The chancellor has drawn up plans to restrict the use of levy funding for degree-level apprenticeships, prompting warnings about the viability of schemes for public sector workers like teachers.
Multiple sources said Jeremy Hunt was concerned about the affordability of the levy. It comes amid a huge rise in the number of costly level 6 and 7 apprenticeships handed to older employees while spending on lower levels and young people falls.
Officials have now floated the idea of limiting the use of levy cash on higher apprenticeships, but the Department for Education is understood to be resisting ahead of next week’s autumn statement.
Proposals include removing some apprenticeships – like the popular but controversial level 7 senior leader standard – from the scope of levy funding, introducing age restrictions, and demanding larger employer contributions.
Networks of training providers and universities contacted the Treasury this week to plead with the chancellor to not cut access to the courses, claiming the move is “political posturing” to appeal to certain parts of the electorate.
The Chartered Management Institute has also warned the majority of level 6 and 7 management apprentices are in public services and “critical for the productivity agenda and fiscal sustainability”.
Teaching apprenticeship at risk
Restricting funding for degree-level apprenticeships would jeopardise plans for an undergraduate teaching apprenticeship, which are being drawn up under Gillian Keegan’s leadership.
Ministers have come under increasing pressure to create a route for non-graduates since the creation of the levy, which must be paid by all employers with a pay bill of over £3 million, including schools, trusts and councils.
Given so much of schools’ spending is on teachers, the lack of an undergraduate route leaves limited options for leaders to spend their levy.
Since the levy was introduced, spending on level 6 and 7 apprenticeships had risen from £44 million in 2017-18 to £506 million in 2021-22. It now accounts for over a fifth of England’s annual apprenticeship budget.
Spending on level 2 apprenticeships dropped by a third over that period, from £622 million to £421 million.
The second most popular degree-level apprenticeship is the level 7 senior leader standard, which has had 25,200 starts in total since 2017-18.
In 2020, it emerged that school leaders were taking advantage of the so-called MBA apprenticeship.
The National College of Education, which offers programmes for those working in schools, had the highest number of people starting the course out of all training providers in the first quarter of 2019-20.
Increase apprenticeship budget instead, say experts
However, starts for this particular apprenticeship have started to drop nationally since the government removed its controversial MBA component from the scope of levy funding. Starts fell almost 40 per cent from 8,050 in 2020-21 to 4,880 in 2021-22.
Business schools and universities can continue to offer the MBA as an optional extra, but the cost of it must be funded by their employer.
Experts have called on the government to increase the apprenticeships budget in line with the level of levy receipts the tax brings in.
The government was accused of short-changing employers in September after analysis by sister title FE Week found the Treasury failed to distribute around £415 million paid into the levy by employers in the 2022-23 financial year.
Ciaran Roche, public affairs manager at the Association of Employment and Learning Providers, said he understood the government wanted more levy funds spent on level 2 to 5 courses.
But the “best way to do this would be to increase the apprenticeship programme budget to match the increased apprenticeship levy take”.
Skills minister Robert Halfon batted away concerns about the affordability of the budget earlier this year in an interview with FE Week, insisting that there were no talks about imposing controls on levy spending.
Levy spending on those aged 25 and over more than doubled between 2017-18 and 2021-22, growing from £460 million to £934 million.
At the same time spending on apprenticeships for young people aged 16 to 19 fell by £60 million, or a tenth, from £686 million to £626 million.
A final decision on whether to restrict levy funding for degree-level apprenticeships could come as soon as next week, it is understood.
The DfE and Treasury declined to comment.
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