'Subcontractors could be seriously affected by the apprenticeship levy'

The chief executive of the AELP welcomes the thrust of the latest announcements on the apprenticeship levy - but has major reservations about the implications for subcontracting

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Never has the term "the devil is in the detail" been so appropriate, I thought, as I thumbed through the various apprenticeship levy documents that the government has published today. Others might point to the fact that Theresa May’s new government has resisted the powerful lobbying of the employer bodies and decided to press ahead with the levy’s start next April as the most important news. And at the Association of Employment and Learning Providers (AELP), we welcome the decision not to entertain the notion of any further delay. After all, we’ve been debating this for over four years now since Doug Richard was first asked to conduct his review.

The AELP deserves much credit for the ground gained over the issue of financial contributions being required from small- and medium-sized enterprises (SMEs) towards the cost of training an apprentice. We were almost a lone voice on this at the outset and our relentless campaigning has secured today’s outcome whereby businesses with less than 50 staff will have the cost of a 16- to 18-year-old apprentice’s training met by the state. This decision will help to support the government’s social mobility agenda, especially in the rural areas and towns which don’t have levy payers as employers. Although consistency of government policy with the learning of all 16- to 18-year-olds would suggest that 100 per cent government funding should apply to all apprentices in this age group irrespective of the employer’s size. When talking about social mobility, is it fair that a young person doing four A levels should benefit from enhanced funding and free education, when an apprenticeship comes with a fee attached?  It would have been even better too if they had applied this to over-19-year-olds who are unemployed, but we will flag these issues up as part of Frank Field’s select committee inquiry on young people this autumn.

Again as a result of the AELP's lobbying, the proposed subsidy rate of 90 per cent for larger SMEs means that mass disengagement on their part may now be avoided, but the insistence of co-investment from these employers could in our view still have a very negative impact. Therefore the AELP has asked ministers to keep the matter under review. The requirement should be quickly phased out if our fears about the impact are realised.

So while there is good news in today’s announcements, I won’t be purchasing some champagne while I'm on my holiday here in France tonight because the details are some of the concern. Providers who have been punching their sector frameworks into the new funding rate calculator are expressing real concern that we will now have a single funding rate for all ages, and that some rates are coming out lower than the current ones, including those for some standards. Some compromise is required and we especially need to look at the proposed incentives for 16-18 apprentices because the move to a single rate will act as a disadvantage. Another area requiring clarification is whether co-investment by SMEs means cash upfront, or whether employers can net it off against the various incentives – we believe it is the latter, but again this is more detail to confirm.

'The biggest bombshell'

Many providers will be spending their weekend calculating what the financial implications are for them and how many apprentices in each age group they may be training after April. Some of them might be surprised to learn that there may not be a place in the market for them at all, and I’m not referring to their Ofsted grading. Arguably the biggest bombshell today comes in the proposals for the new register of apprenticeship training providers. It is clear that a change of minister has meant no let-up in the government’s desire to considerably reduce the amount of subcontracting in the FE and skills sector.    

Firstly, it is being proposed that any provider wanting to deliver apprenticeships must be on the register; the £100,000 contract value threshold has gone. But the really big development is that a provider must be a direct deliverer of training itself. The managing agent model would appear to on the way out and a provider cannot subcontract out all of its delivery. There will be plenty of colleges and a few other providers who will be seriously affected unless the consultation outcome is different.

The proposals suggest that the provider must be responsible for at least half of every apprentice’s training itself, which we are likely to oppose strongly – it just doesn’t make sense when looked at from practical requirements and delivery. At the same time, the government acknowledges that one provider won’t necessarily be able to do everything for one employer. Perhaps a compromise is a percentage of the provider’s overall delivery must be done by itself. We will certainly be sounding out our members on this before we respond.

Other proposals for the register give rise to concern such as inconsistent application of the financial health criteria to different types of provider. We have seen welcome evidence today that the government has listened to many of the points which the AELP has made, yet we still have some way to go to ensure that the levy gets off to a good start next April. But that is what consultation is for and we will be very clear with our views and rationale.

Mark Dawe is chief executive of the Association of Employment and Learning Providers 

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