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LEVELLING UP

Course Correction: Why we need to reform apprenticeships

Apprenticeships are failing working class school leavers, and will undermine efforts to level up without significant reform.
Francesca Fraser, Adam Hawksbee
April 6, 2022
Course Correction: Why we need to reform apprenticeships
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“I welcome this new report from Onward which makes some important recommendations to help improve the apprenticeship system. Extending these avenues to all learners will enable every young person to climb the educational ladder of opportunity.”

Rt Hon Robert Halfon MP, Chair of the Education Select Committee

Disadvantaged young people are being squeezed out of the apprenticeships system in favour of established professionals in wealthy areas.

A sharp fall in small firms offering apprenticeships and a shift away from entry-level to higher apprenticeships has meant fewer school leavers are becoming apprentices, and more established professionals in big firms are doing them to top-up their skills.

As a result, large businesses have increased the number of apprentices they are hiring and fewer and fewer of these are from deprived backgrounds.

The number of people doing entry-level apprenticeships (Level 2) has fallen by more than half (56%) since 2011. This is double the overall fall in apprenticeships available (25%). And the result is clear: There are now nearly twice as many over-25 year olds doing apprenticeships than 19-year olds. In 2008 the opposite was true.

There has been an exodus of apprenticeships from the North and coastal areas.

The number of people in the Red Wall starting apprenticeships has dropped by a third, and fallen in all but two Northern constituencies, since 2011. Meanwhile, some of the greatest increases in the number of people doing apprenticeships are in wealthy parts of London such as Battersea, Wimbledon, Chelsea and Fulham. The decline in intermediate apprenticeships, alongside the rise in apprenticeships in large companies across richer areas, is behind this trend.

This is being driven by changing employment practices as businesses turn their backs on the traditional apprenticeship.

The reforms to the apprenticeship system over the last decade has dramatically shifted how businesses hire apprentices. Smaller businesses have become less inclined to hire an apprentice and larger businesses have been incentivised to focus on existing staff over providing opportunities for new ones. Businesses with between 100 to 249 employees are roughly as likely to only offer apprenticeships to existing employees as they are to only offer apprenticeships to new recruits.

As a result opportunities for individuals from poorer families are drying up. In 2015, there was less than a one percentage point difference in the share of apprentices from deprived backgrounds hired by SMEs and by large businesses. As of 2019, this gap has nearly quadrupled. It suggests SMEs are championing social mobility while large businesses are using apprenticeships for other means.

Without further reform, this shortage of apprenticeships will become a barrier to the levelling up agenda.

Problems with the apprenticeship system

Solutions

  1. Funding. The Government’s ambition for apprenticeships is not matched by investment – particularly for young people, who are fully backed by the taxpayer if they pursue an academic route but not if they take a technical one
  2. Complexity. Small businesses find the apprenticeships system confusing and bureaucratic.
  3. Misused. Levy-paying businesses are increasingly using the levy to train existing employees and not to bring in new talent, partly because the system does not respond to their need for work-ready staff or provide flexibility to fill their skills gaps.
  4. A prestigious education. Technical education faces a marketing challenge, following decades where higher education has been pushed as the route to ‘get on’ and further education has been sidelined.

1. Back young apprentices by fully funding all 16-18 year olds and removing them from the Apprenticeship Levy altogether. This would disproportionately direct funding outside of London and the South East

2. End the additional subsidy for big businesses who fund apprenticeships beyond their levy funds

3. Government should publish Apprenticeship Levy datasets breaking down the amount, allocation, and profile of the funding at the lowest possible level.

4. Give Mayors more responsibility in the apprenticeships system for supporting small and medium sized businesses to recruit apprentices, and hold them to account for driving up numbers

5. Make it easier for levy-paying businesses to take on new recruits by building their skills before they start working through front-loaded training

6. Provide higher financial incentives for businesses to take on new apprentices and explore an ‘Apprentice Tax Credit’ to provide longer-term encouragement

7. Introduce a ‘Future Skills Challenge’ where employers bid for the licence to rapidly develop new skills standards in areas on the technology frontier with the most acute skills gaps

8. Encourage a more ambitious network of technical institutions to provide a meaningful alternative to university

9. Commit to publishing long-term outcomes data for apprenticeship leavers, including earnings and progression data, and use this to build prestige for successful training providers with strong outcomes.

Problems with the apprenticeship system

  1. Funding. The Government’s ambition for apprenticeships is not matched by investment – particularly for young people, who are fully backed by the taxpayer if they pursue an academic route but not if they take a technical one
  2. Complexity. Small businesses find the apprenticeships system confusing and bureaucratic.
  3. Misused. Levy-paying businesses are increasingly using the levy to train existing employees and not to bring in new talent, partly because the system does not respond to their need for work-ready staff or provide flexibility to fill their skills gaps.
  4. A prestigious education. Technical education faces a marketing challenge, following decades where higher education has been pushed as the route to ‘get on’ and further education has been sidelined.

Solutions

1. Back young apprentices by fully funding all 16-18 year olds and removing them from the Apprenticeship Levy altogether. This would disproportionately direct funding outside of London and the South East

2. End the additional subsidy for big businesses who fund apprenticeships beyond their levy funds

3. Government should publish Apprenticeship Levy datasets breaking down the amount, allocation, and profile of the funding at the lowest possible level.

