Treating Students Fairly: The Economics of Post-School Education Contents

Chapter 6: Apprenticeships

197.The Institute for Apprenticeships offered the following definition of an apprenticeship:

“An apprenticeship is a job with training to industry standards: an agreed partnership between an employer and an apprentice. It should be in a recognised occupation, involve a substantial programme of on and off-the-job training and the apprentice’s occupational competence should be tested by an independent end-point assessment. Apprenticeships are employer-led: employers set the standards, create and fund the demand for apprentices to meet their skills needs and are responsible for employing and training the apprentice. The needs of the apprentice are equally important: they achieve competence in a skilled occupation, which is transferable and secures long-term earnings power and the capability to progress in the workplace.”223

198.This chapter considers the apprenticeship system in England, and examines the initial effect of the apprenticeship levy.

Apprenticeships overview

199.Table 7 lists apprenticeship starts in 2016/17 by level and sector. There were 458,400 apprenticeship starts at intermediate and advanced level (Levels 2 and 3). There were 36,600 apprenticeship starts at a level equivalent to higher education (Level 4 and above).224

Table 7: Apprenticeship starts in England, 2016/17

Sector

Level 2

Level 3

Level 4 and above

Total (and percentage of apprenticeships across all sectors)

Health, public services and care

61,700

63,130

14,020

138,850 (28%)

Business, administration and law

68,320

51,990

18,170

138,480 (28%)

Engineering and manufacturing technologies

42,490

31,490

890

74,870 (15%)

Retail and commercial enterprise

54,420

19,800

520

74,740 (15%)

Construction, planning & the built environment

15,840

4,860

510

21,210 (4%)

Information and communication technology

3,630

9,520

2,330

15,470 (3%)

Leisure, travel and tourism

6,370

7,420

-

13,790 (3%)

Education and training

2,710

6,210

-

8,920 (2%)

Agriculture, horticulture and animal care

4,970

2,360

60

7,390 (1%)

Arts, media and publishing

180

670

30

870 (0.1%)

Science and mathematics

40

210

40

290 (0.1%)

Total (and percentage of overall total)

260,700 (53%)

197,700 (40%)

36,600 (7%)

494,900

Source: Department for Education and Education and Skills Funding Agency, ‘FE data library: apprenticeships’, ‘Apprenticeships level, framework and sector subject area data tool, starts 2011/12 to 2016/17 reported to date’: https://www.gov.uk/government/statistical-data-sets/fe-data-library-apprenticeships [accessed 24 May 2018]

200.There are some excellent examples of apprenticeships working well, particularly in engineering and manufacturing. We took evidence from BAE Systems, Rolls Royce and Siemens who all have well-established programmes. All three firms recruit more apprentices than graduates. They were conscious that the system worked well for them but as Martin Hottass, from Siemens, said, “if I was running an SME, I would probably have a completely different experience … we have a brand name and we can attract [applicants].”225

201.Elsewhere, we heard concerns about availability and quality:

Conversion of existing employees into apprentices

202.Many of the apprentices in Table 7 were existing employees of the organisation they are working for: the 2017 Apprenticeships Evaluation Learner Survey found that 42 per cent of Level 2 and 3 apprentices and 60 per cent of higher level apprentices were existing employees. These proportions were highest in the health sector which is the biggest employer of apprentices: 60 per cent of Level 2 and 3, and 82 per cent of higher level apprentices, were existing employees (the business sector, the second biggest employer of apprentices, was around the average).

203.The Department for Education has said that since late 2013 the Government has aimed for apprenticeships to be offered to existing employees where “substantial training is required to achieve competency in their occupation.”

204.The results of the 2017 survey suggest that many apprenticeships being offered to existing employees are not meeting the Government’s condition. Across Level 2 and 3 apprentices, only 43 per cent of existing employees were aware that their course or training meant they were doing an apprenticeship, compared to 90 per cent of new recruits. For the health sector, only 55 per cent of new recruits and existing employees were aware they were doing an apprenticeship (figures for existing employees within the health sector were unavailable).

