A recent report by the CIPD, in collaboration with Youth Futures Foundation, reveals significant unintended consequences of the Apprenticeship Levy on apprenticeship provision and skills development since its introduction.

The report, titled “Balancing Act: Youth Apprenticeships and the Case for a Flexible Skills Levy,” is based on a survey of over 2,000 organisations. It indicates that the current levy system is undermining the intended purpose of supporting young people entering the workforce.

The survey shows that a majority of employers believe apprenticeships should primarily support young people entering the workforce. However, many employers are repurposing the levy to fund training for existing staff instead. Dan Archer, UK CEO of Visiting Angels, expressed concern about this trend, emphasising the need to recognise the diverse talents within the homecare workforce.

Key Findings and Proposed Reforms

The report calls for an Apprenticeship Guarantee for young people and suggests transforming the levy into a flexible skills levy. This would allocate at least 50% of funds to apprenticeships for young people, with the remaining funds directed towards other accredited training forms. The analysis highlights a significant decline in apprenticeship starts since the levy’s introduction in 2017, and it notes that the policy has not reversed the long-term decline in employer investment in skills.

According to the employer survey:

  • 60% of employers believe the primary purpose of apprenticeships should be to support young people entering the workplace.
  • 89% support the recommendation of an Apprenticeship Guarantee for young people up to the age of 24, ensuring a Level 2 or Level 3 apprenticeship is available for every qualified candidate.

However, the report also identifies several negative consequences of the Apprenticeship Levy:

  • 54% of organisations paying the levy have converted existing training into apprenticeship programmes to reclaim their allowance.
  • There has been a 41% decrease in apprenticeship starts for those under 19 and a 36% decline for those aged 19-24 between 2015/16 and 2022/23.
  • Apprenticeship achievement rates are low, with 54.6% completion and £620m spent on training for apprenticeships that were not completed in 2021/22.

The data indicates a significant drop in apprenticeship participation among individuals from the most deprived areas of England, falling from 250,000 to 150,000 between 2015/16 and 2022/23. This highlights the need for policy reforms to address these issues and better support young people.

Calls for Policy Changes

The report makes several recommendations to policymakers:

  • Introduce an Apprenticeship Guarantee for young people up to the age of 24.
  • Reform the Apprenticeship Levy into a flexible skills levy, with at least 50% of funding reserved for youth apprenticeships.
  • Reintroduce a pre-apprenticeship programme to help individuals gain the necessary skills to succeed in apprenticeships.
  • Strengthen sector bodies and local partnerships to address skills challenges at an industry level.

Peter Cheese, Chief Executive of the CIPD, underscored the importance of apprenticeships for young people and the need for a flexible skills levy. “The evidence in this report shows clearly that young people most need and benefit from apprenticeships, and that the erosion of this pathway has had a negative impact on social mobility for the most disadvantaged. The introduction of an Apprenticeship Guarantee would help reclaim apprenticeships primarily for young people and reverse the decline in opportunities for them.”

Supporting Workforce Development

Cheese also highlighted the potential benefits of a more flexible skills levy. “A more flexible skills levy would enable organisations to invest much more effectively in wider workforce development. For example, to adapt to and optimise the use of AI and other technology, support green transition, and tackle skills gaps and shortages more broadly.”

Barry Fletcher, Chief Executive of Youth Futures Foundation, echoed these sentiments, emphasising the importance of apprenticeships in supporting young people’s employment prospects. “International evidence shows apprenticeships are an important and impactful way to support young people prepare for and access jobs. If we want to reverse this trend, we need to ensure that increasing the participation of young people in apprenticeships is at the centre of future policy development.”