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The stop-go system for funding apprenticeships

19 June 2019

Perhaps surprisingly the announcement on Friday 5 February of an extra £25 million of Government apprenticeship funding was greeted with dismay. Although the decision increases the 16 to 18 apprenticeship budget by around 3% and comes on top of £56 million extra for 19+ apprenticeships (a 7% increase), it does not appear to be enough. Training providers and colleges have been told that they can only have 50% of what they asked for. In addition, colleges need to wait until April if they want additional funds for any new under 19-year-old apprentices taken on before August. Apprenticeship budgets in the 2010s 2009/10 2010/1 2010/1 2011/2 2012/3 2013/4 2014/5 2015/6 2016/7 2017/8 16-18 688 751 764 679 728 801 19+ 384 451 625 756 769 833 770 926 1,076 1,247 Total 1,071 1,202 1,389 1,435 1,487 1,634 source: House of Commons Library Briefing 03052 and Skills Funding Letter, December 2015 Despite the rhetoric about expansion and the encouragement to colleges to double their apprenticeship numbers between now and 2020, the latest decisions say something different. The message is that Government funds are finite and that, although apprenticeships are important, control of public spending matters more. Government departments have to keep spending to within 1% of budget for the year to March 2016. Money is particularly tight in the Department for Education budget which rises by just 1.4% in 2016-17 but where there are growing pressures on funds within the school system. DfE will probably cut spending on 16-18 education in the 2016-17 academic year through a combination of falling sixth form numbers and the removal of protection funds and bursary grants but whether this is enough to cope with an increase in 16-18 apprenticeship spending remains to be seen.The bigger picture on apprenticeships is that anyone wishing to expand the numbers trained will need to overcome a number of different systemic obstacles: Government spending budgets are set on an annual basis and will continue to be controlled in this way even when the levy and employer-routed funding system starts. Government's year-end in March means a seasonal stop-go cycle which may not necessarily match employer needs. The fact that employers just pay for salaries and supervision and do not generally make extra payments for training locks them into this fiscal cycle. It is not clear that the levy will change this because it may be handled as a hypothecated tax rather than as a contribution to a fund. The division between DfE and BIS means that there are two apprenticeship funding routes split at age 19. In the recent past there was spare money to expand 16-18 apprenticeships. Right now the budget that is growing is for those over 19. Demand in terms of numbers of apprentices is difficult to predict. Costs will be even harder to predict because apprentices are funded at different rates and because we are at the start of a transition to a new formula for apprenticeship standards and a new employer-driven pricing regime for levy funds. None of this is really new. We have had 20 years of 'stop-go' in the funding of further education and training. The annual April to March cycle and the unpredictability of demand, seem to be fixed features of many programmes. Money always appears to be shortest when (as now) the budget is increasing because demand is always rising faster. Generally it is private training providers who put the most pressure on the system in terms of rapid, unexpected growth. Numbers of 16 to 18-year-old apprentices in colleges are up only about 2% in 2015-16. Once the levy and Digital Apprenticeship Service are in place, large employers will drive decisions about spending. Some of them may make new decisions on spending and may shift money around. The annual cycle will still have an impact and unspent levy funds are likely to be removed mid year or at year end (ie March 2018). The focus in Government on expansion to meet the three million target means there will continue to be a wide gap between average apprenticeship spending (approximately £2,000 a year) and average higher education spending (nearly £9,000 a year). In November 2015, the Minister for Skills, Nick Boles, laid down a challenge to college leaders at AoC's conference. He said that colleges should use their reputation, employer links, town centre facilities and qualified staff to expand their apprenticeship provision. He was correct to ask the question and right to suggest there is an opportunity and a need. Whether the current and future apprenticeship funding model makes this possible for colleges is an important question for the rest of this year. We should find out more about the levy after the March Budget but may not have a clearer view of the new apprenticeships system until late into autumn 2016.