205.Across higher apprentices, 64 per cent of new recruits and existing employees were aware their course or training was an apprenticeship (figures for each, or by sector, were not available). While not conclusive (the survey is based on a sample of apprentices from each sector), the proportion of apprentices who are unaware they are doing an apprenticeship suggests that a large number of apprenticeships, particularly in the health sector, are not being used in the way the Government would like.

206.Professor Alison Fuller and Professor Lorna Unwin were concerned that the majority of apprenticeships are ‘conversions’; “this means existing employees have been re-labelled as apprentices, usually as a result of a training provider persuading an employer to become involved in the state-funded scheme.” While some employers have “excellent apprenticeship programmes for existing employees who want to retrain for a different occupation or upskill to the next level … these are in the minority.” They concluded that although “accrediting employees for existing skills is not wrong … it isn’t apprenticeship and it doesn’t contribute to improved skill levels” and noted that “the highest number of apprentices are in service sectors where the ‘conversion’ practice dominates.”226

Apprenticeship levy

207.Since April 2017, large employers have been required to pay the apprenticeship levy, which is explained in Box 8. Employers are allowed to recoup levy funds to pay for apprenticeship training.

Box 8: How the apprenticeship levy works

The apprenticeship levy is a tax on employers whose pay bill is over £3 million a year. The levy is a 0.5 per cent tax, levied on payroll, which is paid each month through PAYE. The funds are credited to an account which the Government tops up each month by 10 per cent of the total balance.

Using the funds in their account, businesses can claim vouchers from the Government to spend on courses for their apprentices. Funds that are not used expire 24 months after they entered the account. The funds can only be spent on training and assessment, they cannot be used to pay apprentice wages.

From April 2018 employers can transfer funds to other employers, including ones in their supply chain. Initially, employers can transfer up to 10 per cent of the annual value of funds entering their account. Due to EU state aid rules, the maximum amount an organisation can receive through a transfer of funds is 2 million euros over three years.

For non-levy paying businesses, the Government pays 90 per cent of the apprenticeship training and assessment costs and the employer pays 10 per cent. For employers with fewer than 50 employees taking on apprentices aged 16 to 18, the Government pays 100 per cent of training and assessment costs.

208.Professor Alison Fuller and Professor Lorna Unwin were concerned that the introduction of the apprenticeship levy could “exacerbate the ‘conversion’ and deadweight problems as levy-paying employers seek ways of maximising their ability to recoup their levy spend.”227 We received frank confirmation that this was happening at a business round-table event held in Westminster. One business acknowledged that they had rebranded established internal training schemes as apprenticeships to recoup funds: “we are basically badging what we were doing anyway to get the money back.” The 2017 CBI Skills Survey found that 63 per cent of firms were planning to reconfigure their existing training into apprenticeships.228

209.Dr Hilary Steedman said there had been a tendency so far for employers to spend the levy on higher-level apprenticeships, “in a way that suggests quite a lot of deadweight”.229 When the levy was introduced, there were reports of firms using it as an opportunity to fund MBAs for senior staff.230 A cap of £18,000 has been introduced on master’s degrees. Dr Steedman said she hoped the MBAs “are a short-lived phenomenon.”231

210.Sue Husband, the Director of the National Apprenticeship Service, said there was “lots of evidence in the UK that we need to develop the skills of managers in our organisations … the employers we are working with spend the money wisely.” When challenged about MBAs being funded through the levy, Ms Husband replied that “I am an apprentice myself. I am doing a chartered management apprenticeship.”232

Government target for new apprenticeship starts

211.The Government has set itself a target of achieving three million new apprenticeship starts between 2015 and 2020. The Federation of Awarding Bodies said that the CBI Skills survey mentioned above showed that “much of the activity counted towards the target may well be based on a ‘rebadging’ of existing training activity.”

