Apprenticeship reforms have improved quality but must deliver routes into careers for new starters 

Controversial reforms to the apprenticeships system have defied many of their critics and led to a welcome drop in the number of lower-quality apprenticeships in low-paying sectors, according to a new report published today (Saturday) by the Resolution Foundation.

Trading up or trading off? Understanding recent changes in England’s apprenticeships system finds that claims that the recently introduced apprenticeship levy would not be spent by firms, or that it would disproportionately benefit the South East of England, were misplaced. However it shows that changes are needed to ensure the system delivers its core objective of providing young people and new starters with a high quality route into a career. This is urgent because significant growth in the number of more expensive, higher-level apprenticeships being given to older, established employees has used up headroom in the apprenticeships budget and risks crowding out young people and those still making their way up the career ladder.

The Foundation is calling for the core purpose of apprenticeships to be prioritised, with new requirements on firms to ensure young people and new starters are central to their apprenticeship programmes. Levy payers could, for example, be required to dedicate at least half of their levy expenditure to the under-30s and an overlapping half to new starters to the firm.

The Foundation’s analysis takes stock of today’s apprenticeship system, two years on from the introduction of the controversial apprenticeship levy (which required all firms with a wage bill of more than £3 million to either spend 0.5 percent of this total on apprentices’ training or effectively relinquish the money). Many have blamed the levy for the drop off in the number of apprenticeship starts, but the Foundation finds that the fall was actually driven by stricter quality regulations that were introduced at the same time, including a stipulation that apprentices spend at least a fifth of their time in off-the-job training.

Overall, the system is smaller: there were 25 per cent fewer apprenticeships started in 2017/18 as compared to 2014/15. This has driven a notable fall in lower-level apprenticeships, which were reduced by 45 per cent between 2014/15 and 2017/18. Retail apprenticeship starts at Levels 2 and 3 accounted for 18 per cent of all apprenticeship starts in 2014/15, despite the fact that only 9 per cent of the labour force were employed in non-managerial retail roles. These lower-level programmes also often involved lower-than-average rates of work-related training, with more than one-quarter of apprentices in these areas unaware that they were actually undertaking an apprenticeship.

The move away from these lower-quality qualifications is a welcome development, the Foundation says, in spite of the drop in the overall number of apprenticeships. It’s essential that policy makers keep the 2017 regulations in place and continue to prioritise genuine learning and skills development.

In contrast, however, the Foundation’s report also highlights another, more worrying shift – with a noticeable rise in the number of the very highest-level apprenticeship starts, many of which are going to those aged over 25. In 2017/18, the number of apprenticeship starts at Levels 4 and above (higher-education equivalent) reached 48,200, up from 19,800 in 2014/15. And in the first three quarters of 2018/19 alone, there were 19,000 starts at Levels 6 and 7 (equivalent to a degree or Master’s degree). Crucially, over 25s accounted for 59 per cent of the growth in these higher-level programmes – and in 2018/19 they accounted for 44 per cent of all apprenticeship starts, and as much as 65 per cent of all higher-level starts. Starts at these higher levels are not typically undertaken by those at the beginning of their careers.

In addition, the analysis suggests that businesses are offering these higher-level apprenticeships to established employees, rather than using them as a potential route in for new starters. In survey conducted by the Department of Education published in 2017, 83 per cent of all higher-level apprentices aged 25 and over said they were employed by the same firm prior to beginning their apprenticeship. In a follow up survey published in 2018, 62 per cent of apprentices of all ages and levels said that they were employed by the same firm prior to beginning their apprenticeship.

The Foundation says less progress is being made on the core role of apprenticeships as a route into a new career. This is concerning given estimates that the apprenticeships budget could be overspent by as much as £1.5bn by 2021.

Stipulating that a core proportion of apprenticeships must go to new starters or under-30s won’t be an uncontroversial policy, and brings reporting requirements for firms that would need to be minimised. But if policy makers want to ensure the apprenticeships system meets its core purpose – providing young people with development opportunities and a route into a sustainable career – then reform is vital.

Kathleen Henehan, Research and Policy Analyst at the Resolution Foundation, said:

“Rather than being a cause for concern, the recent drop in apprenticeship starts has been driven by a welcome fall in many low-value apprenticeship programmes. While the controversial apprenticeship levy has been blamed, the fall has in fact been driven by stronger regulations to ensure apprenticeship quality.

In contrast a marked rise in the number of apprenticeship starts at higher levels has been influenced by the introduction of the levy in 2017, with employers using the system to upskill established employees, rather than offering enough young people and new-starters a route to a lasting career.

“Policy makers should stick to their guns on quality improvements but ensure apprenticeships deliver their core purpose by requiring firms to spend half of their apprenticeship funding on new starters and half on workers aged under 30.

This won’t be uncontroversial but building a high quality, clear route to skills and a good career is crucial to our country’s future.”