Should students contribute to the costs of their own apprenticeship? This is one recommendation highlighted in a new report focusing on the apprenticeship system, particularly in the built environment.

It suggests that the apprenticeship regulation needs reform, and this reform should focus on reducing the administrative costs of apprenticeships in favour of funding being better used to support training that meets needs.

Written by the Construction Industry Council, the Construction Leadership Council and the University College of Estate Management, the report says the apprenticeship levy must be reviewed to ensure it continues to drive forward investment in apprenticeships, their successful outcomes, and to be open to other uses, including to better support high-quality apprenticeship delivery and assessment.

According to the report, training providers in particular are voicing their concerns about costly and burdensome regulation, the inflexibilities of funding and the impacts of penalties levied on the training provider for withdrawals and non-completion of apprenticeships, which are often beyond their direct control.

The purpose of the levy
The apprenticeship levy was introduced in April 2017 for employers with a salary bill over £3m per annum. The levy aimed to enable employers to fund the training and assessment of apprentices in their workforce. Where employers failed to spend all their levy, the remainder would be returned into the apprenticeship system for other employers to utilise to train their apprentices.

When combined with the employer-led apprenticeship standards system, the report highlights the following as markers of success for the apprenticeship levy:

• The levy has driven significant investment in apprenticeships, with large employers now focused on graduate and apprenticeship recruitment, alongside experienced and skilled recruitment.
• Levy funds are being used to support the training of a technical and professional workforce, which was previously out of the scope of former apprenticeship framework funding mechanisms.
• Employers are engaging with a wide variety of apprenticeship training providers who utilise levy funds to develop the skills businesses need.
• Non-levy payers can now access 95% of the funds needed to train their apprentices.
• Apprentice levy pledge system allowing unspent funds to be made available to other employers within the sector.

The funding of apprenticeships was one of the most important and frequently raised matters during discussions because, as one contributor put it, “funding does drive behaviour”. Many employers in recent years have focused on maximising their levy spend, with many now utilising their full or a significant proportion of their levy allocation, whilst others are overspent. The incentives to enable levy sharing are also facing barriers to their use and uptake: levy transfers, aimed to transfer unspent apprenticeship funds from one employer to another, are not being routinely taken up, or working as well as they could, resulting in the apprenticeship levy not being utilised or retained in the sector. For example, large employers stated that there was a lack of guidance on how to transfer their levy funds to support smaller firms.

Despite a downturn in apprenticeship recruitment during the years affected by the COVID-19 pandemic (leading to a reduction in employers’ use of the apprenticeship levy), the government’s apprenticeship funding model, which relies on apprenticeship levy income, is often reported as being at potential risk of total levy overspend.

The report says the lack of flexibility of the apprenticeship levy is also proving problematic: some employers are now reporting that they can no longer fund alternatives to apprenticeships, resulting in less funding available to those in the workforce that require upskilling via the likes of continuing professional development (CPD), or for supportive activities that would further drive up apprentice numbers, or improving support from mentors and line managers for higher quality apprentice outcomes; this mirrors what had been previously reported by employers in this sector in 2020. Some are questioning if apprentices themselves should invest in, or part-fund, their training, or at least be held accountable for a level of funding if they leave the apprenticeship early, and particularly at the gateway to, or during, EPA.

The rules that govern this apprenticeship funding were also seen as overly complex and sometimes blunt instruments, exacerbating funding problems. Employers and training providers currently have no recourse to claw back funding from apprentices; both are unfairly penalised if the apprentice fails to proceed with EPA. Employers will have paid the full amount for training and assessment, but 20% of this amount is withheld from the training provider, resulting in significant financial losses, especially where the training to EPA gateway has been completed successfully.

Many stakeholders are questioning if the original ambitions for the apprenticeship funding system remain true: that is, employers can devise the apprenticeship training they require that leads to a competent and productive workforce and that their apprenticeship levy can fund the training they need. There are now growing calls for a review of the apprenticeship levy so that it provides greater transparency as to how the apprenticeship levy is being used, and the levels of funding available for the government’s apprenticeship programme.

The report’s authors reveal that, away from the mechanics of the apprenticeship levy, the amount of funding for individual apprenticeships is seen as an even more pressing issue. There needs to be a better match between the actual costs of providing a high-quality apprenticeship and the funding allocated by government. Rising costs, especially for consumables and expensive equipment needed to teach built environment professional and technical apprenticeships were threatening the viability of these apprenticeship programmes. This was because there had been no equivalent rise in the funding bands for these apprenticeships. The upper limit of the maximum ‘apprenticeship funding band’ (£27,000), into which many sector professional apprenticeships fall, has not risen since its introduction in May 2017 and is set below the tuition fee limit for traditional university degrees (£27,750).

The authors assert there must be greater transparency in terms of the funding available for apprenticeships, and how apprenticeship levy contributions are being used. Where the levy is not being utilised, the government must ensure the incentives that facilitate the sharing or transfer of levy funds are better promoted, are accessible and the administrative processes simplified. The funding bands allocated to occupations need reconsideration as part of a wholescale review of apprenticeship funding.

The report concludes that the apprenticeship levy must be reviewed to ensure it continues to drive forward investment in apprenticeships, their successful outcomes, and to be open to other uses, including to better support high-quality apprenticeship delivery and assessment.

Read the full report here.