The pitfall with Labour's apprentice pledge
Why the Growth and Skills Levy is the wrong way forward
Apprenticeships work. The best schemes generate £25 in economic benefits for every taxpayer pound invested. Top apprentices earn £1,630 more than their university-graduating peers five years into their careers.
Young people want the opportunity. Two-fifths of students — some 430,000 — considering university were also interested in apprenticeships. Funding more apprenticeships is also incredibly popular with the public at large, with more than a third backing the idea over other education priorities.
Since 2015, the Government has battled to grow apprenticeship numbers while improving the quality of schemes.
They've succeeded in boosting quality. New standards have transformed apprenticeships, with Ofsted scrutiny now keeping providers in check and a new legal status preventing low-quality, knock-off schemes.
But efforts have stalled on numbers. There are now 10% fewer apprentices than seven years ago, and opportunities for under-19s have shrunk by almost a third.
Businesses have been frustrated by the lack of flexibility in the system, arguing for greater freedom over how to use their apprenticeship levy funds.
Reform is needed to boost apprentice numbers.
But the Labour Party's plan for a new Growth and Skills Levy isn't the answer. Onward's latest research note, Off Course, finds that it could halve apprenticeship numbers to just 170,000 across the country.
The Growth and Skills Levy would allow businesses to spend half of the levy's funds on other non-apprentice forms of training. If they used the complete flexibility, apprenticeship funding would halve - unless the Government stepped in to plug the £1.5 billion gap.
Giving businesses some flexibility may have worked in the past when plenty of unclaimed levy cash existed, but that’s no longer true. Only 4% of funds went unused in 2022 compared to a quarter two years earlier.
The fall wouldn't be felt equally by all. Apprenticeships in the South East would fall furthest, with 26,000 fewer places, and the North East would have less than 10,000 apprentice opportunities left in total. Opportunities for under-19s could plummet to 39,000 places — eight times lower than the number of university places offered to their peers.
This move would blow our apprenticeship policy off course. Three-fifths of students say there are too few apprentices in their local area. The average apprentice is no longer a fresh-faced school leaver but a 25-year-old already highly qualified and employed.
Labour's policy is well-intentioned but misguided.
So what reform is needed instead? Onward recommends the Government stick with the existing levy but improve it by:
Lowering the levy threshold so more businesses pay into the fund and are incentivised to use it.
Fully funding 16-18 apprenticeships from outside the levy, paid for by removing top-up funding for large businesses that recruit apprentices outside of the levy.
Build on the flexi-job scheme to allow apprentices to work across multiple businesses.
Allow firms to bid for licences to rapidly develop new apprenticeship standards in emerging technologies or areas with acute skills gaps.
These are the ideas that the Conservatives and Labour should consider as they prepare their manifesto apprentice pitches for the next election — building on what's working and fixing what's not while maintaining our national commitment to deliver more high-quality apprenticeships.
You can read more about Jess Lister’s apprenticeship proposals in her short research note, Off Course, published by the think tank Onward.