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3 million apprenticeships by 2020 – quite a challenge but not impossible

20 May 2015

“We have already delivered 2.2 million new apprenticeships over the last five years. Over the next five years we will deliver three million more and ensure they deliver the skills employers need” Conservative Party manifesto, 2015. “Jobs, apprenticeships, childcare” were a key promise in the Conservative Party’s election campaign. Now in Government, the plan is for 3 million apprenticeships by 2020. There are lots of interesting issues in further education (FE) at present but, right now, a successful start towards the apprenticeship target matters more than anything else for ministers. Yet despite the importance of the target, there has been very little discussion about how to achieve it. This article explains how it could be done. It’s a longer blog than usual, but that’s because this is such an important issue. The numbers As Nick Linford (Director at LSECT, publishers of FE Week) has helpfully explained, some people will do two apprenticeships in the next few years so will be counted twice, for example when they move on from an intermediate apprenticeship at Level 2 to an advanced one at Level 3. The split in apprenticeships is broadly 20% under 19, 40% 19 to 24 and 40% over 25. After a few years of growth at the start of the decade, the numbers taking apprenticeships has not increased much for the last couple of years. Nick’s chart illustrates the key trends. Chart on Recent Apprenticeship Trends (From LSECT): pic 1.png Faced with these numbers, it is tempting to dismiss the target as political nonsense and to suggest that the best option would be to focus efforts on rebranding training courses taken by adults in work. This happened a few years ago when the Coalition Government would up the Train to Gain scheme and when several big companies started to employ thousands of apprenticeships. It is something that may happen again. This would be a lost opportunity. The skills and productivity crisis The 3 million apprenticeship target is a response to a feeling among voters that the current education and training system isn’t working properly. The public are right. Research[i] shows that the volume of workplace training has halved in 20 years. Even worse, there’s a record number of people at work but productivity levels are no higher than they were eight years ago. UK productivity is below our competitors and is considered by many economists (including the Governor of the Bank of England) to be a major factor in determining future economic growth[ii]. Meanwhile there’s an urgent need to build more houses but a shortage of skilled construction workers[iii]. A generation of engineers will retire in the next 10 years with no obvious way to replace them[iv]. At the same time, we have an apparently world-class higher education system but 38% of graduates are in non-graduate occupations five years after graduation[v]. Those graduating from 2016 onwards will start with £44,000 in debt[vi]. Countries like Australia and Germany have many times as many apprentices at Level 3 as England does[vii]. These are big issues which need big solutions. One of them may be 3 million apprenticeships. 16 to 18-year-olds The biggest challenges in increasing apprenticeships will be with younger people. Apprenticeships start at age 16 and there will be more than 3 million young people reaching this age in the next five years. The conventional image of many apprenticeships is that they start at 16. This was more the case in the past than now despite repeated efforts to raise participation. The Labour Government’s apprenticeship white paper in 2008 set an aim that apprenticeships should become a mainstream post-16 option attracting 20% of young people – more than 100,000 each year[viii]. As it has turned out, the numbers have remained stubbornly fixed at around 30,000[ix]. Government training subsidies and the grant for employers only reduces when apprentices reach 19 but employer preference generally favours apprentices at 18 rather than 16. The strongest pull for the young age group is higher education. The Higher Education Funding Council for England (HEFCE) data shows that 38% of 18 and 19-year-olds currently go to university for full-time courses but higher education exercises a strong pull on the entire school and sixth form system[x]. 71% of 13-year-olds told Department for Education (DfE) researchers they are highly or fairly likely to apply[xi]. Secondary school children have higher educational aspirations than they did a few years ago which is good but is a full-time degree always the best option? Good, honest advice from Year 10 upwards is a priority so it is a scandal that current information and advice is so poor. This will be a priority for the new careers company recently set up by the DfE but it remains to be seen whether its scale and resources are sufficient. Recent National Foundation for Educational Research (NFER) research reported that 65% of teachers would “rarely or never advise a pupil to apply for an apprenticeship if they had grades required for university entry”[xii] . Teachers have a lot on their plate but they may be selling their pupils short by advising them to follow the same routes they have taken rather than discuss options that might better fit themselves for future. There is a wealth of official and academic research which shows the benefits of high quality apprenticeships both in terms of better pay but also job and life satisfaction. Young adults aged 18 to 21 The big focus in the next few weeks will be on apprenticeships in the 18 to 21 age group. In their manifesto, the Conservative Party promised to remove housing benefit and jobseekers allowance from people in this age group with the offer instead of a time-limited payment linked to securing a job or apprenticeship. Legislation will be presented to Parliament very soon to make this happen but it is important to understand that the impact will be small. When the policy was announced last year, the estimate was that there are 30,000 young adults affected by this benefit change[xiii]. Helping them secure an apprenticeship will be a useful change but they are only a segment of the age group. The majority are either in work without training or are full-time university students. There are around 150,000 apprentices aged 18 to 21 but this is the age group to there should be more. The