4. Give Mayors more responsibility in the apprenticeships system for supporting small and medium sized businesses to recruit apprentices, and hold them to account for driving up numbers

5. Make it easier for levy-paying businesses to take on new recruits by building their skills before they start working through front-loaded training

6. Provide higher financial incentives for businesses to take on new apprentices and explore an ‘Apprentice Tax Credit’ to provide longer-term encouragement

7. Introduce a ‘Future Skills Challenge’ where employers bid for the licence to rapidly develop new skills standards in areas on the technology frontier with the most acute skills gaps

8. Encourage a more ambitious network of technical institutions to provide a meaningful alternative to university

9. Commit to publishing long-term outcomes data for apprenticeship leavers, including earnings and progression data, and use this to build prestige for successful training providers with strong outcomes.

The foreword of the report is authored by Tom Tugendhat MP. He writes:

“This timely report proposes a course correction. It brings together a set of recommendations aimed at recognising the very real reasons why businesses are turning their backs on traditional apprenticeships and looks at how Ministers can work with industry to get the apprenticeship system back on track.”

The report is backed by Andy Street, Mayor of the West Midlands, a coalition of Conservative MPs, membership organisations and employers.

Bhavina Bharkhada, Head of Policy and Campaigns at Make UK:

“The expansion of apprenticeships across the whole of the UK is critical if we are to meet the growing demand for skills in the manufacturing and wider industry. British industry is a facing skills crunch, however by reforming the delivery of apprenticeships, we can meet the demand for the country’s next generation of innovators. Today’s report by Onward is an important contribution to this critical debate.

Miriam Cates MP, Chair of the 1922 Backbench Education Committee:

“The Government has made significant progress in raising the status and availability of vocational education, and this report is full of positive ways to build on recent reforms. These innovative ideas would not only make it more attractive for students to follow this path, but also make it easier for smaller businesses to offer apprenticeships and grow their workforce. There is a clear and pressing skills gap in the UK, so we need to go even further in making technical and vocational education a core part of our post-16 offer. That’s the best way to help young people level up their life chances.”

Alun Francis OBE, Deputy Chair of the Social Mobility Commission and Principal and Chief Executive of Oldham College:

“This report is an important contribution to the debate on how to make apprenticeships work better for employers and learners.  Its insights provide food for thought on the unforeseen consequences of the apprenticeship levy on social mobility – particularly the reduced uptake of apprenticeships by SMEs and a focus on training existing employees rather than broadening the range of pathways into work for new entrants to the labour market. The report’s recommendations will be of interest to policymakers, government and industry as they consider how apprenticeships can support ‘levelling-up’.”

Simon Fell MP, MP for Barrow and Furness:

“I know from experience in my constituency the value of apprenticeships. They go beyond the mantra of ‘earn while you learn’ and equip people of all ages with the technical and vocational skills that our economy needs. It is time to rebalance the system, and the emphasis on apprenticeships and T-Levels is welcome but there is far more that we can and must do to support businesses to back apprentices, and to prove to those who are considering this route why doing so can be so valuable. I welcome this important and timely report.”

Rt Hon Robert Halfon MP, Chair of the Education Select Committee:

“For too long, the mantra has been “university, university, university” when it should be “skills, skills, skills”. The Government are making some important progress on this issue – the Skills Bill, Lifelong Learning Entitlement and additional £3 billion to support the sector are welcome initiatives. But more needs to be done to rocket boost this agenda – access to vocational and non-academic routes is essential to build the skills capital we need as a nation. We must say, ‘goodbye to Mr Chips and hello to James Dyson’. My two favourite words in the English language are “degree apprenticeships” which represent a key avenue for young people. They provide students with an opportunity to earn while they learn, receive on-the-job technical training, and students are guaranteed a well-paid, and good job on their graduation.

“I welcome this new report from Onward which makes some important recommendations to help improve the apprenticeship system. Extending these avenues to all learners will enable every young person to climb the educational ladder of opportunity.”

Nichola Jones, director, University of Sheffield AMRC Training Centre:

“Every company and organisation will attribute its success to its people. Its capability, track record and connectivity depends on the skill and experience of its people. As such we know that skills development in every town and region is a critical part of the soft and hard power for how we level up.  Technical education and apprentices are a key pathway for people to develop employable skills and broaden their opportunities. For employers it is a key driver of their productivity and growth. While we have come a long way in the UK, we still have a journey ahead and as such this report’s treatment of some of the learned challenges and opportunities in the system is hugely welcome.”

Martin McTague, National Chair of the Federation of Small Businesses:

“Apprenticeships are a great way to bring fresh perspectives into a business and upskill the next generation, so it’s been really disheartening to see such a drop off in starts, especially within young people, in recent years.

“This report marks an important intervention and contains a lot of ideas that should be given careful consideration. It is right to focus on how the system can help create new jobs for young people. We’re pleased to see our recommendation to extend the £3,000 incentive for taking on an apprentice included as part of this project. We’re also encouraging policymakers to look at how they can get more unspent levy funds into the small businesses that are keen to champion social mobility and can really make a difference in this space.”

Andy Street, Mayor of the West Midlands:

“Apprenticeships provide a proven way of achieving the skills needed for a strong career, so we must all do what we can to reverse any decline in their take up across the country.

“Here in the West Midlands we have led by example to do exactly that, working with government to pioneer the highly successful Apprenticeship Levy Transfer Fund which allows us to redeploy unspent levy money from large companies towards SMEs, upskilling young people in the process.

“Onward’s recommendations are a further positive step in reversing the decline in apprenticeship numbers, as well as also helping to improve the public perception of apprenticeships. We are certainly ready to play our full role as a Mayoral Combined Authority in this, just as Onward calls out for us – and others – to do.”

 

This report follows Onward’s previous work on post-16 education, Question of Degree, where we make the case for reducing the number of low-value university degrees.

 

 

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