The apprenticeships programme Contents

1Overseeing the reform of the apprenticeships programme

1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Education (the Department) and the former Department for Business, Innovation & Skills on the apprenticeships programme.1 We also took evidence from the shadow Chief Executive of the Institute for Apprenticeships, who is also Chief Executive of the Skills Funding Agency and Education Funding Agency.

2.Successive governments have considered apprenticeships to be a key way of developing skills in the workforce which, as a result, will also generate economic growth and improve productivity. In England, an apprenticeship is a full-time paid job, available to those aged 16 or over, that incorporates on- and off-the-job training, and takes at least a year to complete. Public funding of apprenticeships rose from just under £1.2 billion in 2010–11 to around £1.5 billion by 2015–16. There has also been considerable growth in the number of apprenticeships taking place. In the period broadly equivalent to the 2010–15 Parliament, around 2.4 million apprenticeships were started, compared with around 1.1 million in the five years before that.2

3.The apprenticeships programme is undergoing significant change, to make it more employer-led and employer-funded. The Department has a policy objective to facilitate 3 million new apprenticeship starts during the period from 2015 to 2020. Groups of employers are being brought together to design an entirely new set of apprenticeship ‘standards’ (that is, statements of the skills and knowledge to be acquired for each apprenticeship) that are intended to meet their needs more fully than previous apprenticeship frameworks. At the time of our hearing, the Department was around 6 months away from introducing an apprenticeship levy, applicable to all employers with an annual pay bill of more than £3 million. With the help of the levy, the Department expects around £2.5 billion to be spent on apprenticeships in England by 2020, which is around 40% more than the current total funding from government and employers. At the same time that the levy is introduced, an independent and employer-led Institute for Apprenticeships will begin operations. Its role will include regulating the quality of apprenticeships.3

Measuring success

4.We questioned the Department on the metrics it will use to identify whether the reformed apprenticeships programme meets its aims and objectives. The Department explained that ‘success’ meant: expanding the number of apprenticeship starts to three million by 2020; expanding the proportion of black, asian, and minority ethnic (BAME) apprentices; increasing the quality of apprenticeships; and making more funding available through the levy. The Department told us that it would look to introduce some more sophisticated measures of success, for example comparing data on apprenticeship starts, overall and broken down by levels and sectors, against the benefits of apprenticeships at different levels.4

5.To achieve maximum value, the apprenticeships programme needs to raise skills levels, close skills gaps and promote diversity. The scale of the challenge facing the programme was illustrated by the evidence we received. For example, the Federation of Master Builders told us that 39% of small and medium-sized housebuilding firms believe that a shortage of skilled workers is a significant constraint on their abilities to build new homes. The Mineral Products Qualifications Council referred to concerns about skills gaps based on analysis showing that the workforce in its sector has an average age of 55.7 years, and is almost exclusively made up of white males. The Young Women’s Trust noted that, while women make up 94% of childcare apprentices, they account for only 4% of engineering apprentices.5

6.The Department explained that its approach would be to let large employers use the monies they contribute to pay for apprenticeships to tackle their own skills gaps. The Department believed its role was to create price incentives for employers to take on apprenticeships in areas where there were clear skills shortages. For example, just after our hearing, the Department formally set higher funding caps for level 2 and level 3 apprenticeships in STEM (Science, Technology, Engineering and Maths) areas.6

7.The Department told us that the programme has a broad objective of raising BAME participation in apprenticeships, but there are no specific targets with regard to increasing gender and age diversity across occupations. The Department noted that it was considering ways to help young people with disabilities, and those from disadvantaged backgrounds, to access apprenticeships. For example, it had run a consultation exercise which included funding uplifts for 16- to 18-year old apprentices with learning disabilities. The Department subsequently announced that employers and training providers would each receive £1,000 when they take on a 16- to 18-year old apprentice, or a 19- to 24- year old apprentice who has left care or has an Education and Health Care Plan. The Department also announced some temporary funding changes relating to apprentices from disadvantaged backgrounds, while it conducts a fuller review into the best way to support people from all backgrounds into apprenticeships.7

8.We questioned how the apprenticeships programme will deliver the skills needed by emerging industries and how the Department was planning to address the opportunities for, and risks to, the apprenticeships programme presented by the UK leaving the European Union. The Department told us that it believed funding rates and uplifts were flexible enough to be used to incentivise employers to expand the types of apprenticeship that best support the government’s industrial and migration strategies.8

The role of the Institute for Apprenticeships

9.The Department told us that the remit of the future Institute for Apprenticeships (IfA) would include measuring the success of the programme and regulating the quality of apprenticeships. In particular, from April 2017 the IfA would be responsible for keeping the number of new standards to a manageable number, as well as ensuring that apprenticeships deliver up-to-date skills. However, it was not clear how the IfA’s role and responsibilities would fit alongside those of the existing oversight bodies. For example, currently Ofsted inspects the quality of the training that providers offer; the Office of Qualifications and Examinations Regulation (Ofqual) regulates the qualifications that most apprentices receive as part of their training; and the Skills Funding Agency oversees the performance of over 800 training providers.9

10.The Department had also not determined what resources and expertise the IfA would have access to. The Department told us that it planned to conduct a public consultation on the IfA’s business plan, and was currently forming the IfA board via a public recruitment process. We asked whether the IfA would draw upon the perspective of stakeholders other than employers and departmental officials by including, for example, trade unions. The Department told us that it did not plan to explicitly assign any board position to trade union representatives. However, individuals with a trade union background might be appointed to the board as part of the ongoing recruitment process.10

