It would be an ‘enormous error’ to ditch the apprenticeship levy, says the Chartered Management Institute, which claims that new modelling shows apprenticeships are tackling Britain’s productivity gap.
The CMI claimed that the apprenticeship programme is on track to boost growth and productivity, with every year’s cohort of apprentices contributing almost £700m a year to the economy within a decade.
It said that analysis of the current English model of apprenticeships, introduced in 2016, found that apprentices qualified in 2019 are projected to add £7bn to the economy by the end of 2029, based on an initial training investment of £2bn – a 300% return on investment.
The CMI analysis also found that each business using higher level management apprenticeships saw average productivity gains of £7,000 per apprentice over the course of the apprenticeship.
CMI data found apprentices in the private sector received on average a 17% pay rise of nearly £7,000 through their management apprenticeship.
Anthony Painter, director of policy and external affairs at CMI, said: “The flagship apprenticeship programme is doing what it was meant to do – helping employers to be more productive and effective. Highly skilled apprentices are increasing productivity and building a culture of continuous learning that the economy and public services sorely need. Some ask for the apprenticeship levy to be diluted or even ditched altogether. If we are serious about growth and productivity this would be an enormous error.”
Skills and apprenticeships
Businesses with revenues of over £3m each year pay the apprenticeship levy, which funds the training. This is paid at a rate of 0.5% of an employer’s annual pay bill. The scheme is designed to tackle chronic under investment in professional and technical skills and was created to offer a better match between apprenticeships and the skills that employers need while supporting people of all ages, backgrounds and skill levels to gain higher level training based on clear standards.
The analysis also found evidence of the benefits to social mobility of the apprenticeship programme with 71% of management apprentices coming from families where neither parent went to university and 39% of CMI management apprentices coming from a low socio-economic background (compared with 36% in the UK labour force as a whole and 27% in higher education).
One third of apprenticeships are degree level and CMI data indicates that management degree-level apprenticeships lead to in excess of 20% productivity gains.
Almost all (97%) of CMI management apprentices said they were more committed to upskilling the people who work for them, helping to ease the UK’s long-standing underinvestment in training. UK employers currently spend half of the European average on employee training.
Painter said this new evidence of the productivity gains of the levy-funded system came amid calls from some in both business and public life for it to be watered down into a general training fund. He warned this would risk not just the drive towards a higher skilled workforce, but also would likely mean that more of the funds are spent by fewer, larger employers.
He said: “The current system of apprenticeships is giving people at every stage of their career the chance to learn while they earn and equipping employers with the skilled talent pool they need.
“There are definite improvements to be made, especially in helping smaller businesses to take full advantage of today’s apprenticeships, reaching more young people, cutting the paperwork burden and ensuring all parts of the country benefit even more. Fundamentally though, any changes made need to be about making apprenticeships work better for more people and businesses rather than radical upheaval which could jeopardise the enormous impact they are having for apprentices and their employers.”
Rather than water down the levy system, a ring-fenced “apprenticeship opportunity fund”, paid for through the levy system, needed to be created. This would help under-served groups and businesses to access and progress through apprenticeships, including SMEs, young people and those from under-represented backgrounds. “In other words, we need system improvements rather than radical overhaul,” said Painter.
On 4 November, Neil Carberry, chief executive of the Recruitment and Employment Confederation said the chancellor, Jeremy Hunt, should reform the “failed apprenticeship levy to deliver skills where they are needed”. Hunt’s autumn statement, due on 17 November, is likely to address skills and training in a bid to increase productivity and tackle recruitment problems.