212.The Education Policy Institute were concerned that a rush to meet the target would result in “poorer-quality apprenticeships”.233 The National Awarding organisation, the NCFE, said that the focus on starts, rather than completions, “provides a distorted view of volume of training delivered.”234

213.Baroness Wolf of Dulwich described the target as “an abomination”. She said it would be reached easily “by sending half the senior managers in this country on MBA courses and ticking it off.”235 Lord Baker of Dorking said that the public sector “will deliver the numbers.” Professor Alison Fuller and Professor Lorna Unwin said that the conversion of existing employees had enabled successive governments to achieve numerical apprenticeship targets since 2006.236

214.The way the Government allegedly decided to target three million new apprentices does not inspire confidence. In an interview with the Institute for Government, Nick Boles MP, the Minister for Skills at the time the target was adopted in 2015, explained how it was arrived at:

“Well, we had delivered two million apprenticeships in the 2010–15 Parliament. So in the manifesto process, there was a classic exercise in “Well, okay, what are we going to promise for the next Parliament?” There was this feeling that you can’t say two and a half million, that sounds a bit tame, nobody would be excited by that, so we’re going to say three million. Then three million is really a lot of apprenticeships, it’s big growth.”237

215.The current Minister for Apprenticeships and Skills told the Committee that she had “absolutely no idea” how the three million target was arrived at.238

Quality and availability of training providers

216.Many apprenticeships counted in the Government’s target may therefore be so in name only. We heard evidence about the quality of the training on offer during apprenticeships, delays to the new apprenticeship standards that seek to improve quality and an uneven provision of training across the country.

Low-quality apprenticeship training

217.Contributors to the Money Saving Expert page set up for this inquiry shared their experiences of apprenticeships:

“I did one day a week at college during my apprenticeship and I don’t recall learning anything there that I had not already learned during my workplace training. For me it was a complete waste of time and only good for those that wanted the certificate to help them move away from the actual job we were training for and into management, something that I had no desire to do.”

“My other son is on an apprenticeship—what a complete waste of time and money that has been. He was told on day he started “there will be no job at the end of this”—he’s been taught absolutely nothing except, mainly in the 1st year, how to move furniture and boxes. He has been taught nothing of value. He went to college one day a week and learnt nothing he hadn’t already learnt previously in his previous IT course.”

218.When the Committee spoke informally with apprentices, some said their training had been “excellent” but others that it had been “awful”: “the colleges they send us to aren’t as good as they could be.”

219.The quality and behaviour of providers were also a concern for businesses the Committee spoke to. The content of courses was described as “a box-ticking exercise” which was sometimes outdated. One employer explained how an administration apprentice had been forced to learn an older version of software to pass her apprenticeship training course whereas the software she used when working at the company was the most up-to-date version. Another employer described an apprentice jockey being assessed by an examiner who was not able to ride a horse.

220.The latest Ofsted inspection of apprenticeship providers showed around half required improvement or were inadequate, as shown in Table 8. Ofsted inspected 189 providers from a total of around 2,000 registered institutions.

Table 8: 2016/17 Ofsted inspection of apprenticeship providers

Rating

Outstanding

Good

Required improvement

Inadequate

Percentage of providers

6%

43%

40%

11%

Source: Ofsted, The Annual Report of Her Majesty’s Chief Inspector of Education, Children’s Services and Skills 2016/17 (13 December 2017): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/666871/Ofsted_Annual_Report_2016–17_Accessible.pdf [accessed 24 May 2018]

221.The 189 providers were delivering apprenticeships to 187,000 apprentices. Around 37,000 of these (20 per cent) were training with providers rated as inadequate.

222.In its assessment of the providers that required improvement or were inadequate, Ofsted was critical of employers too. Its findings on these providers are summarised in Box 9.

Box 9: Ofsted judgements on apprenticeship providers rated as requiring improvement or inadequate

In the providers judged requires improvement or inadequate for their apprenticeships in 2016/17, inspectors found that:

  • apprentices took too long to complete their apprenticeships because employers did not value the apprenticeship enough to challenge apprentices to do better;
  • training providers failed to check on the work that apprentices were doing;
  • at work, apprentices were not able to apply what they had learned;
  • other characteristics of inadequate training for apprentices included:
    • no off-the-job training;
    • apprentices not in work or on zero-hours contracts;
    • employers using apprenticeships to give qualifications to employees who did not require training;
    • a failure to improve apprentices’ skills and qualifications in English and mathematics;
    • too few apprentices completing their apprenticeships.

