New apprenticeships funding system 'will widen training and jobs gap'

A regional analysis of the impact of the Government’s new apprenticeship levy by the IPPR shows that it will boost training most in London and the South East, areas that already have higher levels of employment and better-qualified workers, at the expense of the North East and Yorkshire and Humber, which have low levels of qualifications and greater unemployment.

The new system of funding for apprenticeships comprises an apprenticeship levy for large employers and a system of up front mandatory cash contributions for smaller ones.

The levy, which comes in to effect on 1 April, will apply to employers with a payroll of over £3m.

The IPPR says that while no figures have been produced by the Department for Education on the regional impact, it is likely to raise more from the levy from employers based in London and the South East than other regions because of the uneven distribution of large employers.

The Government’s aim is for three million apprenticeships to be funded by the apprenticeship levy by 2020, but the IPPR says that unless the policy is changed to ensure a fairer distribution of funding between north and south, it will make existing regional disparities worse.

According to the IPPR’s annual business survey, London and the South East have 38 per cent of the UK’s large businesses (more than 100 staff),  which will be targeted by the levy – more than in Wales, North East, Yorkshire and the Humber and the South West combined.

Pay is also higher on average in London and the South East, which, as the levy is based on payroll rather than number of employees, will accentuate this disparity, the IPPR says.

London and the South East have among the highest qualified populations in the UK – 49.8 per cent of workers in London and 39.8 per cent in the South East are qualified to Level 4 or above. This compares to 30.7 per cent in the North East and 30.6 per cent in Yorkshire and Humber.

The proportion of young people in each region who are NEET (not in education, employment or training) is far higher in the North East (18.6 per cent), and Yorkshire and Humber (17.5 per cent), compared to London (13.4 per cent), and the South East (10.7 per cent).

The UK's youth unemployment ‘hotspots’ are all outside of London and the South East - Bradford, Middlesbrough, Swansea and Wolverhampton have youth unemployment rates higher than 25 per cent.

The North East has the highest youth unemployment rate among UK regions (18.3 per cent) compared to the lowest rate of 11.2 per cent in the East of England.

The IPPR has devised its own solution  - a new Skills Levy to increase employer investment in the areas that need it the most.

It claims this would raise more than £5 billion in 2017/18 - doubling the £2.6 bn raised by the apprenticship levy.

It proposes applying a skills levy for all employers with more than 50 staff at 0.5 per cent of payroll; setting a levy of 1 per cent of payroll for the largest employers (250 or more employees), twice the current level; and make it fairer, with a £1.1 billion Regional Skills Fund to boost investment in left behind areas, by top-slicing investment from the largest employers.

Clare McNeil, IPPR associate director for Work and Families, said, ‘The Government has said that it wants to break down the barriers to social mobility faced by young people in this country. It is clear to see that young people outside of London and the South East, face a much harder time finding a first job or training opportunity - particularly those not going on to university.

‘It is extraordinary then that the Government has not analysed the regional impact of its new apprenticeships policy, which is likely to boost investment in training precisely in those areas where employment is higher, such as in London and the South East, leaving unemployment hotspots in the North East or Yorkshire with proportionately less funding. 

‘These areas are also those most likely to be hardest hit by the uncertainty facing the UK over Brexit, and the increasing impact of technological change on jobs. The education secretary must think again on this policy if the Government is not to put even greater numbers of young people at a disadvantage simply because of where they live.’

But apprenticeships and skills minister Robert Halfon disputed the IPPR’s claims.

‘I have been clear that everyone should benefit from our reforms to apprenticeships and there is no evidence of a north south divide.,’ he said. ‘We currently have the highest number of apprentices on record, with 900,000 last year and with numbers consistently high across the whole country.

‘We truly are investing in the whole of England by doubling funding for apprenticeships to £2.5 billion by 2019-20 – twice what was spent in 2010-11 – and giving employers more power than ever before to design training that meets their needs. Our reforms to apprenticeships will boost our country’s economic productivity, give everyone the chance to climb the ladder of opportunity and increase our home grown skills base.’

The Department for Education said that every Local Enterprise Partnership has been given £5,000 to work on employer readiness for the levy and to support campaigns to raise the profile of apprenticeships.

Those with fewer than 50 employees who train 16-18 year olds or 19-24 year olds formerly in care or with an Education, Health and Care Plan, will not have to co-invest – Government will pay 100 per cent of training costs. These employers will also be eligible for the £1,000 payment associated with these apprentices.

The IPPR's analysis follows the publication last month of a report by the Institute for Fiscal Studie that warned that the apprenticeship levy could result in lower wages for employees and fewer jobs.

• For the latest on apprenticeships in the early years sector see Nursery World's Nursery Management Spring 2017 supplement apprenticeship roundup.