Simon Ashworth | Chief Policy Officer | AELP

 

When stepping in to write in Countdown I always like to look back over the last week to see what burning issues have come up that would be worth exposing and/or debating further. For me there is just one hot topic which I need to get on the table as it’s one area we have seen a shedload of queries on and it worries me how many providers are getting in touch about trying to interpret what the real position actually is.

So the main focus today isn’t on the recognition of prior learning … no, it isn’t how do you calculate the minimum 20% off-the-job requirement (although both have been very popular recently!) …. what I wanted to focus about today was the topic of whether there is really an impeding apprenticeship funding crisis or not? This is a really intriguing question which it is clear to me many providers are currently wrestling with to understand and triangulate with so many confusing messages out there.

Before I unpick this it would be unjust of me not to mention that when I joined AELP in January 2017 one of our pre-levy lines was that we said the that there was a real risk that the apprenticeship levy could run dry with more of the levy getting consumed than hypothecated by government, which would then strangle the funding supporting smaller non-levy paying employers. I remember many ‘experts’ in the sector scoffing at this suggestion, especially after the levy got off to a slow start. However, unfortunately that prediction has now partly crystallised and without intervention will become reality.

So let’s not beat around the bush - our sector is facing a huge challenge. It’s the answer to the exam question this week, but worth explaining how we got here and why others are maybe struggling to get to this same point. The analogy I have used has been that at times it feels that we are hurtling along on an express train and someone is literally laying down the track as we shoot along. I’m sure many of you can empathise with this analogy of what the last two years has felt like. However, on the horizon is a sharp cliff edge which we are hurtling towards at a rate of knots and many are so busy putting track down they don’t see it coming, whilst some are also distracted by other stakeholders who believe it will be all right in the end, and that the cliff edge is merely a mirage and to keep on going. The truth is either we need someone need to quickly to build a bridge to allow us across the ravine safely or someone needs to put a bend in the track to allow us to take an alternative safe route to our final destination.

To me, the future funding crisis was amplified clearly by the recent National Audit Office Report and the subsequent Public Accounts Committee hearing. In between these events we published our own discussion paper for the need to create a sustainable apprenticeship marketplace and different options that need to be considered. Just to be clear our preferred option is for someone to come along and build that bridge for our speeding train in the form of more funding into the system to pay for the breadth of what is needed by employers, from both a social mobility and a productivity perspective. However, we also need to be realistic that the levy (as someone pointed out to me in our recent trade mission to the USA) is in essence “a tax on jobs”, and how feasible is it to increase that tax or the scope of that tax with the pressures already faced by employers with the uncertainty of a small thing called Brexit hanging over us all? So, if no new funding is found then as Jonathan Slater the Permanent Secretary for the Department for Education stated at the Public Accounts Committee “hard choices need to be taken”, with the NAO report suggesting the need to ration and/or prioritise provision as there will not be enough funding to pay for everything if no new funding is found. In my train analogy, this could be the building of a bend and a slower track. Not as effective as more funding and the building of the bridge, but it certainly beats crashing over the cliff which helps no-one; not an independent provider, not a College, not a HEI and certainly not the apprentices and their employers either.

I can fully understand why there is so much confusion on this and providers struggling to decipher some very mixed messages. As an example, just consider the following points:

  • Several FOI requests made public since May 2017 and the introduction of the Apprenticeship Levy showed between within a year or so only 11%-14% of levy being spent on new starts by employers.

  • At the AAC Conference last month, Keith Smith used a slide which stated that this figure had increased, but still only 22% of the levy has been spent by employers on new starts.

  • Add to the mix that this month alone £12m of levy has reached the first 24-month sunset period and is in danger of being removed from employer accounts as it has not been spent.

  • In FE Week’s webinar with Keith Smith and Anne Milton last week it was confirmed that over £300m was unspent and being returned to the Treasury.

So taking all this in account it’s easy to understand why we have many providers saying to us - how can there be an impending funding crisis? If 22% of the levy has been spent on starts, what about the other 78%? But there is £300m going back to the Treasury? This month there is an anticipated £12m of sun-setted levy getting dropped off employer’s digital accounts? Only last year Keith Smith said at the AELP Autumn Conference the ESFA have never not funded high quality apprentices who started on programme. How can the government not fund over delivery of 16-18s then? Government have always funded 16-18s, and surely it would be wrong to assume otherwise?

It’s easy to see why this does not appear to add up. However, we are in fairly unique times and the reason it does not add up is because these attention-grabbing headlines don’t cover the whole story and the other important detail. It’s worth highlighting these other factors:

  • Also in Keith Smith’s slide a the AAC it highlighted that 64% of the levy had been used to pay for learners already in learning prior to the reforms starting with the balance (14%) funding non-levy apprenticeships.

  • There was the infamous presentation last year from Rob Nitsch, the COO of the IfA, to an employer group highlighting a potential future overspend of £500m.

  • Jonathan Slater at the PAC said that it was originally anticipated that levy payers would spend 50% of the levy, but this is swinging towards 60% and this constrains the funding passed through to non-levy payers.

  • We have already seen the non-levy contract extensions through until March 2020 contain no growth with a very strongly worded and unprecedented message from the ESFA that they do not anticipate announcing funding for growth, “unless significant budget becomes available” and that “no delivery above allocation will be funded.”

  • The NAO report said that the number of starts is down, but the cost per apprentice is double what was anticipated. Standards cost more than comparable frameworks, no more so than at the higher level programme, such as at level 6 and level 7.

On this final point I must always say that AELP are not anti-level 6 and level 7 apprenticeships in any way. In fact, I recently did a piece for NAW saying degree apprenticeships have been a “game changing opportunity”. However, being a numbers person, I’ve done some simple sums on this. In the first 6 months of this academic year there have been just over 14k starts at Level 6 and Level 7, that’s 11% of all actual starts in that period. Some will argue that at 11% this represents the minority of the provision but is still a big step change in growth bearing in mind the starting point of 0% until a couple of years ago. Imagine a new training provider joining the sector and taking 11% of the market within two years. To me that is clearly some impressive rapid growth from a standing start. Over the last decade I’m sure many of you will recognise the phrase “providers need to do more for less”, but this change means that government is now getting “less for more” which sums up the current predicament, and the associated challenge that 11% of starts equate to 25% of the total funding commitment during that same six-month period.

I would challenge anyone who says that the volumes of higher-level programmes will not continue to grow when you add into the melting pot more programmes becoming available, more employers recognising the opportunity and more providers becoming approved to offer these programmes too. On that basis it is easy to see level 6 and level 7 programmes growing to not just 50% of the funding available, but possibly 100% of it too. If there is no extra funding, there need to be some “hard choices” to what warrants a government subsidy and what does not.

Whatever happens one thing is clear; we need to avoid that cliff edge which is fast approaching on the horizon at all costs.

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