“Exploring Apprenticeship Funding”
In Advanced’s recent webinar ‘Uncovering Funding Challenges in FE’ most of the live participants were concerned about apprenticeship funding. 63.2% said that the way the Apprenticeship Levy is used to fund delivery requires reform. Introduced in 2017, with the intention of providing sustainable long-term funding for apprenticeships while also giving employers more control over training opportunities, the fund requires larger businesses with a pay bill of over £3 million to contribute 0.5% of that value. They can then either access their funds to pay for the provision of apprenticeship training (but not apprentice salaries) or nominate another smaller business to receive up to 25% of their funds instead. Smaller employers don’t have to pay in and can use the fund to cover 95% of their apprenticeship training costs.
Who really benefits?
The Apprenticeship Levy has dramatically affected apprenticeship funding for 16-18 year-olds, but not in the way that was intended. It was meant to help increase apprenticeship opportunities and provide training, skills and employability for young people coming out of schools and universities, but much of the funding has shifted towards older employees. Back in 2015, almost two-thirds (63%) of apprenticeship places were taken by 16-18 year olds, a figure that has dropped to around one-third (35%). Many employers who contribute to the levy are using the fund to deliver wider training and development to their existing staff, via apprenticeships.
Upskilling existing employees is of course necessary, as many people in the workforce have low basic skills, but one might argue that this should be their employers’ or their own personal responsibility. This new trend in apprenticeships for older workers has led to a growth in level 4 and above apprenticeship standards, to the detriment of the crucial lower-level courses that are intended to form the skills foundation for the future workforce.
Discussions with employers around apprenticeships now seem to be the wrong way around and are about how to spend their funding pot, rather than about how to use apprenticeships for long-term business benefit.
Achieving a higher number of appropriately skilled workers is crucial for a sustainable national economy. However, current low rates of funding for apprenticeship training provision in crucial sectors such as adult social care means that providers are struggling with delivering the necessary quality in training. There appears to be a significant mismatch in the level of value placed upon the skills and the provision of funding to achieve these. For example, funding for a 24-month standard in adult social care is around £3,000 – with £600 required for the endpoint assessment (EPA) fee, leaving £2,400 for learning provision. In order to sustainably cover the required quality of training, funding for more expensive-to-deliver standards such as adult social care , at least twice that amount may be required.
Current funding rates do not take into account the varying numbers of hours that different apprenticeship standards require for achievement, and the blunt 20% deduction for endpoint assessment (EPA) fails to respond to variations in actual cost. For example, the costs of an assessor for a chef’s apprenticeship in London will be much higher than one in another city such as Leicester. In today’s framework, Assessor Organisations don’t have to justify the actual cost in order to charge providers the blanket 20% rate.
Costs are of course rising. The average cost for apprenticeship delivery in 2023 is 28% higher than it was in 2017. In reality, many funding rates have not changed since 2017 and some cases, not since 2015, representing a massive drop in real terms. This fails to keep up with the rising cost in wages, fuel, and energy bills incurred by learning providers over that period and specifically now, during the cost-of-living crisis, funding is just not high enough. During the discussion, almost two-thirds (65%) of the online participants said that apprenticeship funding bands should increase annually by rate of inflation. Skills shortages in sectors such as adult social care, construction and hospitality should also be driving increased funding bands, particularly in low Level 2 standards to secure more high-quality provision.
The implementation of new technology in business will require even more specialised, and therefore potentially expensive tutors. For example, finding engineering specialists to deliver training on hydrogen-powered vehicles is in the region of £55-£60 per hour, far higher than would have previously been budgeted for tutors on a traditional mechanics course. Funds also fail to take into account the capital depreciation that can occur during training sessions, for example for engines that were never designed to be taken apart and reassembled multiple times. Eventually, and sometimes quite quickly, these will fail and have to be replaced at significant cost to the learning provider.
The real terms drop in funding and changed application of Apprenticeship Levy funds will of course have serious implications for the future. Learning providers may decide that it is better to scale down and offer fewer standards, covering the skills needed by fewer sectors. Consolidating into a niche, offering one standard, within one industry sector may prove to be the most economically successful route, enabling them to focus on high quality training with the available funding.
The rollout of the Local Skills Improvement Plans (LSIPs) will prevent local FE colleges from doing this as they will be required to work with employers and local stakeholders to provide all of the standards identified as key for the development of the local economy. If funded sufficiently however, this may mean that they will be able to underwrite the costs of low-performing standards and continue to provide as wide a range of courses as possible for the local community.
Learning providers are increasingly turning to specialist technology to help them streamline teaching and management processes, delivering more effective learning, improving learner experience and engagement, and driving greater efficiencies. Maintaining learner engagement towards the end of a course remains a significant challenge for many providers who are not able to access all of the funding because of the misalignment of achieving their qualification and EPA. It is currently possible for an apprentice to achieve their qualification and leave without completing the EPA. This has a detrimental effect on provider Qualification Achievement Rates (QAR) which in turn impact future funding and organisational reputation that would help with higher learner attraction success. It shouldn’t be difficult to align the two, ensuring qualifications are not awarded without completion of the EPA.
As yet, the full implications of LSIPs and how they will affect learning providers, particularly Independent Training Providers, remain to be seen. There may have to be some rebalancing of identifying actual local need with skills shortages, particularly in relation to national providers and national employers, who will be required to provide consistency for all of their apprentices around the UK.
The sector is already witnessing the loss of some providers, for example from those businesses where apprenticeships only represented a small part of their function, and have withdrawn delivery, while others are struggling to continue to stay in business at all. One suggestion for helping rebalance funding might be for the government to guarantee full funding for all vocational standards up to Level 3, whether that is delivered via an apprenticeship or 100% classroom-based. Any continued vocational training would need to be covered with a combination of funding by an employer and the individual themselves, but there will be sectors that will rely upon the government to cover all of the funding at higher levels too. Finding the right balance for funding apprenticeships and providing access to that funding is a critical responsibility for politicians seeking to ensure a sustainable skilled workforce into the future. The Apprenticeship Levy Fund has made a positive start, but it is not there yet.
For more insights into some of the challenges facing FE colleges and skills providers in England, check out our Funding Fundamentals Content Hub, with a collection of webinars dedicated to funding within Education.