaucracy for smaller businesses:
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.[61]
41. While we welcome recent efforts
to improve the administrative processes for apprenticeship training
for employers, we are concerned that the funding chain remains
unnecessarily complex. The sheer number of organisations involved
works against the efficient allocation of funds. We therefore
recommend that the Department provides a simpler and more efficient
delivery system.
The effect of varying funding by age of apprentice
INTRODUCTION
42. The NAS website summarised the
funding structure for employers:
If the apprentice is aged 16-18
years old, you will receive 100 per cent of the cost of the training;
If they are 19-24 years old, you
will receive up to 50 per cent; and
If they are 25 years old or over
you may only get a contribution depending on the sector and area
in which you operate.[62]
43. The rationale behind this funding
structure is twofold. First, it reflects the Government's commitment
to free education for all individuals under the age of 19 and
second, the potentially higher cost to an employer of taking on
a younger (and relatively less experienced) apprentice. The Department
confirmed that:
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.
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.[63]
We received a significant volume of
evidence on this subject which raised four main issues: cost,
inequality, progression and supporting our youth.
COST
44. The Engineering Construction
Industry Training Board told us that this funding structure was
distorting the recruitment practices of employers:
Obviously employers will look to
the 16-18 age group first. This leaves the 19+ young people, who
may have been out of work for some time, or have just left school
with A levels and do not want to go to university, with reduced
opportunities.[64]
The Open University agreed, telling
us that:
After the age of 19 the funding
goes down considerably and with it, goes the incentive for employers
and learning providers to engage with older apprentices.[65]
The training provider NCG took this
notion further, telling us that is was especially pertinent when
businesses were sensitive to cost because of the wider economy:
In the current economic climate,
businesses are discouraged from taking on 19-24 year olds due
to the expected fee level.[66]
45. Many industry representatives
told us that not only was the funding structure distorting recruitment,
but that it was based on a false premise. For example, the Royal
Aeronautical Society summarised that "there is no difference
in cost if an apprentice is 16, 18, 25 or 32—the training,
materials etc. they receive are the same".[67]
Learndirect explained that the learning needs of 19-24 year-olds
had been underestimated, particularly when many 19-24 year olds
apprentices come from non-employment, education or training (NEET)
backgrounds:
The current split by age group alone
is too simplistic. In our experience 19-24 NEET apprentices can
be as resource-intensive as 16-18 apprentices for the following
reasons:
They have been out of the working
environment for some time and therefore will need a lot of support
in the workplace to bring them up to the employer's expectations.
In reality they are starting from scratch in the workplace.
They may be moving into a new sector
which means starting again. This requires higher levels of support
from the provider and employer to retain them in that role and
make them valuable to the business/employer.
They have developed poor working
habits from previous, less structured programmes and employers.[68]
British Gas agreed, telling us that
"the investment British Gas makes in individuals is consistent
irrespective of their age".[69]
46. Other contributors to our inquiry
were more pragmatic about the idea of two-tiered funding. For
example Gateshead Council told us that 19-24 year olds were easier
to train, but argued that 50 per cent funding was too low and
did not account for experience:
To many employers, a 19-24 year
old is a more valuable employee because they are more mature.
