The government’s pledge to create three million new apprenticeships in the next five years, and also ensure they deliver the scientific and technical skills UK businesses needed to increase productivity, is ‘doomed’ to fail without major changes warns government skills adviser Professor Baroness Alison Wolf, in a report published today (2 July) by the Social Market Foundation (SMF).
She argues there is too little money in government budgets even to deliver low-skill apprenticeships in this quantity. Worse, employers have been slashing their own spending on and commitment to training. Without major funding reform, through an apprenticeship levy, there is no prospect of turning the country’s skills system around.
In the report, Fixing a Broken Training System: The Case for an Apprenticeship Levy, Professor Wolf warns that if the government continues with the current funding arrangements and current target there will only be £2567 of funding available per apprentice. The report finds that currently only two apprenticeship frameworks, out of more than 200, receive government support below £3000, meaning it will impossible to meet the 3 million target and improve the quality and labour market relevance of apprenticeships at the same time. Yet a shift to higher-skill apprenticeships, which can meet skill shortages, and away from the low-skill, cheap ones which dominate at present, is urgently required.
Fixing a Broken Training System argues that turning apprenticeship back into an institution which reflects labour market needs, develops young people’s skills to a high level, and makes a genuine contribution to productivity requires two major changes: A return to the employer-apprentice contract as central and defining; and, a much higher spend per apprentice than the current system provides. To achieve this Professor Wolf recommends the creation of a National Apprenticeship Fund funded by a levy on employers. The key features of this fund would be:
- Every employer would pay in via a small levy on payroll, similar to taxes in other EU countries with successful apprenticeship systems, such as Denmark, France and Austria.
- Anyone who employed an apprentice would be subsidised by the fund at levels well in excess of their own individual contribution.
- The employer of the apprentice would determine where that training took place, selecting from an approved list of institutions.
- The current policy of individual government contracts with ‘training providers’ to find and deliver ‘completed’ apprentices would cease. All apprenticeships would be funded through the apprenticeship fund, on the basis of an employer-apprentice contract.
- Government would also contribute to apprentice training costs, in order to cover the cost of the ‘general education’ part of the apprenticeship. It would do so by continuing to subsidise approved institutions which offer training. However, this money would reach institutions through a different funding stream, not through the fund.
- The apprenticeship fund would be not be treated as a part of general revenue. The student loan system provides a clear precedent for the collection of hypothecated funds through the tax system.
Professor Baroness Alison Wolf, author of Fixing a Broken Training System, commented:
“Without new funds, David Cameron’s talk of improving apprenticeship quality while also having 3 million new apprenticeships by 2020 is self-deception, at best. Under current budgets it simply cannot be done. To rebuild apprenticeship as a robust and credible institution for the long-term it needs a secure funding source. A small but hypothecated payroll levy on businesses is the only simple and robust way to do this.
An apprenticeship fund is a practical way to kick-start the revival of apprenticeships now, forcing all employers to take note and take action. It will transform incentives, restore the employer-apprentice contract as the core of the system, and fund apprenticeship growth and improvement.”
Notes to editors:
- Professor Baroness Alison Wolf is available for comment and interviews. Please contact sean@smf.co.uk.
- The Social Market Foundation is a leading independent UK think tank developing innovative ideas across a broad range of economic and social policy, championing policy ideas which marry markets with social justice, and taking a pro-market rather than free-market approach. smf.jynk.net