Source: Ofsted, The Annual Report of Her Majesty’s Chief Inspector of Education, Children’s Services and Skills 2016/17 (13 December 2017): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/666871/Ofsted_Annual_Report_2016–17_Accessible.pdf [accessed 24 May 2018]

Apprenticeship standards

223.The Ofsted annual report for 2016/17 noted that the Government had introduced apprenticeship standards to improve quality but only five per cent of new apprenticeship starts were using the standards (23,700). The rest started on the old apprenticeship framework (460,000).

224.The standards were introduced in 2014/15. The Department for Education said that they are designed by employers and “describe the skills, knowledge and behaviours an apprentice needs to be competent in a defined occupation.” They said that by 2020 there would be one standard for each occupation identified by employers as requiring an apprenticeship. The Institute for Apprenticeships, established in April 2017, is responsible for assuring the quality of standards and reviewing them.239

225.As of 23 May 2018, 275 apprenticeship standards have been approved and 262 are awaiting approval. Businesses and education providers told the Committee about the delay in introducing the standards. Aston University said they had employers wanting to sign up to degree apprenticeships, and providers wanting to run them, “but what should be the most fleet of foot offering has become the most bureaucratic.”240 Warwickshire College Group said the development of the standards, and the hindrance it is causing to accessing levy funds, “is a source of frustration for employers and a huge business risk to training providers.” They were concerned about the effect on training providers’ short-to-medium term cash flow, warning that “there is a danger that some sectors will be without adequate numbers of quality training providers when the new apprenticeship standards become available.”241

226.Seamus Nevin, from the Institute of Directors said that there were sectors and businesses that “simply cannot access an appropriate apprenticeship for their needs”.242 One business the Committee spoke to at a roundtable event in Westminster was involved in writing the standards. He attributed the delay to the demands placed on the business groups responsible for writing the standards. Involvement in these ‘trailblazer’ groups for 12 months to two years was “too time consuming for the majority of SMEs”. They pointed out that:

“The promise and the process of turning two sides of A4 into qualifications has been really drawn out. Part of the problem is that employers asked to develop marking criteria for the standards from scratch. I don’t know how to do that—I can do the output required … Employers were asked to engineer the standard from beginning to end. They should have been asked to define the desired output and a qualification authority or training provider should be doing other issues.”

227.Antony Jenkins, Chair of the Institute for Apprenticeships, told the Committee he thought it would take another “two to three years” to approve all the standards.243 But he was confident that “the time cycle can be compressed and that the standards will be produced much more effectively.”244 When we asked the Minister for Apprenticeships and Skills about the delays, she indicated they would be ready by the end of 2018:

“The first thing I said to the new chief executive of the Institute for Apprenticeships was, ‘Speed right up. Get those out of the door by the end of this year’. I said September, and he negotiated me down to the end of this year.”

“I cannot lean on employers about what they are doing with the levy if they do not have the standards. I am hearing a lot less about that. The Institute for Apprenticeships produced a document called Faster and Better, and for members of the Committee who have watched “W1A”, it could have been taken straight out of that television programme.”245

Availability of apprenticeship training

228.Seamus Nevin said that the approximately half of the funds raised by the apprenticeship levy were being raised in London and would therefore be spent in London where there was a “proliferation of providers”. This would not incentivise training in areas “where there is a shortage of providers and a shortage of training structures.”246

229.Julian Gravatt explained how providers needed a certain number of people for it to be worth their while providing training:

“The college would look at the rate card for the qualification or apprenticeship that your company wanted to offer and would then have to work out the economics—that is, the number of apprentices it would have compared with income. The rates are set broadly on the basis that there will be a group of people, and sometimes it is quite difficult, on the amount of money available, to get customised training for an employer.”247

230.This may be a particular problem for small businesses. One business told the Committee at the roundtable event in Westminster that it was a challenge for small businesses as they were “too small for providers to care about … There are a number of training providers who have little interest in, or don’t deal with, small businesses.”

Progression through different levels of apprenticeship

231.The final issue with apprenticeships is the apparent lack of progression from lower to higher level apprenticeships. Table 7 shows that of the 494,900 apprenticeship starts in 2016/17, only 36,600 (seven per cent) were at Levels 4 and above.