However, they still require time, and training because they have
limited practical experience and skills.[70]
EQUITY
47. Several witnesses expressed
concern with the current funding structure from a diversity and
fairness perspective. For example the National Skills Academy
for Nuclear told us that apprenticeships should be focussed on
getting the right person into the right place, not dependant on
their age:
Expanding the ability of the funding
to offer apprenticeship places to the right person, irrespective
of age, should be a focus for the government and UK plc. The current
funding discrimination is placing a barrier to diversity for Employers
and Providers who recruit on behalf of Employers to get the right
people for the right jobs.[71]
Sheffield City Council told us that
"the current funding model acts as a financial disincentive
to employers in employing/investing in the skills of the 19 plus
workforce".[72]
48. The evidence also highlighted
specific sectors, whose representatives told us that they considered
themselves to have been discriminated against. The Financial Skills
Partnership argued that the Financial Services sector was disadvantaged
because it did not tend to recruit below the age of 19. They told
us that "some apprentices do not come to the decision to
train in a particular career, such as accountancy, until 19 or
over".[73] This
was echoed by the Association of Licensed Multiple Retailers[74]
and UCATT (the union for construction workers).[75]
The National Specialist Contractors' Council highlighted that
the specialist sector had all but been excluded from the apprenticeship
scheme because of the two-tiered funding structure:
Many specialist apprentices are
mature workers because the nature of specialist trades often requires
more experience and maturity. [...] Under the current system,
employers of apprentices aged over 18 years are financially penalised
for being more mature and the SFA will not provide enhanced funding
for those apprentices who have had previous employment.[76]
PROGRESSION
49. We have also heard that the
current funding structure prevents employers supporting their
apprentices to progress in their training. This view was prominent
in evidence received from the construction and contracting sectors.
The Federation of Master Builders explained the problem:
The current age-dependent funding
rules for apprenticeships (100% for 16-18 year old and only 50%
for 19+ year olds) limits a firm's ability to progress their apprentice
onto Level 3 programmes which is our industry standard for a craftsman.
Most apprentices are likely to be 19+ before progressing onto
Level 3 courses and therefore a flexible delivery contract covering
full funding for both Level 2 and Level 3 is required.[77]
This sentiment was echoed by the UK
Contractors Group who told us that this was an issue specific
to the construction industry:
The nature of the construction industry
means that the reduction in apprentice funding post-19 has a particularly
strong impact on the numbers starting Level 3 apprenticeships
compared to other industries.[78]
The Federation of Master Builders agreed
that an apprentice over the age of 19 was more attractive as a
resource for an employer, but agreed that the structure was preventing
the appropriate training of this group of apprentices:
Employers are often motivated by
the benefits of hiring apprentices over the age of 18, which can
include a better level of maturity, previous work experience and
fewer problems with insurance. [...] The current system limits
the rate of progression to advanced apprenticeships, and thus
has a negative impact on the industry's ability to meet its skills
needs.[79]
YOUTH
50. We also heard evidence supporting
the current funding structure. For example BAE systems told us
that in a tough funding climate the "Government need[ed]
to prioritise its investment". It went on to say that it
was "vital that Government investment should continue to
be at the 100% level for 16-18 year olds".[80]
Similarly McDonald's agreed that the current apprenticeship funding
arrangement of 100% for 16-18 year olds and 50 per cent for 19-24
year olds was "appropriate" but told us that it could
be improved by "weighting their support towards younger people
and those not in education, employment or training (NEETs)".[81]
Other witnesses agreed with the principle of 100 per cent funding
for 16-18 year olds, but argued for more flexibility within the
funding arrangements for older apprentices. The West Midlands
Training Provider Network summarised this argument by telling
us that the Government should take more factors than age into
account:
Apprenticeship funding must recognise
the true costs of successfully delivering such a complex programme,
often uniquely tailored to meet the needs of both the employer
and of the apprentice and make available appropriate levels of
funding based on those individual needs. Age and experience will,
of course, be factors that would need to be taken into account.
We do believe, however, that those learners who are 19-24 who
do not have a Level 2 qualification or who had been unemployed
at the start of the programme should have full funding and not
reduced, as currently happens, by 50%.[82]
51. When considering the evidence
submitted to us on this topic, we were keen to combine the opinion
of experts and stakeholders with the evidence of what was actually
occurring in the economy. Despite the evidence received, it is
worth repeating the analysis of the official growth in apprenticeship
starts, which saw the age group which received the least amount
of Government subsidy (those over the age of 25) tripling in size
between 2009-10 and 2010-11.[83]
When we asked the Department whether or not it had conducted any
assessment or analysis of the current funding policy on employer
demand, apprenticeship take-up or resulting socio-economic consequences,
it confirmed that no such analysis had taken place.[84]
52. We note the concerns that
the funding structure (of 100 per cent public funding for 16-18
year olds and 50 per cent for 19-24 year olds) may bias firms
towards employing younger apprentices and unfairly disadvantage
older applicants. However, there is a lack of empirical evidence
and analysis to substantiate these concerns and it is disturbing
that the Minister does not have this evidence to hand. We therefore
recommend that the Department provides a detailed assessment of
the impact that the funding structure has had on the take up of
apprenticeships by age group. That assessment should specifically
address the following four issues:
- The actual cost to businesses
of employing apprenticeships of differing ages and experience;
- Inequality perpetuated by the
funding;
- Barriers to progression through
the scheme; and
- Disproportionate impact on specific
sectors.
