Blog published by WONKHE 12 September 2024

Written by Dr Mandy Crawford-Lee, Chief Executive, UVAC

There is growing disquiet around Labour’s growth and skills levy plans.

In this article published by WONKHE, Mandy Crawford-Lee asks what lies ahead for higher and degree apprenticeships. She writes:

A change in government inevitably brings a period of vast uncertainty, and concerns around how a change in policy will impact everything from education and the environment through to living standards and the wider economy.

Labour’s election win has put the future of higher and degree apprenticeships into sharp focus, and increased fears that their rapid progress, popularity, and growth under the previous government could be undone.

In its manifesto, Labour claimed the Conservative’s Apprenticeship Levy was broken, needed to provide greater flexibility and that it was planning to invest around 50 per cent less in apprenticeships across all levels moving forwards. That fear has not been alleviated and for apprenticeships to come under threat seems unthinkable when you consider how critical they are to promoting social inclusion, bolstering the wider economy, and addressing the skills gap across all sectors.

Apprenticeships support

UVAC is not alone in recognising and voicing these concerns. A recent survey of our university members explored what policy commitments and funding support the new government should provide, to ensure higher and degree apprenticeships meet employer talent needs.

The results certainly provided food for thought. A resounding 88 per cent of universities believe that higher and degree apprenticeships hold the key to Labour driving economic growth and addressing the urgent skills gap across the UK. Those surveyed believe that the new government should continue the apprenticeship progress made under the Conservatives, with 84 per cent urging Labour to support their continued growth.

As is always the case, the future expansion of apprenticeships across all levels will largely boil down to money. Some 64 per cent of universities believe Labour should commit to helping them meet the cost challenges of delivering higher and degree apprenticeships in partnership with employers and help them diversify their provision to meet the needs of more business sectors.

The research also explored the impact Labour’s Growth and Skills Levy will have when it replaces the Conservative’s Apprenticeship Levy, which is financed by a 0.5 per cent compulsory contribution by employers with payroll costs of over £3m. Despite being met with concerns from levy-paying organisations across the UK, and regarded as another form of business taxation, 60 per cent of universities felt the Apprenticeship Levy better supported the delivery of apprenticeships across all levels, ages and occupations when compared to Labour’s new funding solution.

Growth and skills

Labour’s Growth and Skills Levy has prompted many concerns. Although 50 per cent of payments would be ring-fenced for apprenticeships, it would allow employers to spend up to 50 per cent on other approved training programmes. This Labour claim will help deliver the flexibility employers have been demanding but at what cost to future apprentices and higher education institutions delivering level 6 and 7 apprenticeships?

Over three quarters (77 per cent) of universities are rightly concerned that allowing employers to spend up to half of their levy payments on non-apprenticeship training will hinder the volume of top talent entering the workplace via apprenticeships. We share the view that less funding in principle will go to finance apprenticeships under Labour’s scheme, especially at level 6 and 7. If employers are allowed to direct more funding to non-apprenticeship approved training, this leaves circa £1,6bn for apprenticeship funding annually across the devolved nations versus the £2.5bn spent by the government on apprenticeships in the last financial year.

The annual apprenticeship budget under the Conservatives, largely funded by levy payments, dedicated around a fifth of spend to higher and degree apprenticeships. With a new government in place, UVAC feels that should be doubled to nearer 40 per cent of the total budget but there are certainly no indications Labour will make that happen.

Clarity is also needed on some of the mooted pre-election levy reforms and whether Labour will adopt them. For example, there were numerous calls to reduce spending on certain types of apprenticeship and types of learner. Since the Conservatives introduced the levy, there had been calls to restrict employers’ use of levy funds on degree apprenticeships for older workers, for individuals earning above a certain salary, for employees with a degree, or for apprenticeships at higher levels. Such measures, if introduced would cause havoc with the apprenticeship system, undermine its focus on productivity and social mobility, as well as severely restricting employers’ ability to use the apprenticeships their organisations need. Imagine the NHS not being able to use its levy payments to train a nurse simply because the individual had a history degree or was aged over 24.

It certainly feels like we’re at a crossroads for apprenticeships and the next few weeks and months will hopefully provide a better indication of Labour’s direction of travel. Until then, we will undoubtedly be stuck in a period of limbo.

What remains hugely reassuring though is that education institutions and employers are fully aligned and will continually defend the vital role apprenticeships play in the UK economy as an all age, all skills level programme.