It’s time to broaden out the Apprenticeship Levy – by Professor Dave Phoenix

This blog has been kindly contributed by Professor Dave Phoenix, Chair of MillionPlus and Vice-Chancellor of London South Bank University.

In April, the Open University released a report showing that, a year after its introduction, 92 per cent of apprenticeship Levy funds went unspent, to the tune of almost £1.3 billion. Since then, concerns have continued to grow that organisations are simply writing the Levy off as a tax and Freedom of Information requests submitted for his piece have shown the percentage of unspent Levy funds is yet to decline.

The Augar Review is attempting to address the shortfalls of the funding system, including the collapse of part-time and mature students, while somehow remaining consistent with the Government’s fiscal policies to reduce the deficit. They may well have identified the apprenticeship Levy as a key piece of the puzzle.

The UK suffers from a pronounced skills gap. Part of this, the IPPR’s latest paper has argued, is due to the culture of many businesses prioritising short-term profits over investment in both capital and labour. As a concept, therefore, the apprenticeship Levy is undoubtedly a positive way to encourage investment in worker training.

However, the development of the Levy took place in a vacuum, which ignored the fact that many employers do not operate in this fashion. Many, prior to the Levy, invested in their employees by sponsoring them directly to undertake higher education at degree and sub-degree levels.

In April 2016, I authored a report for the Higher Education Policy Institute entitled Making a Success of Employer Sponsored Education, which argued for funding parity between apprenticeships and employer-sponsored degrees, with the latter also receiving funding from the Levy. The time is right to re-examine this proposal.

Employer Sponsored Degrees are the original ‘learn while you earn’ degrees, in which employees undertake degree-level or sub-degree level study on a part-time basis (usually one day a week). There is an argument to be made that they represent a ‘gold standard’ for degrees – a proven solution for funding higher education, which benefits the student, the employer and the taxpayer.

It is clear the apprenticeship Levy is not working for all employers. The highly-prescriptive, centrally-managed standards reduce local flexibility and cannot be adapted at speed to meet the needs of different businesses. To compound these challenges high levels of bureaucracy have bogged down implementation and added costs.

Employer Sponsored Degrees provide an equivalent, but more straightforward means for employers to raise the skills of their staff. The central involvement of universities provides easy access to the UK higher education quality frameworks and structures – providing portable internationally-renowned qualifications and clear progression pathways. Many of these qualifications are also accredited by the relevant professional bodies. The degrees enable employers to incorporate work-based training that relates directly to their business – providing greater flexibility than apprenticeship standards – and allowing employees to contribute swiftly to their employer’s productivity. Just as importantly, universities have the potential to enable flexible, local validated solutions to be generated at speed.

Furthermore, this approach supports study at Levels 4 and 5 where the UK has an acknowledged shortfall. Through a nested approach, using HNCs, HNDs and degree-level study it provides a pathway of steps and jumping-off points offering flexibility for both employers and employees.

Extending the use of the Levy to Employer Sponsored Degrees offers a balanced, sustainable and flexible model for supporting employer-directed education. If employers do not choose to fund the full degree (via the Levy), the students could part-fund it themselves, ideally with the tax benefits of a salary sacrifice scheme.

This offers a potential model for spreading the cost between all the beneficiaries of higher education in which the employer is contributing towards enhanced productivity and staff retention, the student is contributing towards their future earnings and the Treasury is contributing to the public good.

Higher and Degree Apprenticeships are making a valuable addition to professional and technical education. However, Levy-funded Employer Sponsored Degrees, would provide a more balanced, flexible, portable and recognised model that could benefit employers, learners and the Treasury alike.