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The introduction of the Apprenticeship Levy in April 2017 was designed to increase the number of people doing an apprenticeship. But despite the Education Secretary’s defence of the Levy yesterday, the number of people doing apprenticeships has fallen, in particular in the places where an increase in skilled workers is needed most.
In the first academic year after the introduction of the Levy, there were 134,000 fewer apprenticeship starts, a 26 per cent drop compared to the last full academic year before the introduction of the Levy.
Source: Department for Education, Apprenticeship starts by delivery in each Local Authority District by Provider and Level 2017/18 – Starts
The fall has been sharpest in cities where apprenticeships have been traditionally more popular (see the chart below). In Sunderland, the city with the most apprenticeship starts in 2015/16, apprenticeship numbers have dropped by 41 per cent since the introduction of the Apprenticeship Levy. All the cities with the most apprenticeship starts in 2015/16, such as Mansfield, Middlesbrough and Barnsley, saw a significant drop in the number of people starting an apprenticeship – 40 per cent or more. This is far higher than the national average of 26 per cent.
Meanwhile, just seven cities have bucked this trend and saw an increase in apprenticeship starts between 2015/16 and 2017/18. These include cities such as Oxford, Cambridge and Exeter.
Source: Department for Education, Apprenticeship starts by delivery in each Local Authority District by Provider and Level 2015/16 and 2017/18 – Starts
There are two explanations for the patterns in the chart above, both of them related to the type of apprenticeships that people are starting. Firstly, take up of intermediate level (good GCSE-equivalent) apprenticeships fell by more than a third nationally in the last year. This has particularly hit cities in the North and Midlands where intermediate apprenticeships are more popular.
Secondly, the introduction of higher level and degree apprenticeships has meant that businesses in places that were traditionally less engaged with apprenticeships are now growing their stock of apprentices.
These changes may be a temporary consequence of the introduction of a new system, with numbers returning back to normal once employers get their head around the new rules.
However, news coverage suggests that since the introduction of the Levy, employers have been trying to ‘game’ the system by enrolling existing senior staff in higher apprenticeships getting a better and easier return on the money they had paid in the Levy.
This, compounded with the geographical patterns of apprenticeships growth and decline, is alarming. When the Government introduced degree apprenticeships in 2015, it did so with the aim of offering an alternative route to higher education and promoting social mobility. Three years later, we now see that these types of apprenticeships are more popular in cities with stronger economies, where university take-up is already higher. Meanwhile lower level apprenticeships, which are crucial steps to get to higher level apprenticeships, are actually declining. This suggests that apprenticeships are now contributing to the widening of the gap between different parts of the country, rather than reducing it.
So what can cities do about this?
First, they should be cautious about calling for the devolution of the Levy. Since the introduction of the Apprenticeship Levy, local authorities up and down the country have been frequently calling for it to be devolved. Yet, recent research by the Centre for Vocational Education in partnership with our sister organisation the What Works Centre for Local Economic Growth , has found that the impact of devolving the Apprenticeships Grant for Employers through City Deals was limited, and that this could partly be due to the fact that devolution of the funding was negotiated on the wrong margins, such as by asking for more flexibilities for large employers when actually this scheme was somewhat more successful at improving take-up of apprenticeships in small and medium-size businesses.
Therefore, if Sadiq Khan, Steve Rotheram and the other mayors now want devolution of the Apprenticeship Levy, the first step they should undertake is gathering intelligence on how apprenticeships work in their local areas to make their intervention as targeted as possible, such as who employs them and why.
Second, cities should use their soft powers to make improvements in the existing system. While cities cannot wait for a Government preoccupied with Brexit to fix the apprenticeship system, they also should not just lobby the Government for more devolution.
They should instead make sure they are already using their soft powers to make apprenticeships work. That means, for example, working towards raising awareness of apprenticeships in their local area – a tool the What Works Centre has found effective in raising apprenticeships take-up. Cities should also play a coordinating role at the local level by facilitating interactions between employers and training providers and improving efficiency in the system by mapping existing provision and reducing duplication.
As with every new intervention, it takes time for those involved to adapt to changes. The Apprenticeships Levy will only turn two in April this year, so we should not be too quick in judging its impact. However, we must also not ignore the early signs that suggest the Levy is actually doing the opposite of what it wanted to achieve – increase skills and improve productivity up and down the country.
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