education system needs to provide young people with a firm foundation for adult life – including maths and English – with apprenticeships becoming a standard post-18 option. This could involve a re-think of entry routes into work. Employers find themselves paying a premium for graduates in their early 20s. Perhaps they should be offering more advanced and higher apprenticeships to A Level and BTEC holders at 18. Recent apprenticeship qualification reforms make it easier for employers to influence the apprenticeship curriculum but there is still not enough engagement. Despite the skills and productivity challenges, many employers have backward-looking recruitment models. Employer engagement and involvement will be the key. Funding and systems A significant challenge in expanding the number of apprenticeships will be how to pay for them. The government currently spends £1.6 billion a year to support apprenticeships which implies an average payment of £2,000 per apprentice. The funding formula assumes that employers pay 50% of the training costs for apprentices over the age of 19, but there is currently no mechanism for checking this. Employers have a firm legal obligation to pay their apprentices the relevant minimum wage. Expansion will require more spending either from government or employers even if unit costs stay at current levels. The Prime Minister promised an extra £255 million a year to be transferred from the benefit budget as part of plans to withdraw housing benefit from those under the age of 21 and to reduce the family welfare cap from £26,000 to £23,000. These reforms will be included in forthcoming legislation but only add 15% to the total budget. Further funds were promised in March 2015 from the fines levied on Deutsche bank. Hopefully we'll find out in the Treasury's 8 July budget how the sums add up but it will not be straightforward because the Conservative manifesto's promise of £13 billion in departmental spending cuts in the next two years implies an average 18% cut to unprotected departments. Securing a 50% increase in numbers requires these new funds promised by the Government but also requires the existing budget to be locked. However, maintaining the apprenticeships budget at current levels implies larger cuts to other post-16 spending in DfE and the Department for Business, Innovation and Skills (BIS), for example sixth form spending, adult further education, science or university student grants. Post-16 education spending in England is divided between DfE and BIS and adds up to £20 billion of unprotected departmental expenditure. The promises in the Conservative manifesto to protect NHS and school spending while cutting departmental spending imply cuts in unprotected areas of as much as 20%. The chart below summarises the issue: pic 2.png Employers Given the constraints on government spending, the alternative place to go for money is to employers. This will require a major change in message because, for the last few years, employers have been encouraged to employ apprenticeships on the basis that their training is paid for. To quote Ewart Keep, employers have become “accustomed to delivering training provider delivered apprenticeships at low or no cost”. Despite the rhetoric about sharing the cost, recent government policy hasn’t moved us in the right direction. In 2011, when there were concerns about a recession, Ministers introduced grant which rewards employers for recruiting apprentices. Spending on these grants now stands at £131 million[xiv] but economic circumstances have changed. There is an economic recovery, zero inflation and companies, collectively, have never had so much cash in the bank. The time is possibly right to strike a new deal with large companies that does not involve spending more than £300 million to train their apprentices[xv]. The apprenticeship grant for employers may have outlived its usefulness. These are big changes which will take time to bed down. A sensible strategy over the next few years will be to protect government spending, allocate it differently and use any extra funds raised from employers to fund the expansion. Apprenticeship vouchers The trigger for a different approach to funding apprentices may be the new voucher system set out in March 2015. The proposal is a shift to a system in which employers pay directly for apprentice training but at a discounted price. The college or training provider then reclaims the value of the discount from government in return for providing an assurance the training is happening to the right standards. pic 3.png These plans cloud the issue of financial responsibility and may require a significant overhaul of current systems. The Government will need to work quickly to meet a 2017 deadline for implementation but also very carefully to ensure that the IT and the rules work. Otherwise we'll have another great training robbery and a repeat of the individual learning account disaster. A lot has been learnt in the last 15 years. Government has introduced many new high transaction volume computer systems in a couple of years and there is now plenty of experience in the sorts of controls needed to prevent training rip-offs. Proper investment now in a new IT system and in strong project management to put the new arrangements in place could make it all work. Colleges would be keen to help. The payback in taking a new approach is the way that this might energise employer demand. For all their flaws, individual learning accounts captured the imagination of hundreds of thousands of people who liked the idea that government would co-invest in their training. In the same way, apprenticeship vouchers might help persuade non-participating employers to take a look. The important balance here will be rock-solid systems and protecting the interests of the apprentice. The interests of the apprentice Apprenticeships have returned to England in volume in the last 10 years but with mixed success. At their best, apprenticeships offer immersion into a new career, combine work and training and meet the differing needs of the employer and the apprentice. Entry to the flagship engineering apprenticeships is incredibly competitive and very rewarding for those who secure them. However there are other apprenticeships which are a pale shadow of this sort of scheme - either too short, lacking in real training and offering little on top of an employee's job. Some of the 2 million apprentices didn't know they were