A revolution in apprenticeship funding yes, but only if we get the mechanism right

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Acquiring higher-level skills through higher-level apprenticeships

As manufacturers continue to focus on innovation, R&D, bringing more sophisticated products to market and improving processes, businesses are increasingly demanding higher level skills. Only by acquiring such skills can the UK's manufacturers compete with lower cost economies. Access to the right skills allows the UK to compete on a world stage.

Apprenticeships play a pivotal role in acquiring these skills, and it is for this reason that in our Route to Growth report we set the government a benchmark to increase the number of science, technology, engineering and maths (STEM) Apprenticeships at Level 3 and above by 25% by 2015.

Manufacturers are looking for higher quality apprenticeships, provision that is relevant and responsive to employers' needs and increased demand from learners. However, they have been left frustrated with poor training provision with only one in five companies say they find it easier now than two years ago to find appropriate training providers and relevant courses.

To win in the global market, industry needs more and better apprenticeships and the government has backed it up with a commitment to reform apprenticeship funding and efforts to raise quality and simplify the apprenticeship system through implementation of the Richard Review recommendations.

Pushing forward on placing the funding in the hands of the employer….

We now need a revolution in apprenticeships in how they are funded if we are to take this to the next stage.

Businesses need a functional skills market, which meet the demands of all employers and this will only be achieved by shifting the balance of power towards the employer. If we are to achieve this we must then rule out apprenticeship models that continue to route funding through the provider.

As such, our response to the recent government consultation on apprenticeship funding reform quite clearly stated that government must rule out model 3, or any adaptations of model 3, where the funding continues to be paid directly to the provider. Such a model is simply the status quo, which remains too provider driven and offers no incentive for providers to offer high quality training, and employers are unable to hold providers to account on delivery.

There is a clear consensus from manufacturers to shift the balance of power away from the provider and towards the employer, with funding being a primary lever. Government must then take forward a model where the funding is routed through the employer, to make the employer the customer. Doing so allows the employer to choose their apprentice, their provider and the provision that they need. Such an approach will create the market in training businesses have long been calling for. This market will be one where the employer can negotiate the price of the training they want, and hold providers to account on delivery.

…but making sure we get the mechanism right…

However, consultation with our members revealed that there are divided opinions as to the mechanism government should adopt to route funding through the employer. As such, as have not come out in favour of either Model1 (Direct Payment) or Model 2 (PAYE) as presented in the consultation document. Moreover, during the consultation period, a number of other proposals have been put forward for direct employer model, and we have seen some appetite to explore these models also.

...with businesses having all the necessary information

In addition, manufacturers would be in a better position to support a specific model for direct employer funding, if they were better informed about the intended reforms to the wider apprenticeship system. Many concerns amongst manufacturers have been on the infrastructure surround the apprenticeship system, and its complexity. This has to some degree taken the focus away from funding reform. The government's consultation presented models on how to route funding through the employer, but offers limited information on the practical steps that an employer would need to take to access this funding.

EEF's 5 key recommendations to government on apprenticeship funding reform

1) Rule out model 3 and instead push forward a model for direct employer funding. Such a model brings about numerous benefits:

  • An interested purchaser
  • Incentivising quality
  • Incentivising Industrial Partnerships – where employers take end to end responsibility for the skills system
  • Increasing competition in the training market
  • Encouraging more innovative approaches to training
  • Closing the gap between supply and demand of apprenticeships
  • Employers able to hold providers to account on delivery
  • Freeing up the price of training

2) Use this consultation to commit to routing funding through the employer. But do not adopt a single model to take forward at this early stage.

3) Explore offer options for employer directed funding as well as looking in more detail at PAYE and direct payments model.

4) Provider employers with detailed examples of how each would work in practice.

5) Announce wider reforms to apprenticeships before taking forward the outcomes of this consultation.

In summary….

It is clear that only by placing the funding in the hands of the employer will we see a truly responsive, relevant system, which delivers high quality apprenticeships demanded by employers and learners. Getting the mechanism right is crucial and government must listen to the views of industry to ensure the reforms deliver the intended outcomes.

Author

Head of Education & Skills Policy

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