Posted : 5 years4 months ago by mandy crawford-lee

The Apprenticeship Levy Must Not Be a Stealth Tax on Public Sector Employers – UVAC OPINION

The Apprenticeship Levy Must Not Be a Stealth Tax on Public Sector Employers – UVAC OPINION

The original rationale for the Apprenticeship reforms and Apprenticeship levy can be summarised in one word: productivity. In 2016 UK productivity was 16% lower than the OECD average. A key reason for the UK’s productivity gap was the failure by employers to invest sufficiently in the training and development of their employees.  The Apprenticeship reforms were designed to enable employers to develop the Apprenticeships their sectors needed through an employer led Trailblazer process and purchase the Apprenticeships they needed to raise the productivity and effectiveness of their organisations.

Employers have responded with gusto. Trailblazers have developed a wide range of high quality Apprenticeships. This has been particularly the case in the public sector – think registered nurse, nurse associate, social worker.  In the police sector the new police constable degree apprenticeship is a highly innovative solution to recognise that all police constables in future will be required to achieve a degree. New apprenticeship providers have also entered the market, over 100 higher education institutions, from across all university mission groups including the Russell Group have successfully applied to the ESFA’s Register of Apprenticeship Training Providers. Individuals too have seen the benefits with a job from day one, earning while learning and with fees paid by their employer including where a degree is a mandatory qualification in an Apprenticeship. Through Apprenticeships we have the potential to tackle skills requirements and the crisis in recruitment and retention in key public sector roles and for Apprenticeship to become an aspirational choice. Indeed, so far, so good.

Unfortunately we have some problems which could prevent public sector employers having the Apprenticeships their organisations need. Firstly, despite a slight softening on the Government manifesto commitment for three million Apprenticeship starts, there’s still a focus on numbers – just look at the number of articles in the press since the beginning of last year on the decline in Apprenticeship starts.  A preoccupation with numbers is entirely incompatible with an employer led programme focused on productivity or the delivery of high quality public services. Do the maths and the amount raised through the levy, if it were to fund three million Apprenticeships, equates to £4,167 per Apprenticeship. We don’t want to labour the point, but £4,167 is a mere fraction of the cost of the high quality Apprenticeships public sector employers will increasingly want to use – if as we suspect police forces focus on police constables and the NHS on nurse associate and registered nurse or indeed management training.  Ministers in the Department for Education and Department of Health and Home Office need to decide if they want an employer led system focused on the high quality (and higher cost) Apprenticeships focused on raising productivity and delivering public services or whether a chase for numbers is more important.  A slight downplaying of the manifesto commitment for three million starts isn’t enough. These and other points we made to the Higher Education Commission during the collection of its evidence for the Policy Connect report, Degree Apprenticeships: Up to Standard? published on 29 January.

It’s worth considering why numbers are apparently so important to Government or more accurately the Apprenticeship sector.  Apprenticeships were in the past used to support individuals to gain level 2 skills and competencies i.e. equivalent to GCSE level qualifications and often presented as an option for those who weren’t intending to stay on at school and were, W’d argue being failed by the school system.  In 2016 just under 60% of Apprenticeship starts were at level 2. The question is why should employers, including public sector employers, be expected to pay to rectify the failure of the school system when the Apprenticeship levy was introduced to support employers invest in theirworkforce to raise productivity? If there is an occupational need for Apprenticeship programmes that deliver level 2 skills, in care, for example, then this should be determined by employers. Regrettably, this isn’t a view shared by some.

Let’s be a little controversial and reference the largest levy-payer by far, the NHS. The levy isn’t a stealth tax on the NHS to support individuals failed by the school system nor is it a funding pot, into which the NHS makes a massive contribution, to support the equally cash strapped further education sector. Yet in recent press comments, Ofsted’s chief inspector has argued that Apprenticeship funding should be prioritised for individuals without a full level two qualification.  Such a statement implies the NHS and police forces and other large levy payers should pay and support young people who leave compulsory education without a level 2 qualification, rather than invest in the training and development of new police officers and registered nurses.  Why? Shouldn’t Ofsted and the schools system ensure that after 11 years of compulsory education young people leave with the necessary qualifications to progress?

As well as paying for the three million Apprenticeship starts manifesto commitment (or a slightly lower number), the Apprenticeship levy which is set at 0.5% of payroll costs for employers with payrolls of over £3 million, must fund the Apprenticeships used by smaller businesses that do not pay the levy. While there may well be a good rationale for levy underspend by NHS Trusts being used to support GP surgeries or local authorities to support care homes, surely the levy payments made by NHS Trusts, local authorities or police forces should not be used to fund Apprenticeship provision used by small business in the private sector in say hospitality or retail? But that may well happen.

Of course, the response to our argument has been that employers can recover 100% of their levy payments and more because Government makes an additional 10% investment into their Apprenticeship accounts and gives incentives where applicable. Well yes this argument is made, but in future it won’t stand scrutiny.  It may come as news to many employers, but the Apprenticeship funding band that is set for an Apprenticeship standard may be less than the cost of delivering the Apprenticeship. Indeed, the Institute for Apprenticeships (IfA) that advises ministers on Apprenticeship funding bands simply states that they represent the maximum Government contribution to the cost of the Apprenticeship.  They are set in the context of cost and affordability, in particular delivering the three million starts manifesto.  Take the employer led Social Worker Trailblazer – the Trailblazer provided costings for the Apprenticeship, argued its case, but the IfA has recommended a lower funding rate than the estimates provided.  Public sector employers will therefore have less to spend on each social worker Degree Apprenticeship.  This means they will have to accept a lower specification, pay over and above the funding band or hope a university absorbs the cost reduction following negotiation. Public sector employers have, however, been led to believe that a funding band is the price of Apprenticeship and cannot afford to pay more.  Muddying the waters is also a lack of transparency in the process used to determine funding bands and the bureaucracy and time taken to develop standards which lead some Trailblazers to feel they are not being enabled to spend ‘their’ levy payments on the Apprenticeships they most need.

So what should happen? Well, UVAC would suggest the ball is in the public sector’s court.  We’re an outsider and have our own interests representing an organisation supporting universities deliver Degree Apprenticeship.  But having declared an interest here goes.  Firstly public sector employers should insist the levy paid by the public sector is retained in the public sector. Secondly, the NHS, local authorities and police forces must seek the support of their Government departments and appropriate regulators and ensure Apprenticeship funding bands are set at levels that enables them, and other public sector organisations, to have the Apprenticeships they need and not what Ofsted, or the IfA as a result of levy rationing says they should have.  Succeed here and the Apprenticeship levy will not be a stealth tax, but an enabler that supports the public sector recruit and train key occupations to deliver high quality public services and potentially a highly effective policy.

For a further discussion please contact [email protected]

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