1Impact of the apprenticeships programme
1.On the basis of a report by the Comptroller and Auditor General, we took evidence on the apprenticeships programme in England from the Department for Education (the Department), the Education and Skills Funding Agency (the ESFA) and the Institute for Apprenticeships & Technical Education.1 We also took evidence from three apprenticeship training providers (ACE Training, which is a construction training provider based in Oxfordshire, Derby College and Sunderland College) and an employer of apprentices (Utility Warehouse).
2.The apprenticeships programme is intended to help address two important problems: poor productivity in the United Kingdom compared with many international competitors; and a significant fall in employers’ investment in training over recent decades. Apprenticeships are jobs that combine work with training, and apprentices can be new or existing employees. The content of each apprenticeship is set out in either a ‘framework’ or a ‘standard’. Frameworks are being phased out in favour of standards, each of which is designed by a group of employers from the relevant sector and sets out the knowledge, skills and behaviours that apprentices will need to learn. Apprentices must spend at least 20% of their paid hours doing off-the-job training, which can be delivered by an authorised provider, the employer or a combination of the two.2
3.The Department intends that the move to apprenticeship standards will help to improve the quality of apprenticeships. The development of the standards began in 2013.3 When the levy was introduced in April 2017, just 2% of apprenticeship starts were on a standard. Starts on standards overtook framework starts in April 2018 and had reached 53% of all starts by July 2018.4
4.The Government has reformed the programme since we last reported on it in November 2016.5 In particular, since April 2017, employers with an annual pay bill of more than £3 million have been required to pay an apprenticeship levy of 0.5% of their pay bill. The total value of levy contributions for England in 2017–18 was just under £2 billion. Employers can use their levy contributions, plus a 10% government top-up, to pay for apprenticeship training and assessment. Smaller employers who do not pay the levy are required to pay 10% of the cost of training and assessing apprentices, with government paying the rest.6
5.The Department is accountable for the apprenticeships programme in England. The ESFA is responsible for apprenticeships policy and funding, and for overseeing the delivery of the programme. The Institute for Apprenticeships & Technical Education, which was set up in April 2017, is responsible for ensuring the quality, consistency and credibility of apprenticeships, including helping employers to develop apprenticeship standards and approving the standards.7
6.In the 2017/18 academic year, there were 375,800 apprenticeship starts.8 This was 26% lower than the 509,400 starts in 2015/16, the last full year before the programme was reformed. Due to the drop in starts, the Government is very unlikely to meet its target of 3 million apprenticeship starts by March 2020.9
7.In the 2017–18 financial year, the Department spent £1.6 billion on the apprenticeships programme, out of a budget of £2.0 billion.10 However, because employers are developing and choosing a greater proportion of higher-cost apprenticeships than expected, the Department projects that, even if starts remain at current levels, spending on the programme could rise to more than £3 billion by 2020/21.11 The Department told us that, in that event, government would have to make choices to balance supply and demand; for example, one of the options as resources became constrained would be whether to prioritise some sorts of apprenticeship over others.12
Impact on productivity
8.Ultimately, the apprenticeships programme is intended to boost economic productivity. It is difficult to assess the direct impact of any particular qualification on someone’s productivity but an accepted approach is to measure how the qualification is associated with wage changes—in this case, the approach would involve establishing whether successful apprentices tend to earn higher wages than other employees with similar characteristics who did not complete an apprenticeship.13
9.Following a similar approach, the Department uses a ‘skills index’ as a proxy measure for the impact of apprenticeships on productivity. The index combines three components: the number of people doing apprenticeships, their progression into jobs and the subsequent increase in their earnings.14 The Department told us that it recognised that it would be helpful to publish more information about the workings of the skills index.15 Accordingly, in April 2019, the Department published a document explaining how the index is calculated and how it should be used.16
10.The value of the skills index increased by 3% in 2016/17, compared with 2015/16.17 Subsequent to our evidence session, the Department published a further progress report on the programme which stated that the skills index had increased by an additional 2% in 2017/18, due to more people achieving higher-level apprenticeships and a small shift towards sectors with higher wage returns.18 However, the Department has not set out what level of improvement in the index would constitute success in the future.19
