The government has put forward a number of options including the proposal to use HMRC's PAYE system to fund employers' apprenticeship programmes. In the view of the Association of Employment and Learning Providers (AELP), the proposal will come with as many potential downsides as it will with benefits.
The proposals all require new systems of funding, inspection, assessment and compliance and are in no way a simplification of the existing system. In particular SMEs will find it hard to navigate their way around the new systems when they may only have one or two apprentices.
Concern over quality
AELP is particularly concerned that the proposal could have a negative impact on the quality of programmes when the whole thrust of recent government-sponsored reviews of apprenticeships has focused on driving improvements in quality.
AELP was responding to today's publication by BIS of a consultation on how apprenticeships should be funded in the future on the back of Doug Richard's recommendation that employers should be given more control over the funding.
The Association supports the objective of increasing the involvement of employers in apprenticeship delivery and to establish the most effective system of funding that meets the needs of employers and encourages all employers to recruit and train apprentices. However, AELP points out that the Richard review put forward a number of recommendations about the future of apprenticeships which went well beyond just funding and it believes that a solution on funding cannot be agreed until we have agreed a way forward on the system itself.
Nevertheless AELP has announced that before it submits its formal response to the BIS consultation, it will be conducting its own full consultation with the employers that its members work with and make that an open process so that it gets as many views as possible on this key aspect of the apprenticeship reform programme. The system changes are designed to respond to the needs of employers and AELP is determined to give all employers a chance to respond.
Initial backing for co-funding option
Of the three options for funding in the BIS consultation, AELP initially favours co-funding via registered providers. This option keeps the employer in control of the process because the employer makes the decision on who to employ, the decision on the training framework and how much they will contribute. The quality of delivery will be controlled by employers and providers overseen by the inspection regime that is already well established.
Issues with the PAYE proposal
AELP has identified a number of concerns with the proposed PAYE system including:
- Barrier to entry for small employers: The system appears to require an employer to interact with the government department to register, to check maximum fees etc., a training provider, an assessment body, HMRC and an inspection body. These multiple contacts and contracts will be a major barrier to entry for a small employer looking to take on just one or two apprentices. Currently training providers support SMEs and avoid the need for the employer to get involved in claims and contracts. Furthermore many smaller employers will not have sufficient National Insurance payments to cover the cost of training, so there will also be a need for a payments system from HMRC to employers.
- Potential threat to the quality of training and those who most need it:Once a system of tax rebates is introduced, many employers will feel that they should be taking advantage of the system. While this is a positive consequence of the tax system, controlling quality will be an issue. There will be no way of capping the investment in the system. If this system is adopted, there will be no ability to manage the investment in training and we would be concerned that 'caps' would eventually be applied to control spend rather than direct funding to those learners and employers who need most support.
- Possible tensions with the interests of young apprentices: Government support for the programme is based on balancing the needs of employers and learners. This will be particularly important for 16 -19 year olds when many have learning needs that are not directly related to the job they have been recruited for. At present, training providers play a key role in ensuring that the apprentice's learning experience is a positive and fruitful one.
Making the current system more effective
AELP are committed to continuing reform of the apprenticeship system and will consider the implications of the proposals set out in the BIS paper. However an option which builds on the significant progress made in recent years and the advantages set out in option 3 would provide an opportunity to improve the system.
Employers are currently firmly in control of the existing apprenticeship programme but its responsiveness can be considerably improved. AELP has on many occasions put forward recommendations to improve the system including those relating to procurement, in-year contract upward and downward adjustments for all providers to incentivise a better response to employer demand and flexibility of delivery. We hope these will be part of any future reform.
Warning against further complexity in the skills system
It is also important to understand that the proposals only refer to the funding of apprenticeship frameworks. Many employers are involved in other government supported schemes such as Traineeships, Study Programmes (work experience), Youth Contract and programmes for the unemployed. This involvement could be through a single or several training providers, so we should not forget the complexity of involvement that any new system will bring. Employers often say they want a simple contact point for all government supported schemes and training providers can provide that single point of contact.
AELP also takes encouragement that both the Deputy Prime Minister in announcing his review of employment and skills programmes for young people and the CBI have said that solutions which suit large employers may not be appropriate for SMEs.
AELP chief executive Stewart Segal said:
“We should be considering a total review of the future of apprenticeships, which is after all what Doug Richard advocated, rather than deal with the funding options separately. AELP supports the view that funding should be more responsive to the needs of employers.
“We have considerable doubts over whether the PAYE proposal would actually bring more employers into the apprenticeship programme. In fact, it might put smaller businesses off. The co-funding option might have merit if it properly recognises the contributions which employers make towards an apprentice's framework achievement.
“AELP will be pressing ahead with its own consultation of employers and research to try and ensure that the way forward is properly evidence-based. If we want to build on the major growth in apprenticeships over the last ten years, then it is vital that we get this reform right.”