Labour plans apprenticeship funding shake-up

Labour is promising to give businesses more flexibility over how they spend government money currently earmarked for apprenticeships if they win the July election.

Shadow education secretary Bridget Phillipson says the party will allow businesses to use up to 50% of the cash provided by the government to fund apprenticeships or training for existing staff.

Labour previously outlined the plan to “tackle skills shortages” but the announcement gives more detail on how it hopes it would work in practice.

It comes after the Conservatives said they would scrap some university courses to fund more apprenticeships.

The Conservative Party said Labour’s proposal was “ill thought through”.

Apprenticeships are partly funded by money raised through taxes, as well as through an “apprenticeship levy” paid by bigger businesses with an annual wage bill of more than £3m.

Those firms, as well as smaller businesses, can then use that money to train apprentices.

Labour’s plans for what it has termed a “growth and skills levy” involve giving businesses the choice to spend up to half of the money they receive to train existing staff in “high-level technical skills” such as retrofitting or engineering.

Under the plans, employers could also offer “pre-apprenticeship training” courses to prepare people for full apprenticeships or jobs.

A minimum of 50% of the money from the levy would still be reserved for apprenticeships.

They say that any courses will need to be from an approved list of essential skills, which could include areas like digital and green skills, social care or childcare and that businesses would not be able to use it on internal training such as HR or health and safety.

Labour said that if businesses used just 3% of the additional flexibility, it could generate 150,000 traineeships for young people.

Bridget Phillipson said the plans would create a “golden age of lifelong learning”.

She added: “Labour will put businesses in the driving seat of creating the opportunities people need to get on in work.”

A spokesperson for the party said they had no plans to increase the levy.

Education Secretary Gillian Keegan said Labour’s plans would halve the number of apprenticeships and disadvantage small and medium-sized businesses.

“Since 2010, we have built a world-class apprenticeship system from the ground up… creating pathways to 70% of occupations through apprenticeships.”

The Liberal Democrats said its own plans involved giving every adult a “pot of money” over their working life to spend on education and retraining.

The Institute for Fiscal Studies (IFS) has warned that in order for apprenticeship plans laid out by any party to be a success, more businesses need to be convinced to take up the funding available.

Imran Tahir, a Research Economist at the IFS, said: “Both main parties have now set out aspirations to increase the number of employees – and especially young employees – in training or apprenticeships.

“Ultimately, employers will decide how to use the funding, and presently many are choosing not to take up the funding that is available.

“If these new programmes are to benefit the youngest employees, either party would have to convince employers shift their current patterns, which see nearly half of apprenticeships funded by the levy being taken by employees aged 25 and up.”

David Hughes, chief executive of the Association of Colleges, said the plans were a “good first step” in transforming the current apprenticeships levy which, he says, “has not delivered for young people”.

He added: “I would like to see more commitment to grow training and skills funding in colleges for those adults who need to learn in a rapidly changing world.

“Without an urgent and significant growth in opportunities in colleges, millions of adults risk being left behind as technology changes.”

According to the IFS, average employer spending on training has fallen by 27% in real terms since 2011, and public spending on adult education and skills is down 31% over the same period.

The number of adults on further education courses has declined by around 50% since 2010, from roughly 3.5 million in 2010 to 1.8 million in 2023.

The number of people completing apprenticeships has also fallen in recent years.

In England, 54.6% of apprentices completed and passed a final assessment in 2022-23, which is far below the government’s 67% target by the end of 2024-25.

A report by the Department for Education in March 2022 suggested that four in 10 people who did not complete their apprenticeships cited personal reasons such as mental health issues, caring responsibilities or career changes.

However, about four in 10 also said that the apprenticeship was badly run, they were not given enough time for training or that it did not meet their expectations.

There are no UK-wide figures for the number of apprentices, but there were 752,200 in England in 2023, which is higher than during disruption from the Covid pandemic, but lower than in the mid-2010s.

Additional reporting by Branwen Jeffreys and Louise Martin