Friday, 8 November 2013

Segmenting all age apprenticeships

 by Mark Corney

The key lesson to emerge from the consultation on the funding reform of apprenticeships in England which closed on October 1st is the need to segment them by age.*

Use of the catch-all term ‘apprenticeships’ clouds rather than clarifies the decisions to be taken in the build-up to the Autumn Statement on Wednesday, December 4th.

The funding consultation asked the apprenticeship sector to consider the introduction of mandatory employer cash contributions of 30%, as well three options for distributing public funding, namely direct employer contracting, reimbursement through PAYE and retention of the provider system. But a considered assessment of these propositions really requires a segmenting of apprenticeships by age.

To be fair, early in the consultation phase the sector recognised the case for examining 24+ apprenticeships separately from the rest.

The obvious point was made that 24+ Level 3/4 apprenticeships are funded through loans to individuals, which runs contrary to the principle of placing public funding into the hands of employers.

The Edge Foundation and others argued that apprenticeships should be a programme enabling young people aged 16-24 to upskill, rather than helping adults aged 24 and over to reskill.

In addition, the Edge Foundation and later the Sutton Trust argued that the £300m available in provider grant funding and individual loan funding for 24+ apprenticeships could be better spent on the 16-24 age group.

When nearly 1 million 16-24 year olds in England are unemployed or economically inactive outside of full-time education, there is a strong case for allocating scarce resources to young people.

And yet it was not until extremely late in the consultation period that the sector moved beyond treating all 16-24 apprenticeships as one and the same.

The segmentation of apprenticeships between 16-18 year olds, 19-24 year olds and 24 year olds and over came when the Coalition Government confirmed it was consulting on introducing mandatory employer cash contributions for 16-18 as well as 19+ apprenticeships. This basic and important issue should surely have been clarified at the start of the consultation process.

At present, 16-18 apprenticeships are fully funded whilst 19+ apprenticeships receive 50% support from the taxpayer. Applying mandatory employer cash contributions, albeit at a lower level than for adults, would break the principle of fully funded 16-18 apprenticeships. It could also destroy 16-18 apprenticeships in England.

No more than 20% of all apprenticeships are for 16-18 year olds. There are 1.5 times as many 19-24 year old apprentices as 16-18 apprentices. And we now know the number of under-19 apprentices fell significantly between the academic years 2012/13 and 2011/12, whilst 19-24 and 25+ apprentices both increased.

But even the segmentation of 16-24 apprenticeships between 16-18 and 19-24 is too limiting for policy making purposes.

An often overlooked fact is that within the 16-18 year old apprenticeship group there is a sharp differentiation by age: there are more 18 year olds on apprenticeships than 17 year olds, and more 17 year olds than 16 year olds.

As at the end of 2012, only 3.2% of all 16 year olds (20,600) were on apprenticeships compared to 6.0% of 17 year olds (38,900) and 7.5% of 18 year olds (50,900).

There is no doubt that mandatory employer cash contributions would make employers much more reluctant to take on 16 and 17 year olds, which could crucify the 16-17 apprenticeship sector.

Given that the participation age will be raised to the 18th birthday in September 2015 and apprenticeships count as participation under the RPA, the Chancellor of the Exchequer should use the Autumn Statement to rule out the introduction of mandatory employer cash contributions to apprenticeships started before age 18.

A closer call is the case over 18-24 apprenticeships. There are nearly as many 18 year olds on apprenticeships as 16-17 year olds combined, and participation amongst this group has increased incrementally over the past two years. Meanwhile, the proportion of 19-24 year olds on apprenticeships as a share of the total is over 33%, and the number actually increased by 20,000 between the academic years 2011/12 and 2012/13.

Even so, mandatory cash contributions for 18-24 apprenticeships could choke off employer demand. On balance, this is probably not a risk worth taking when there are 900,000 unemployed and inactive 18-24 year olds who are not in full-time education.

This leaves 24+ apprenticeships, which constitute 45% of all those on the programme and have grown exponentially in recent years.

If a decision is taken to retain public support for this part of the apprenticeship sector rather than redirect it 16-24 year olds, there is a clear case to segment it by level of apprenticeship.

Between the academic years 2010/11 and 2012/13, participation in 25+ higher level apprenticeships (Level 4) has grown from 100 to 7,300 - nearly twice as many as 19-24 year olds. Similarly, the number participating on 25+ advanced apprenticeships (Level 3) has increased from 86,100 to 186,900 – 1.5 times more than 18-24 year olds.

To date, fewer than 250 applications have been received for 24+ Level 3/4 apprenticeship loans: mandatory employer cash contributions are hardly going to help matters. Loans to individuals also do not square with the principle of employer ownership.

The case for abolishing individual loans for 24+ Level 3/4 is overwhelming. The policy is putting at risk higher level apprenticeships, an early priority of the Coalition Government, and indeed the supply of advanced apprenticeships to the economy. Returning to a grant funding system is essential. Mandatory employer cash contributions of 30% of the price could significantly put at risk employer demand.

And so, we are left with 24+ intermediate apprenticeships (Level 2). Nearly one in four apprentices are aged 25+ and on Level 2 programmes. Between the academic years 2010/11 and 2012/13 the number has risen by 77,000 to 200,500.

Continued growth in the 24+ Level 2 apprenticeship market suggests that if mandatory employer cash contributions might be introduced anywhere it is here. But many 24+ Level 2 apprenticeships are of less than 12 months’ duration and the apprenticeship Implementation Plan announces the move to a minimum of 12 months for all apprenticeships irrespective of level and age.***It is difficult to imagine the 24+ Level 2 apprenticeship market coping with both changes at the same time.

Overall, perhaps the Coalition Government should quietly forget the proposition of mandatory employer cash contributions and get on with working through the implications of routing post-16 apprenticeship funding through the PAYE system in combination with the Implementation Plan reforms.

*A Consultation on Funding Reform for Apprenticeships in England, BIS/DfE, July 2013

**Adult Apprenticeship Funding: Heading the wrong way? Edge Foundation, September 2013

***Real Apprenticeships: Creating a revolution in English skills, The Sutton Trust, October 2013

****The Future of Apprenticeships in England: Implementation Plan, HM Government, October 2013

Mark Corney is policy adviser to the Campaign for Learning.

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