232.Dr Hilary Steedman said she hoped that young people would see a Level 3 apprenticeship as “a really important goal” and that many of them want the option of continuing: “Even if they are not going to choose it immediately, they like the idea that their qualification at Level 3 gives them an option to continue to Levels 4 and 5, so the existence of those levels is very important. There is also the fact that companies would be likely to support them to progress.”248

233.One concern raised by Professor Alison Fuller was that “we are getting to the point where perhaps the best and most attractive options for higher and degree level apprenticeships are being taken up by those with A-Levels who could be going straight into conventional degrees.”249 The Minister for Apprenticeships and Skills said that “the fear of a middle-class grab on these apprenticeships is valid. So I am watching and waiting.”250

Apprenticeship levy funding for degree apprenticeships

234.Witnesses were supportive generally of the development of degree apprenticeships. Lord Baker of Dorking said that their provision was “undoubtedly going to increase” and he thought they would be “much more attractive” than some three-year undergraduate degrees.251 Manchester Metropolitan University said that degrees should not be placed in opposition to technical education and they saw degree apprenticeships as “a good example of a pathway that is both ‘technical’ and ‘academic’.252 Aston University explained to us how they were using degree apprenticeships a programme to attract people who had alternative qualifications to A-Levels.253

235.There were however concerns that the switch to funding all apprenticeships through the apprenticeship levy may see degree apprenticeships take up too much of the available funding. The Association of Employment and Learning Providers said that higher and degree level apprenticeships would take around 50 per cent of the funding available from the apprenticeship levy, leaving less money for entry level apprenticeships. They were concerned about the effect on progression from lower to higher level apprenticeships:

“This can have an adverse impact on the availability of apprenticeships for young people to take up, particularly entry level apprenticeships. Furthermore, with such a strong focus on higher and degree standards, there is currently no stepping stone apprenticeships to the higher levels.”254

Conclusions

236.There have been substantial changes to the apprenticeship system in the last few years. The Government’s focus on its three million target may mean issues of quality and availability are being overlooked, a concern expressed by Julian Gravatt:

“Everything in the apprenticeship system has changed within the last 12 months, and there is a danger that it has been partly driven by the original target to have 3 million apprentices. In the process of introducing the levy to support that, and in giving employers the spending power, there is a definite danger that we will lose sight of what the apprenticeships are for and making sure that they are in the skills of the future rather than the skills of the present.”255

237.An apprenticeship should be viewed by young people and society as just as valid an option as the academic route of sixth form and university: they offer a way of accessing higher education without incurring student debt and can address directly skills shortages in the economy. The Government should consider ways to promote the progression from lower to higher level apprenticeships, rather than higher level apprenticeships becoming the preserve of those with academic backgrounds.

238.There are some excellent apprenticeship schemes but it is concerning that the recent Ofsted inspection found that over half of providers they assessed were rated inadequate or required improvement. There is worrying evidence that the system is being gamed by rebadging existing employees as apprentices, large proportions of whom are unaware they are doing an apprenticeship.

239.The Government must renew its vision for apprenticeships, concentrating on the skills and choices that employers and individuals really need. An apprenticeship should be a method by which a young person, or new entrant to an industry, develops skills while working. MBAs and other training activities that would have happened anyway should be the employer’s sole responsibility to fund and arrange. In addition, the Government should have a clearer plan for degree apprenticeships within its broader higher education policy.

240.The quality of apprenticeships is not helped by the Government targeting three million new apprenticeship starts by 2020. The target prioritises quantity over quality and should be scrapped immediately. Framing a target in terms of starts makes no sense when about 40 per cent of starts are not completed. It also treats a one-year apprenticeship as equivalent to a three-year apprenticeship. The target encourages the rebadging of training which should not be funded or described as an apprenticeship.

241.It was not clear from the evidence we heard which body had overall responsibility for apprenticeships. Antony Jenkins, the Chair of the Institute for Apprenticeships, said that the Institute was not responsible for the delivery of the three million target. He said that “the training component will be largely inspected by Ofsted; the quality assurance and the endpoint assessment will be done either by the institute or a third-party body. The training from the employer will be assessed by feedback through the apprentice.” The Institute had three responsibilities:

“The first is to set standards for each apprenticeship … The second thing we do is to recommend a funding band to the Secretary of State for the training and assessment component … Our third role, which is a default role, is endpoint assessment, which is the way it is assessed that apprentices have acquired the knowledge, skills and behaviours of the apprenticeship. There are organisations that do that, but those organisations have to be quality assured. When there is no other body that will provide that quality assurance, the institute will do that. We have no mandate for that target.”

