How is the Apprenticeship Levy doing - Sept 2018 review (Moneyweek)

The short answer is not well:

How is the apprenticeship levy doing? Badly. Last year the government introduced it in England to encourage more workplace training. The charge is applied to businesses with an annual wage bill in excess of £3m. They pay a 0.5% tax on their payroll into a £2bn training fund. They can then claim money back from the fund to finance training courses for their apprentices. The measure was supposed to encourage employers to invest more in skills. Yet the number of new apprenticeships fell by 28% in the year to June. The initial introduction period was even more disastrous: in the first three months of the levy the number of new apprenticeships dropped by 60%. Just 341,700 new apprenticeships were created in the year to June, far short of the government’s target of three million new apprenticeships by 2020.

What is the problem?

Employers complain that the levy is overly bureaucratic. Under the old system a business could take on an apprentice, pay them for their time and leave much of the out-of-job training to others. Now businesses need to claim the money spent on training courses back from the state in the form of electronic vouchers. Business groups complain that the introduction of new standards has led to a shortage of courses to spend the money on in some areas of the country. An Open University Freedom of Information request this spring found that of the £1.39bn paid into the fund by firms, just £108m had so far been paid back out, leaving the levy looking more like a revenue-raising exercise by Whitehall than a commitment to skills training. Smaller businesses, which are not affected by the levy, have been hit by a new requirement that they pay 10% of the cost of apprenticeships.

How does the system work?

From the age of 16, young people not keen on the conventional academic route can begin working in industry, with one day a week typically given over to classroom study towards vocational qualifications. Britain’s vocational education system has long suffered from low prestige, with only about 30% of young people taking vocational routes, compared with an average of 50% across the OECD group of developed countries. A government drive started under New Labour to get half of young people into university has only worsened perceptions of the vocational track. Britain’s higher education fixation is starkly illustrated by that fact that MBA students have been unexpected beneficiaries of the new apprenticeship levy. Some businesses have been reclassifying senior executives as apprentices and sending them on part time MBA courses, financed using money drawn from the apprenticeship fund.

Does anyone get it right?

Apprenticeships at the likes of Rolls-Royce, Siemens and British Aerospace are highly prized and fiercely fought over. More than 1,400 people applied for eight spaces on the BBC apprenticeship programme for the 2017/2018 academic year. Such programmes are increasingly, in the words of skills minister Anne Milton, subject to “middle-class capture”. That may not be all bad. One of vocational education’s main challenges is, as Theresa May put it in February, that the middle-class professionals who run Britain’s institutions have historically regarded it as “something for other people’s children”. What could fix that? With student debt rocketing, apprenticeships that offer degrees and a salary could change that attitude. The trouble is that such high-quality schemes are thin on the ground. In the meantime, the UK seems to be doing little to rectify skills shortages. The Construction Industry Training Board has complained of a skills gap. Yet according to the union Unite, last year 90% of those enrolled on construction courses were taking “dead end” theoretical courses that leave them without the practical skills employers need.

Is there a better way?

Germany’s famed “dual vocational training programme”, which combines a three-year on-the-job apprenticeship with academic study, does not sound all that different from Britain’s own system on the surface. Yet about 60% of young people in the country take the vocational route, more than double the figure in Britain. This is reinforced by an educational culture that regards skilled trades as respectable choices leading to a comfortable livelihood, rather than backstop options for the less academically successful. The German system also ensures that those who have taken apprenticeship qualifications can enter university at a later date.

Could that work in Britain?

Countries hoping to adopt the German system face cultural barriers to making the system work, notes Rose Jacobs in the Financial Times. They may also be unwilling to sacrifice the flexibility of their own labour markets for a system that trains workers for specific occupations. In Germany, “most positions, from electricians to nursery-school teachers, require standard training and certification”, making mid-career moves more difficult. What is the next move? From 2020 new “T” (or “technical”) levels will become a vocational alternative to A-levels. The hope is that these courses, ranging from agriculture, environmental and animal care to hair and beauty, will achieve parity of esteem with the academic qualifications. Let’s hope so. According to Paul Johnson of the Institute for Fiscal Studies, “It is our failure to get enough young people into high quality, job-based training... that creates our skills shortages... and productivity problems.” Getting this right could give the British economy a big boost.