11.The apprenticeships programme now covers a wider range of professions than it traditionally has done. For instance, new standards enable apprentices to become qualified accountants and solicitors. And some employers are replacing their professional development programmes and management training with apprenticeships, raising concerns that public money is being used to pay for training that already existed in other forms.20 We asked the Department whether it considered that this was an acceptable use of the programme’s budget, and whether it was concerned about employers using public money to pay for training for senior staff. The Department told us that it saw nothing wrong with an employer improving the quality of its leadership and management through apprenticeships—as long as it followed the rules and as long as there was enough money in the budget to meet demand—and that this could contribute to increased productivity.21
Apprenticeships for people with lower skills
12.Apprenticeships are available at a range of levels, from GCSE-equivalent (level 2) to postgraduate degree-equivalent (level 7). People often join the programme at level 2, which is a pathway into employment or an apprenticeship at a higher level.22 However, the introduction of apprenticeship standards has led to a significant decline in the proportion of apprenticeships that are available at level 2 because employers are choosing to develop standards at higher levels. Around 20% of the approved standards are at level 2; in contrast, more than 40% of the old-style frameworks were previously available at this level.23
13.The reduction in availability of level 2 apprenticeships particularly affects the ability of people who are economically disadvantaged to start an apprenticeship.24 The British Retail Consortium told us in its written evidence that the decline in level 2 starts was a real concern for the industry, given the role that retail plays in providing employment for individuals who experience a high level of economic exclusion and who need flexibility in the hours and location of their work.25 Sunderland College and ACE Training also told us of similar concerns, as did ukactive in its written evidence.26
14.Sunderland College also told us that it sometimes had to provide English and maths training in addition to specific apprenticeship training, in order to ensure that apprentices had the requisite skills. This could be a challenge for the college as English and maths training did not count as part of the 20% off-the-job training for the apprenticeship, and employers sometimes struggled to release apprentices for the extra time.27
15.The Department aims for at least 25% of apprentices to be from disadvantaged areas but the actual level fell from 25% in 2015/16 to 22.6% in 2017/18. The ESFA said that, historically, a large proportion of level 2 apprentices had come from disadvantaged areas, so the fact that more apprenticeships were now at level 3 and above partly explained the drop in the proportion of apprentices from disadvantaged areas.28
16.The ESFA told us that it was carrying out research to understand what could be done to make the programme work better for people from disadvantaged areas. It was focusing on four areas—Portsmouth, Nottingham, South Tyneside and Torbay—to identify what more could be done to improve social mobility. It was seeking to gather data and understand employer behaviour, and expected that it would need another 12 months to understand what meaningful interventions it might be able to make.29
Participation by under-represented groups
17.One of the programme’s four main objectives is to draw apprentices from a wider range of social and demographic groups.30 The Department has a target for just 11.9% of apprenticeship starts to be from the black, Asian and minority ethnic (BAME) population by 2020, despite the fact that this group represents 14.9% of the overall working-age population and 20.7% of pupils at the end of key stage 4, who will potentially join the workforce over the next few years. Similarly, the Department aims, by 2020, for 11.9% of starts to be by people with a learning difficulty, disability or health problem, whereas as many as 19% of working-age adults in the UK report that they have a disability. In 2017/18, each of these two groups represented 11.2% of apprenticeship starts.31 We asked why the targets were not more ambitious. The Department said that the BAME target had been set under the previous government, which had identified that the proportion of BAME apprentices, as well as the proportion of BAME undergraduate students, should increase by 20% by 2020.32
18.The programme has no targets relating to gender. While 51% of new apprentices in 2017/18 were male and 49% were female, traditional gender imbalances persist at sector and subject level. For example, only around 7% of those starting an apprenticeship in ‘engineering and manufacturing technologies’ are female, compared with 80% in ‘health, public services and care’.33 In our 2018 report on science, technology, engineering and mathematics (STEM) skills, we recommended that the Department should establish specific targets relating to the involvement of girls and women in key STEM learning programmes such as apprenticeships.34 The Department rejected our recommendation, stating that it did not believe that setting specific targets was likely to help it properly tackle the issue of gender participation.35