Perception of apprenticeships
53. Alongside the recent expansion
of the apprenticeship scheme has come an increase in public awareness
and engagement around the programme. This is not coincidental,
as the National Apprenticeship Service told us of its recent efforts
to promote the apprenticeship brand, specifically citing the recent
'apprenticeship week':
The National Apprenticeship Service
have been working closely with BIS and the Cabinet Office on a
new marketing and communications campaign that launched during
National Apprenticeship Week on 9 February 2012 to promote Apprenticeships
to employers, young people and parents. The campaign creatives
lead with the strapline 'Apprenticeships deliver' designed to
be inspirational and to showcase young talent in Apprenticeships.
Direct mail, public relations and advertising will focus on themes
that define 'a new era for Apprenticeships'—quality, growth,
pride and value.[85]
54. When we asked the Chief Executive
of NAS, David Way, how important he considered the apprenticeship
brand to be, he confirmed that NAS was actively looking at ways
to enhance it, saying, "I think the brand of apprenticeships
is hugely important in this area, because we have a rich heritage
on which we rely heavily. [...] We are always looking at branding,
not least to keep it modern and relevant to those mostly young
people who come into apprenticeships".[86]
The Shropshire Training Provider Network largely agreed, saying
"NAS has provided a national profile of the apprenticeship
brand which has been successful".[87]
55. However, despite the value that
NAS claims to place on the apprenticeship brand, we have also
heard that the pursuit of its other objectives may have worked
against that end. Several witnesses and written submissions told
us that the focus on apprenticeship numbers had undermined industry
confidence in the scheme. For example, CITB-ConstructionSkills
told us that "NAS had promoted apprenticeship volumes, irrespective
of age and length, but this could potentially damage the apprenticeship
brand in the long term".[88]
We received evidence to this effect from different stakeholders.
The Electrical Contractors' Association told us that NAS was perceived
to be entirely focussed on numbers which created a perception
that the quality of the apprenticeship scheme had suffered and
was seen as secondary. It summarised that "a focus on quantity
continues to dilute the apprenticeship 'brand'".[89]
The Greater Manchester Learning Provider Network also argued that
the pursuit of numbers had incentivised NAS to focus on 'easy
wins' and that this had a negative effect on public perception:
NAS is fixed upon chasing and reaching
the target numbers that it has been set. In our opinion this is
leading NAS to focus more on the larger employers and in many
cases using tax-payer money to subsidise the training programmes
of the very large employers, thus de-valuing the Apprenticeship
Brand.[90]
56. The Minister told us that NAS
had a responsibility to enhance the apprenticeship brand. He told
us that one of the fundamental reasons he made apprenticeships
"the pivot of our skills strategy" was because of the
already strong brand:[91]
I said to them [NAS] when I became
the Minister, "You are a sales and marketing organisation.
You have to go out and sell this to businesses and you have to
sell this to providers." The brand "apprenticeships"
is bigger than ever. We are filling a bigger space than we ever
have, but you are quite right: there is much more to do.[92]
57. While we appreciate that one
role of NAS is to 'sell' the benefits of apprenticeships to employers,
we consider that an unfocussed and indiscriminate sales pitch
may produce numbers but is unlikely to address skill-needs. This
is likely to have unintended consequences on the brand. As well
as the ongoing perceived conflict between the NAS's objectives
and the public perception of quality, we were made aware of several
high-profile cases recently reported in the media. These seemed
to culminate in April 2012 with a BBC Panorama programme
which "investigate[d] a story of poor quality training, of
disappointed young people, and highlight[ed] the example of some
training companies who are making a killing out of public funds".[93]
There can be no doubt that the reporting and handling of these
issues had an effect on the public's perception of apprenticeships.
