Small businesses are key to apprenticeship success

24th June 2016 at 00:00

The government’s latest apprenticeship advertising campaign is great, with a truly inspiring set of young people chosen to promote the benefits gained from being part of the programme. I have one concern though. The “Get In Go Far” apprentices come from the likes of IBM, the BBC and Boots – all big-name employers that help to add respectability to the apprenticeship brand. Yes, you may find well find a Boots in Bridlington or St Austell, but for the vast majority of young people across the country, a local apprenticeship opportunity is only going to be available at a small- or medium-sized enterprise (SME), which hardly anyone will have heard of outside of the area.

We need to keep SMEs (non-levy payers) engaged if the reforms are to be a success. Of course, the prime minister’s target of 3 million starts may be achieved just through levy payers and the public sector organisations which now have statutory apprenticeship targets. But Mr Cameron also made it a key pledge that every young person should have the choice of starting an apprenticeship or going to university. The second choice won’t be available for many if the reforms lock SMEs out of the programme.

This is why the Association of Employment and Learning Providers is lobbying to secure a funding system that will keep the non-levy payers engaged. Ministers are standing firm that all employers have to make cash contributions towards taking on an apprentice. But we could be about to witness a serious market failure in respect of the smaller employers.

To stop that from happening, the government’s contribution to non-levy payers – the so-called co-investment – has to be set at a rate to offer substantial compensation to keep these employers in the game with incentives in the transition years of the programme to set off any employer cash commitment for level 2 and level 3 apprenticeships.

We fully recognise that this poses challenges for the programme’s finite budget. By 2020, the proceeds from the levy are expected to be £2.5 billion for England – £1 billion more than at present, which is excellent.

The belief is that ministers would like to fund all apprenticeships from the levy, but this will depend on how much funding the levy payers claim back. If they claim back a very large proportion, little money will be left for non-levy payers. Skills minister Nick Boles has said that government investment will still be necessary to make up the shortfall, but how much?

The concern is that demand for apprenticeships from SMEs will have to be capped or even reduced. The government can do this either by using the training provider contract management system, or by making the required cash contribution from the non-levy payers so high that it limits the number wanting to offer apprenticeships. The first option might not be as unattractive as the second, but it could preserve the frustration that independent training providers often experience when asking for extra funding to satisfy clearly evidenced employer demand.

So, without knowing what the take-up from levy payers will be, we imagine officials juggling spreadsheets trying to find a formula that will keep the Treasury happy. But this still leaves the challenge of meeting the expectations of young people whose aspirations may have been raised by those “Get In Go Far” ads. They need SMEs – the nation’s engine room for innovation and national productivity – ready to offer them an apprenticeship opportunity. If the government is serious about the productivity agenda, surely it should commit support to the apprenticeship programme for these non-levy payers.

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

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