The apprenticeship levy: where are we now?

Apprenticeships are back in the news since King Charles’ comments about the need for more technical education at the ‘Repair Shop’. Given that our new Education Secretary was an apprentice herself, perhaps now would be a good time to reflect on the state of apprenticeships today.

First, some background: the new apprenticeship system, introduced in 2017, brought in new standards for apprenticeships as well as a new levy and funding system. New apprenticeship standards, endorsed by employers and often including a technical or professional accreditation, laid the ground for the growth of apprenticeships at higher levels including degree and postgraduate apprenticeships. The apprenticeship levy is only paid by large employers, with any funds unspent within a specific period (generally 24 months, but there have been extensions as a result of the pandemic) returned to a pot and spent on apprenticeships at smaller employers. When the levy was introduced, the House of Commons library briefing set out that “[i]n England, spending will be ring-fenced – meaning it will be protected within departmental budgets to be spent on apprenticeships only”.[1]

In 2016, I wrote a paper for IPPR[2] highlighting some of the potential issues with the new system, notably the potential for there to be low-quality, high-volume apprenticeships in some sectors, and a drop in small and medium-sized employers offering apprenticeships. The report offered recommendations to safeguard quality, and to encourage the growth of Level 3 apprenticeships.

The reality of the levy

Now fast forward to 2022: five years since the levy was introduced, my early concerns seem prescient. There has been a large drop in 16-18 apprenticeships at Level[3]. In 2014/15, 16- to 18-year-olds on Level 2 apprenticeships made up 17.1% of starts, but by 2020/21 this had dropped to 9.9%, with the actual numbers falling from 85,600 to 31,710. Level 3 apprenticeships for young people have stayed relatively stable. However, higher apprenticeships, those at Levels 4, 5, 6, and 7, typically taken by adults, have increased dramatically from 18,630 to 95,170 from 2014/15 to 2020/21, now making up 29.6% of starts compared to only 3.7% in 2014/15.

Other predictions have also held. There are organisations who supported individuals to obtain MBAs through the senior leader apprenticeship[4] to spend the levy rather than consider the needs of the whole workforce. Some large organisations with a predominantly professional workforce find it difficult to spend their levy, while smaller organisations who do not pay the levy find it more difficult to access the funding that would help them secure an apprentice.

There are also big problems with achievement rates, as new providers of varying quality have entered the market. The end-point assessments that apprentices need to pass to formally complete their apprenticeships have led to extended completion times.

The changing nature of apprenticeships

On a more positive note, apprenticeships are now much broader than before. They represent pathways for young people and for adults to move into new roles in new areas, to upskill or to reskill. An apprentice could be 16 or 60, training for their first job or their fifteenth, with the same employer or a new one. However, we also need to recognise that for many people, apprenticeships are understood as being a first step into a career for young people, often in skilled trades. These kinds of apprenticeships have fallen dramatically while newer apprenticeships in areas like higher level management, and arts, media and publishing have increased[5].

The future of the levy

What does the future hold? The levy has broad support in principle and the changing nature of apprenticeships, at a time of renewed focus on upskilling and reskilling adults, is welcome. There are concerns about the underspend of the current system, however. A recent report from FE Week[6] highlights that over £2 billion of apprenticeship funding has been returned to the Treasury since the launch of the levy.

Mayoral combined authorities in the West Midlands, London, and others have been promoting levy transfer, whereby up to 25% of a large organisation’s levy pot can be transferred to another organisation to fund their apprenticeships. The funds can be used to ensure that apprenticeships are still available for 16 to18 year olds at Level 2 or 3, and to promote greater use of the levy by smaller businesses. The West Midlands Mayor, Andy Street wants to double the number of apprenticeships in the region by 2030 partly through levy transfer[7] and Labour have proposed lifting the 25% cap on levy transfer[8]. Reflecting on the demand for the shorter courses that businesses typically demand to upskill existing employees, the Labour party[9] and others[10] have proposed broadening the focus of the apprenticeship levy to include those. The exact rules about what the apprenticeship levy can fund, what happens to the underspend, and how to encourage more smaller businesses to take on apprentices are in flux.

What won’t change is the notion that apprenticeships are for people of all ages and available at a range of levels. For the economy, through upskilling and reskilling, but more broadly for adult learners, this is a sign that lifelong learning is becoming a priority.

Charlynne Pullen

In September 2022, Charlynne joined SIRKE as a Principal Research Fellow focusing on post-16 education. Prior to this, she was working independently on research projects, for example the Global Statement on the Future of Professional Technical Education and Training for the World Federation of Colleges and Polytechnics. From 2014-2020 Charlynne was Head of Research and Evaluation at The Education and Training Foundation. She is a Governor at Milton Keynes College Group and the University of Bedfordshire.

[1]  https://commonslibrary.parliament.uk/research-briefings/cbp-7523/

[2] https://www.ippr.org/publications/englands-apprenticeships-assessing-the-new-system

[3] https://explore-education-statistics.service.gov.uk/data-tables/fast-track/24fba78b-86df-4342-359b-08daa20fa891

[4] https://www.instituteforapprenticeships.org/apprenticeship-standards/senior-leader-degree-v1-0 (version retired in 2021)

[5] https://explore-education-statistics.service.gov.uk/data-tables/fast-track/a70bac68-2e3a-4123-a6ef-e5d3c8121df5

[6] https://feweek.co.uk/dfe-forced-to-finally-reveal-true-amount-of-apprenticeship-funding-returned-to-treasury/

[7] https://www.wmca.org.uk/media/2267/regional-skills-plan.pdf

[8] https://labour.org.uk/skillsreport/

[9] https://labour.org.uk/press/labour-announces-landmark-shift-in-skills-to-drive-growth-and-equip-our-country-for-the-future/

[10] EDSK: https://www.edsk.org/publications/changing-courses/ Learning and Work Institute: https://learningandwork.org.uk/resources/research-and-reports/raising-the-bar-increasing-employer-investment-in-skills/ IPPR: https://www.ippr.org/research/publications/skills-2030-another-lost-decade CIPD: https://www.cipd.co.uk/knowledge/work/skills/employer-skills-view-uk#gref