Apprenticeship Funding Fever

by Mark Corney


The debate on apprenticeship funding is reaching fever pitch. The Coalition consultation* closes in less than two weeks, the Liberal Democrats** and Labour*** have set out their stalls and the Conservatives will do the same at the end of the month.

In recent days, the debate on the Coalition consultation has shifted away from adult apprenticeships to 16-18 apprenticeships. Mandatory employer cash contributions to adult apprenticeships seem to be a done-deal and PAYE looks the favoured model for distributing public funding.

Less clear, however, is whether 16-18 apprenticeships will be partially funded with mandatory cash contributions, partially funded with voluntary cash contributions or fully funded as now. There is then the issue about whether the public subsidy – at whatever level – is distributed through the PAYE system.

The Liberal Democrats, as distinct from the Coalition, support distributing the public subsidy for adult apprenticeships to employers through the PAYE system, though they make no mention of mandatory cash contributions. But the party seems content with the present system of fully funded 16-18 apprenticeships allocated to providers.

Labour, on the other hand, has rejected devolving apprenticeship funding to each employer, use of the PAYE system and mandatory cash contributions. Instead, the party proposes to devolve the £1.5bn youth and adult apprenticeship budget to employers on a collective basis to Industrial Partnerships and reformed Sector Skills Councils.  


Labour also want to move to a position where the term apprenticeship is restricted to Level 3 and Level 4 whilst traineeships - or some other term - refer to present day Level 2 apprenticeships. Even so, the implication is that the entire post-16 budget for apprenticeships and traineeships, however branded, would be devolved to sector bodies.

Equally important is the fact that sector bodies would have the freedom to invest in their sector as they think fit. The problem is that, with no age allocation to 16-17 year olds, Labour’s policy could seriously undermine the contribution Level 2 traineeships and Level 3 apprenticeships make to participation by this age group as the participation age increases to the 18th birthday from September 2015.

Common ground, meantime, exists across the political spectrum over twinning procurement policy with apprenticeship policy.  As a means of increasing employer demand for apprenticeships, the Coalition is planning to introduce a legal requirement on employers to take on apprentices as part of public contracts. This measure will form part of the Public Contracts Bill which is due for second reading in November. Both Labour and the Liberal Democrats similarly support this proposal.

In addition, Labour has proposed that large employers taking-on non-EU workers should recruit an apprentice as well. They expect this measure to create an extra 125,000 apprenticeships over five years. The measure is a clever twinning of immigration and apprenticeship policy, although the Coalition believes employers must also have the right to take on EU as well as UK apprentices to be compatible with European law.

Nonetheless, the elephant in the room on both procurement and immigration- linked apprenticeship policy is who pays for the training? Politicians are refusing to say whether apprenticeships will attract public funding in these circumstances or whether employers would have to fund apprenticeships fully themselves.

More generally, there is the question of how to fund apprenticeships when employer demand exceeds the public funding available.

Both Labour and the Liberal Democrats have ruled out a statutory system of employer funding of apprenticeships. The formulation remains the same as the last Blair/Brown governments: if both employers and unions agree that a statutory training levy, licence to practice or membership of an employer body is the best way forward, the government will facilitate their introduction. But since there is rarely industry-wide agreement on statutory intervention, the outcome will be the status quo.

And yet there is a straw in the wind. Labour and the Liberal Democrats flag up the possibility of rebate in employers’ national insurance contributions to fund apprenticeships where no public funding is available. Reductions in employer NICS and devolving public spending on apprenticeships to employers will both be needed to achieve a funding revolution.

 *A Consultation on Funding Reform for Apprenticeships in England, BIS/DfE, July 2013. Closing date 1st October 2013.
**Learning for Life, Liberal Democrats, September 2013.
***A Revolution in Apprenticeships – Labour’s Policy Review, October 2013.

Mark Corney is policy adviser to the Campaign for Learning.