242.Stephen Evans, from Learning and Work, thought it was the job of the Institute to measure outcomes: “It is meant to be the guardian of quality for apprenticeships, and outcomes are the key measure of quality.”256 The Minister for Apprenticeships and Skills said that she was responsible for the three million target.

243.The role of the Institute for Apprenticeships is unclear. It should be abolished. Under our proposed new regulatory structure above, the quality and outcomes of Level 2 and 3 apprenticeships should be the responsibility of the new further education regulator; the quality and outcomes of Level 4 and above apprenticeships should be the responsibility of the Office for Students. The Minister for Apprenticeships and Skills should provide oversight of both.


223 Written evidence from the Institute of Apprenticeships (HFV0039)

224 These were starts under the pre-apprenticeship levy system. Full year figures for starts under the apprenticeship levy system are not yet available but there were 232,700 apprenticeship starts between August 2017 and February 2018 (reported as of May 2018). This compares to 309,000 apprenticeship starts between August 2016 and February 2017 (reported as of May 2017). Department for Education, ‘Apprenticeship and levy statistics: May 2018’, 17 May 2018: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/705954/Apprenticeship-and-levy-statistics_May-2018_commentary.docx.pdf [accessed 24 May 2018]

225 Q 106 (Martin Hottass)

226 Written evidence from Professors Alison Fuller and Lorna Unwin (HFV0061)

227 Written evidence from Professors Alison Fuller and Lorna Unwin (HFV0061)

228 CBI, ‘Helping the UK thrive, CBI/Pearson Education and Skills Survey 2017’, July 2017: http://www.cbi.org.uk/index.cfm/_api/render/file/?method=inline&fileID=DB1A9FE5-5459-4AA2-8B44798DD5B15E77 [accessed 24 May 2018]

229 Q 143 (Dr Hilary Steedman)

230 ‘MBA students become unlikely beneficiaries of UK apprenticeship levy’, Financial Times (6 October 2017): https://www.ft.com/content/0b674abc-a926-11e7-93c5-648314d2c72c [accessed 10 May 2018]

231 Q 143 (Dr Hilary Steedman)

232 Q 137 (Sue Husband)

233 Written evidence from the Education Policy Institute (HFV0048)

234 Written evidence from NCFE (HFV0017); see also written evidence from UNISON (HFV0060)

235 Q 93 (Baroness Wolf of Dulwich)

236 Written evidence from Professor Alison Fuller and Professor Lorna Unwin (HFV0061)

237 Institute for Government, ‘Ministers Reflect, Nick Boles’, 28 November 2017: https://www.instituteforgovernment.org.uk/ministers-reflect/person/nick-boles/ [accessed 24 May 2018]

238 Q 168 (Rt Hon Anne Milton MP)

239 Written evidence from the Department for Education (HFV0086)

240 Written evidence from Aston University (HFV0099)

241 Written evidence from Warwickshire College Group (HFV0097)

242 Q 122 (Seamus Nevin)

243 Q 140 (Antony Jenkins)

244 Q 141 (Antony Jenkins)

245 Q169 (Rt Hon Anne Milton MP)

246 Q123 (Seamus Nevin)

247 Q126 (Julian Gravatt)

248 Q 143 (Dr Hilary Steedman)

249 Q 143 (Professor Alison Fuller)

250 Q 169 (Rt Hon Anne Milton MP)

251 Q 83 (Lord Baker of Dorking)

252 Written evidence from Manchester Metropolitan University (HFV0068)

253 See Appendix 5. Aston University discussed how students at their University Technical College who studied for UTech diplomas in science struggled to get accepted by universities who wanted A-Level science: “Why do they need A-Level as well?” They believed too many schools were focused on traditional A-Levels.

254 Written evidence from the Association of Employment and Learning Providers (HFV0033)

255 Q130 (Julian Gravatt)

256 Q 150 (Stephen Evans)




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