Responding to these reports, Geoff Russell, the Chief Executive
of the SFA, argued that this was not a widespread problem and
explained:
There are various forces, but at
the end of the day, we have to balance the bureaucracy issue.
I can double the number of people I have and the amount of effort
I make to peer over the shoulders of the several thousand providers
we have in the country. That would cost money and generate much
more bureaucracy, and I am not sure it would be a good return
on investment given that the number of providers who are bad apples
is, happily, relatively low, although the Panorama experience
illustrates one of them.[94]
58. We are sympathetic to the desire
not to over-burden providers and to avoid the excessive use of
public money to regulate a few 'bad apples'. However, we do not
believe that historically the balance has been right. Neither
NAS nor the SFA has given adequate weight to the negative public
perception associated with doing nothing. The Director of Unionlearn,
Tom Wilson, told us that this while these bad practices may not
have been widespread, it was essential to deal with them swiftly
because:
It can very quickly become a major
problem. [...] You have to deal with it very quickly and effectively
to stop it spreading quickly from the margins and becoming a much
bigger threat.[95]
59. Our overall assessment of the
objectives and success of public bodies (including NAS) can be
found elsewhere in this Report. We cannot ignore, however, the
evidence that the perception of quality may have been undermined
in recent times. It has been argued that the priorities of NAS
have been misaligned, which has led to the perception of NAS as
an organisation blind in its pursuit of sales. Whether or not
this is the case is not the issue. There can be no doubt that
the apprenticeship brand has been damaged as a result of this
perception. Secondly, recent high-profile issues have damaged
the public's confidence in apprenticeship quality and value-for-money.
We acknowledge that many of these issues have now been dealt with,
but future examples of poor performance will need to be addressed
quickly and efficiently to prevent further damage.
60. While we welcome the efforts
of NAS to strengthen the apprenticeship 'brand', we cannot ignore
the evidence that the perception of quality may have been damaged
in some sectors, which has in turn undermined those efforts. NAS
must not trade off between numbers, quality and brand. We therefore
recommend that NAS produces a longer-term strategy outlining how
it intends to maintain and improve the apprenticeship brand in
tandem with its other objectives.
48 National Audit Office,
Adult Apprenticeships, 1 February 2012, para 1.6 Back
49
The diagram on page 6 of this Report summarises the key organisations
involved in the apprenticeship programme Back
50
Ev w133 Back
51
Q 526 Back
52
Q 524 Back
53
Q 713 Back
54
Ev w242 Back
55
Q 19 Back
56
Q 586 Back
57
Q 593 Back
58
Q 593 Back
59
Q 713 Back
60
Ev 138 Back
61
Ev 138 Back
62
National Apprenticeship Website, The Basics-Apprenticeships
[accessed 5 July 2012] Back
63
Ev 144 Back
64
Ev w117 Back
65
Ev w235 Back
66
Ev 212 Back
67
Ev w253 Back
68
Ev w187 Back
69
Ev w46 Back
70
Ev w139 Back
71
Ev w221 Back
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Ev w267 Back
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Ev w130 Back
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Ev w25 Back
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Ev w282 Back
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Ev w224 Back
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Ev w153 Back
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Ev w298 Back
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Ev w125 Back
80
Ev w35 Back
81
Ev w201 Back
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Ev w244 Back
83
Table 2 Back
84
For example Ev 218 Back
85
Ev 199 Back
86
Q 562 Back
87
Ev w256 Back
88
Ev w70 Back
89
Ev w108 Back
90
Ev w143 Back
91
Q 705 Back
92
Q 707 Back
93
BBC website, BBC One-Panorama, The Great Apprentice Scandal
[accessed 3 July 2012] Back
94
Q 568 Back
95
Q 568 Back
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