on an apprenticeship until they completed[xvi]. No-one thinks this is right but there are differing views about what to do about it. Some people have said that it is wrong for people over 25 to be apprentices. Given that more than 90% of older apprentices were already employees of the company that started to train them, this is a understandable view. Apprenticeships ought to be targeted on people in new jobs or new roles rather than as ways to re-badge existing training. However we no longer live in a world where people train for a single career before the age of 25 and never change or re-train. Apprenticeships have a role for those who are middle-aged, so long as the programme is good enough. The way to work out whether it is is to provide balance. Anyone who cares about apprenticeships knows that a dominant issue is programme quality. This is a repeated theme in every conversation, in newspaper stories and in government reports[xvii]. The current apprenticeship reform programme is tackling one aspect of quality by redesigning qualifications but the issue goes much wider than this. Enlightened, well-resourced employers will ensure their apprentices have high quality training whatever the final qualification. The issue is to ensure that all publicly supported apprenticeships reach an appropriate standard and that the system does not rely wholly on employer goodwill. Employers who apply for and cash in the new apprenticeship vouchers need to know that they will be held accountable to these standards both by the college and training provider who handles the administration but also by an appropriate inspection agency - possibly Ofsted. Government, rightly, wants to privatise some of the responsibility for paying for apprenticeship training but this does not mean it can stop regulating the area. The purpose of this regulation will be to protect the interests of the apprentice. The National Institute of Adult Continuing Education’s (NIACE's) idea of an apprentice charter is a start but needs to be clearly explained[xviii]. What simply needs to happen is action to ensure that apprentices have the similar rights and responsibilities towards their training as people like junior doctors or trainee solicitors: the responsibility to put in the work and effort to learn a skill combined with the right to time and support that makes it happen. Delivery Delivery of the apprenticeship expansion target is a major issue for the government. It will take money, energy and some of the tricks of the trade learnt in recent years to succeed. Michael Barber’s tips on delivery are relevant here and were summarised at a recent Institute of Government seminar[xix]: Establish a dedicated unit focused on getting those things done Use data and trajectories to drive progress Build routines around those priorities (such as stocktake meetings, or monthly notes to the Prime Minister) Help with problem-solving Persistence – stick with those priorities despite the temptations in government to shift However as we have also learnt in recent years, there is a tendency in Government for delivery in one area to crowd out effort and resources in other equally important fields. Apprenticeships are an option for people in full-time work and in our economy, this covers around 40% of the adult population, leaving 25 million who aren’t eligible. We have a society with a large number of part-time workers, a mass of self-employed people and a wide cohort of carers and parents. For the country to stay competitive and cohesive, we need people of all types to develop themselves and to keep learning. Apprenticeships are a good option for people at the start of a particular career who have a full-time job but there are risks in missing the bigger picture. Just as health policy covers public and community health as well as hospitals so education and skills policy needs to look beyond full-time education and training for those in full-time work to consider opportunities for part-time workers, for those wishing to change career, for those returning to work when their children grow up or partners die and for those who need to work longer to make up for inadequate savings. It is madness to expect government to do everything here because responsibility falls mainly on individuals, families and employers. At the same time as government focuses on delivering apprenticeships, it needs to ensure there is support via the student loan system for those who want to retrain on their own account, training grants for those with low or no basic skills support for family learning and continuing action to maintain workplace training. The voters in 2020 will judge the government on whether it delivered its promises but the verdict will also be on whether life is better or worse. Apprenticeships are part of the solution but not the only part. Julian Gravatt is the Assistant Chief Executive of the Association of Colleges. Apprenticeships will be covered in our Future Apprenticeship Conference on 3 July 2015. [i] Green, Felstead, Gallie, Inanc and Jewson “What has been happening to the training of workers in Britain” UCL 2013 [ii] Bank of England inflation report, May 2015, speech by Mark Carney [iii] “Shortage of builders hobbles UK housing ambitions. FT 3 February 2015 [iv] UKCES “Working Futures report 2012 to 2022” May 2014 [v] Office of National Statistics “Percentage of graduates in non-graduate occupations has risen” [vi] Institute of Fiscal Studies “Payback time, student loans and debt repayments” [vii] Boston Consulting Group “Towards a real revolution in apprenticeships” 2013 [viii] HM Government “World Class Apprenticeships” January 2008 [ix] House of Lords, Parliamentary answer on 2013/14 apprenticeship starts, 23 March 2015 [x] HEFCE “Trends in young participation in higher education” 2015 [xi] DFE “Longitudinal Study of Young People in England” [xii] NFER “Changing attitudes to vocational education” [xiii] [xiv] SFA 2014-15 academic year allocations report spending on apprenticeship grants for employers [xv] Estimate from SFA 2014-15 academic year allocations for money paid to employers via the Large Companies Unit [xvi] BIS research on appenticeships in 2014 showed that only 52% of leisure sector apprentices knew that their training was an apprenticeship [xvii] Official reports that discuss apprenticeship quality include the Richard report on apprenticeships published in 2012 [xviii] NIACE apprentice charter [xix] Institute of Government blog