The apprenticeship standards

11.An apprenticeship standard is a statement of the learning that an apprentice should successfully undertake in order to be able to perform his or her job role competently. The Department explained that it began the process of developing new standards, based on the principle that employers should “design the skills, behaviours and knowledge that they regard as essential”.11 The Department also emphasised that apprentices should have their skills, behaviours and knowledge rigorously assessed at the end of the apprenticeship, and that the IfA should be able to scrutinise and challenge the content of each standard.12 This new approach is designed to deliver a “significant increase” in the quality of apprenticeships.13

12.While the time taken to introduce the new standards had fallen recently, it was still taking on average nearly a year for each one to be developed. Employers involved in designing the new standards have expressed concern about the amount of time they are investing at their own expense. The Department originally intended to have all the new apprenticeship standards in place by 2017, but this timeframe has now been extended to 2020. As at April 2016, only around 2,600 people had started an apprenticeship under a new standard, out of 844,000 starts between August 2014 and April 2016. The Department told us that it expected to have closed down around a quarter of the old apprenticeship frameworks by Christmas 2016, because they were not meeting current needs. The Department also expressed confidence that all apprenticeship starts would be under one of the new standards by 2020.14

13.Each new apprenticeship standard must have an assessor body, independent from the training provider and the employer.15 It may be a qualification awarding body, a professional body, a university, or even the IfA itself. One of the IfA’s responsibilities will be to oversee this framework in the future, to “make sure the right assessor is in place for the right apprenticeship”.16 We questioned the Department about the speed with which assessor bodies were being appointed. The Department told us that 19 assessor bodies had been approved, covering 40 to 50 standards. Only one of these bodies had actively assessed any apprentices, as only a few apprenticeships had been completed under the new standards so far.17

14.The National Audit Office found that the large number of groups and, in some cases, competing interests among the employers involved, had led to more standards being developed than had originally been envisaged and that there may be as many as 1,600 standards in place by 2020, compared with 224 of the previous frameworks.18 We asked how the standards would be prevented from becoming out of date soon after inception. The Department accepted that it needed to make sure the standards were sufficiently flexible, “both so that they can be changed over time and so that they don’t go into too much detail”.19 In the light of evidence from the Royal College of Nursing about ambiguity around apprenticeship levels in the nursing profession,20 we asked the Department whether the large increase in standards was likely to cause confusion for some sectors and employers in the future. The Department conceded that “in the early days, some standards were rather narrower and more overlapping than they should be”.21 One of the IfA’s tasks will be to critically assess the number of standards, and consolidate where possible.22

Managing behavioural risks

15.A key rationale for the apprenticeship levy is that levy-paying employers will be encouraged to use the money they have contributed to expand the use of apprenticeships in their own workforce or “risk losing it to others”.23 But introducing the levy increases the risk that some stakeholders may behave in unintended ways. For example, employers and training providers might collude to recover and share levy funds while offering little or no genuine training; employers might artificially route other forms of training into apprenticeships; or employers might take on apprentices as cheap labour with no intention of retaining them once the apprenticeship ends. In June 2016, the Department and the Skills Funding Agency established a scrutiny group that brings together representatives from across government and the commercial sector to consider the risks of fraud and gaming that might arise. The Department told us that the Skills Funding Agency would have lead responsibility for managing these risks, and that the Agency had identified eleven key risk areas so far.24

16.We were concerned that the apprenticeships programme might face similar problems to those that emerged after the introduction of Individual Learning Accounts which this Committee examined in 2003 when it noted that “to encourage new providers and new learners, the Department decided to minimise bureaucracy, including checks on learners, on providers and on the quality of learning. They should have matched this innovation with more rigorous and incisive monitoring downstream, but failed to do so. As a result, they were slow to identify emerging problems, including substantial fraud and abuse.”25 The Skills Funding Agency told us that it expected growth in the number of apprenticeship training providers, but planned to mitigate the risks through stronger assurance measures and checking of providers’ activities. The Agency also referred to the need for better contract management and management information. The Agency told us that it was currently drawing on expertise from the Education Funding Agency in terms of spotting “abnormal data patterns”.26

17.We asked about the specific risk that employers hire apprentices as a way to avoid paying the minimum wage. The Agency told us that it had improved the information available for employers on their responsibilities in this area by highlighting that there was a different minimum wage for 19-year-olds in the first year of an apprenticeship than afterwards. It also suggested that the existence of a formal apprenticeship agreement helped apprentices to be more aware of their rights. Nevertheless, the Agency said that a high degree of non-completion in a particular sector might be related to non-compliance with minimum wage legislation, and accepted that “this is something we need to look at in more detail, to see whether we can mine the data… to look at particular sectors where it might be an issue”.27

1 C&AG’s report, Delivering value from the apprenticeships programme, Session 2016–17, HC 624, 6 September 2016

2 C&AG’s Report, paras 2–3, 5–6

5 Qq 39–44; C&AG’s Report, paras 1.8, 2.4; Federation of Master Builders, (APP0030); Mineral Products Qualifications Council; (APP0026), Young Women’s Trust (APP0029)

6 Qq 9, 12; Department for Education policy paper, Apprenticeship funding in England from May 2017, October 2016

7 Qq 39–51, 65, 99–104; Department for Education policy paper, Apprenticeship funding in England from May 2017, October 2016

14 Qq 83, 110-111; C&AG’s Report, paras 3.3, 3.7 and Figure 9

15 C&AG’s Report, para 3.24

18 C&AG’s Report, para 3.9

20 Royal College of Nursing (APP0017)

24 Q 67; C&AG’s Report, para 4.12 and Figure 15

25 Committee of Public Accounts, Individual Learning Accounts, 10th Report of Session 2002–03, 4 April 2003

25 November 2016