£60m plan | Major reforms announced to boost apprenticeships by 20,000 - do the plans go far enough?

Major reforms announced to boost apprenticeships by 20,000 - do the plans go far enough?

The Prime Minister has set out a major package of reforms to support businesses to deliver as many as 20,000 new apprenticeships.

Rishi Sunak announced on Monday that the Government will fully fund apprenticeships in small businesses from April 1 2024 by paying the full cost of training for anyone up to the age of 21 - reducing costs and burdens for businesses and delivering more opportunities for young people to kick start their careers.

This will remove the need for small employers to meet some of the cost of training and saves time and costs for providers like further education colleges who currently need to source funding separately from the government and businesses.

The move is underpinned by an additional £60 million of new government funding for next year, guaranteeing that where there is demand for apprenticeships from businesses, the government will ensure there is enough funding to deliver them.

From the start of April, the government will also increase the amount of funding that employers who are paying the apprenticeship levy can pass onto other businesses. Apprenticeships can currently be funded by a levy paying employer transferring up to 25% of their unused levy to a different employer.

Under the new measures, large employers who pay the apprenticeship levy will be able to transfer up to 50% of their funds to support other businesses, including smaller firms, to take on apprentices. This will help SMEs hire more apprentices by reducing costs and enabling more employers to get the skilled workers they need while unlocking more opportunities for young people in a huge range of sectors, industries, and professions.

Hundreds of large levy-paying employers have already taken advantage of the opportunity to transfer their unused levy funds to other businesses. As of December 2023, 530 employers including ASDA, HomeServe and BT Group have pledged to transfer over £35.39 million to support apprenticeships in businesses of all sizes since September 2021.

Taken together, these measures are expected to enable up to 20,000 more apprenticeships, primarily for young people, and is part of our plan to build a stronger economy and deliver a brighter future where hard work is rewarded and young people get the skills they need to succeed in life.

Rishi Sunak said: “Growing up in my mum’s pharmacy, I know first-hand how important small businesses are. Not just for the economy, but as a driver for innovation and aspiration, and as the key to building a society where hard work is always recognised and rewarded.

“Whether it’s breaking down barriers and red tape for small businesses, helping businesses hire more young people into apprenticeships and skilled jobs or empowering women to start up their own businesses – this government is sticking to the plan and leaving no stone unturned to make the UK the best place to do business.

“Taken together, these measures will unlock a tidal wave of opportunity and make a real difference to businesses and entrepreneurs across the country.”

Today’s changes not enough to fix failing apprenticeship levy, says the CIPD

The Prime Minister's enthusiastic speech about unlocking a “tidal wave” of opportunities was at odds with the thoughts of Ben Willmott, head of public policy at the CIPD. While welcoming the news of extra funding for apprentices for small businesses, Willmott expressed concerns that the plans don’t go far enough.

“It’s welcome news that the Government plans to fully fund apprenticeship training in small firms for people aged up to the age of 21. This will go some way towards encouraging more smaller businesses to take on apprentices and ensuring that it is younger people that benefit from these opportunities,” he said.

“However, the additional 20,000 apprenticeships it’s hoped these changes will help create isn’t nearly sufficient to address the collapse in the use of apprenticeships we’ve seen among SMEs and young people since 2017.

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“This gap in apprenticeship provision will largely remain. Likewise, increasing the proportion of levy funding larger employers can transfer to smaller firms to help them take on apprentices is also unlikely to have a big impact as to-date few levy paying firms have used the levy transfer mechanism at all.”

Willmott added: “Tackling these issues and the ongoing fall in investment in workplace training requires more fundamental reform of the Apprenticeship Levy to make it more flexible and responsive to employer and learner needs.

“A more flexible skills levy would mean employers could use levy funding to develop existing staff through other forms of accredited training and skills development which are cheaper and usually much more suitable for employees aged 25 and over. This would at the same time leave more money to invest in apprenticeships for young people who most need and benefit from them.”

Changes could ease recruitment challenges

Kate Palmer, Employment Services Director at Peninsula, said: “This announcement is likely to be a boost for businesses who offer apprenticeships or those that want to take on more apprentices within their organisation.

“It may also go some way to offset the impact that the upcoming increases to the national minimum wage may bring for businesses.

“Apprenticeship schemes can allow employers to train staff ‘their way’ right from the start. This can help businesses particularly if they are facing recruitment challenges in their industry.

“Apprenticeships blend training and practical work to equip the apprentice with the skills to reach a certain level or qualification.

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“These reforms are, therefore, likely to be a positive for small businesses.

“Every December Peninsula sends out a global survey to 79,000 clients across the globe to find out what their largest concerns are.

“Apprenticeships are lucrative to many SMEs who can afford to offer them as they aid in recruitment and retention although with these training schemes not accessible for all businesses this news from the government will be welcomed.

“In December 2023 Peninsula saw a 36% increase across the globe in the demand for apprenticeships and a 32% increase across the UK.”

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