19.The Department told us that the proportion of women starting STEM apprenticeships had gone up from 8% in 2016/17 to 9% in 2017/18, but acknowledged that the position was “hopeless”. It told us that it was working hard to improve the situation, regardless of whether there was a target or not, citing success in increasing the number of women doing STEM subjects at A level and degree level. It said that, as a direct consequence of the fact that there were at least 25% more girls doing STEM subjects at school, there should be a significant increase in the proportion of women doing STEM apprenticeships.36
20.The ESFA said that employers were taking the issue seriously and that it heard more and more from employers who said that they were passionate about getting more girls into STEM roles. It referred to the example of a pharmaceutical company which was exceeding its own target for female apprentices by a large margin.37 The ESFA also highlighted its current apprenticeships campaign which portrayed women in STEM subjects positively, and its ‘young apprentice ambassadors network’ who acted as role models to raise awareness of apprenticeships among women and girls.38
Ensuring that all employers benefit from the programme
21.Money raised by the apprenticeship levy effectively has to pay for all apprenticeships, including those in smaller employers who do not pay the levy, and ongoing apprenticeships that started before the levy was introduced. Larger, levy-paying employers have direct access to their funds, via an online service, to pay for apprenticeship training and assessment.39 In contrast, for non-levy-paying employers, the ESFA holds contracts with training providers and allocates funds directly to providers to pay for apprenticeship training and assessment.40
22.Under the current funding arrangements, the Department had expected that levy-paying employers would spend around half of their available funds, leaving the rest to be spent mainly on smaller employers. In 2017–18, levy-payers spent only 9% of their available funds but the Department told us that this proportion was growing, which meant that there would be less money left for non-levy paying employers.41 However, two of the training providers who gave evidence told us that their non-levy funds were running out and that their funding allocations were restricting their ability to offer as many apprenticeships to smaller employers as they would like.42
23.Levy-paying employers have up to 24 months to spend their funds, after which any unused money is returned to HM Treasury.43 The ESFA explained that unspent funds would expire on a monthly basis starting in May 2019, when it expected around £12 million might be lost to the programme.44 ACE Training suggested that there should be a local pooling system, whereby unspent funds could be redistributed to fund apprenticeships, including salary costs, with small businesses, local charities or community groups, for the benefit of the local economy.45 Mr Richard Marsh made a similar suggestion in his written evidence.46 The Department and the ESFA told us that they were looking into ways of enabling a greater degree of local pooling of funds, potentially facilitated via Local Enterprise Partnerships or combined authorities.47
1 C&AG’s Report, The apprenticeships programme, Session 2017–19, HC 1987, 6 March 2019
2 C&AG’s Report, paras 1–4
3 C&AG’s Report, paras 2.17, 2.19
4 C&AG’s Report, para 2.23
5 Committee of Public Accounts, The apprenticeships programme, Session 2016–17, HC 709, 30 November 2016
6 C&AG’s Report, para 6, Figure 3
7 C&AG’s Report, paras 1.8, 1.11
8 Throughout this report, further education sector academic years are written as, for example, ‘2017/18’ and run from 1 August to 31 July; financial years are written as ‘2017–18’ and run from 1 April to 31 March.
9 C&AG’s Report, para 14
10 C&AG’s Report, paras 11, 1.22
11 C&AG’s Report, paras 1.24, 2.26
12 Qq 101, 111
13 C&AG’s Report; para 3.6
14 Qq 65, 67, 111
15 Q 65
16 Department for Education, Further Education Skills Index: England, April 2019
17 Q 65; C&AG’s Report, para 19, Figure 11
18 Department for Education, Progress report on the Apprenticeships Reform Programme, April 2019
19 C&AG’s Report, para 19
20 C&AG’s Report, paras 2.29–2.30
21 Qq 109, 111
22 Qq 8–9, 44; C&AG’s Report, para 1.7
23 Qq 8, 14, 48, 72–73, 91–92, 108; C&AG’s Report, Figure 9
24 Qq 48, 91–92
27 Qq 17–18
28 Qq 45, 91–92; C&AG’s Report, para 2.11
29 Qq 91–94
30 C&AG’s Report, para 1
31 C&AG’s Report, paras 2.9–2.10
32 Q 83
33 Qq 84–85; C&AG’s Report, paras 2.12–2.13
34 Committee of Public Accounts, Delivering STEM skills for the economy, Session 2017–19, HC 691, 22 June 2018
35 HM Government, Treasury Minutes: Government response to the Committee of Public Accounts on the Forty Third to the Fifty Eighth reports from Session 2017–19, Cm 9702, October 2018
36 Qq 87–88
37 Q 90
38 Q 88
39 C&AG’s Report, paras 1.15, 1.19, 1.21
40 Qq 19, 100; C&AG’s Report, para 1.18
41 Qq 133, 137; C&AG’s Report, para 13
42 Qq 19, 26
43 Qq 97–98
44 Qq 103, 136
45 Qq 27, 50
47 Qq 94–102
Published: 22 May 2019