Labour market· Skills Apprenticeship participation reaches a record high – but wider adult education and training continues to decline 26 June 2017 by Kathleen Henehan Kathleen Henehan Figures on apprenticeships and further education are unlikely to garner front-page headlines, particularly amidst the wider political turmoil and the commencement of Brexit negotiations. But the figures do matter. Skills and education can help to explain how we got here in the first place: lower levels of education, a sense of alienation and a feeling of being economically left behind were linked to the propensity to vote leave in last year’s European Union referendum. Leaving the European Union will also have significant consequences for the skills base itself: skills shortages and skill gaps, which have been rising over recent years, are likely to become even more pronounced in the face rising labour costs and reduced migration from the EU. And beyond Brexit, future innovation and occupational change mean that opportunities to upskill and reskill will be critical for most of us over our working lives. On the face of it, we should be well-placed to respond to these challenges. From April we saw the implementation of the apprenticeship levy, which is expected to raise £2.2bn from employers in England during 2017-18 alone, the passage of the Technical and Further Education Act, and the launch of the Institute for Apprenticeships and Technical Education, which will have remit over apprenticeships and technical education in England. But looking closely at recent figures, while we find reasons to be positive (such as annual growth in the number of people in an apprenticeship) there are also reasons to be cautious (uncertainty around how employers will respond to the apprenticeship funding system) and a big longstanding areas of concern (a wider decline in adult education and training). So, here are four key takeaways from the data on where we stand on skills and education. Apprenticeship participation is up (and at higher levels) According to figures published this month, apprenticeship participation in England during the 2015-16 academic year reached 899,400 – an all-time high. As shown in the chart below, figures for the first half of the 2016-17 academic year, which predate the onset of the apprenticeship levy, show participation levels higher than the same point in 2015-16. And while a majority of participants continue to take on apprenticeships at Level 2 (equivalent to GCSEs) the proportion of those taking on Level 3 (A-level) and Level 4+ (higher education) apprenticeships is on the rise. In fact, there were as many participants on higher apprenticeships (Level 4+) during the first half of the 2016-17 academic year as there were in the whole of 2015-16. The new apprenticeship standards appear to encourage higher equivalent levels of study The apprenticeship system has been undergoing reform in recent years. Previously the content and examination requirements that guided each type of apprenticeship were set out in something called an ‘apprenticeship framework.’ A 2012 review of the system found that many of these frameworks were misaligned with employer need. It proposed gradually replacing the pre-existing frameworks with employer-designed ‘apprenticeship standards,’ which have been coming online since 2014-15. While absolute levels of participation on standards are still small, participation growth has been driven by take-up at Levels 3 and 4+. Between August and January 2016-17, 76% of apprentices studying on standards did so at Level 3 and higher, as compared to just 44% of those on the older framework system. Levels are important: if apprenticeships are to be a viable progression pathway, those who already hold a Level 2 qualification, like a GCSE, should in most cases be able to take on an apprenticeship at Level 3 (‘advanced’), just as those who already hold A-level equivalent qualifications should be able to progress onto a Level 4+ (‘higher’) apprenticeship, rather than repeat education and training at an equivalent or lower level. This growth is good news, but there is uncertainty about how the apprenticeship levy will bed in. There has been some volatility in apprenticeship vacancy numbers over the past year Previously all employers taking on an apprentice would receive a subsidy equal to 100% of the training costs for a 16-18 year old and 40% to 50% for those age 19+. Under the apprenticeship levy, employers with a pay bill over £3 million will pay 0.5% of it into the levy fund and then receive a voucher equal to 100% of an apprentice’s training costs (regardless of age), along with a 10% co-investment from Government. Smaller employers, who don’t pay into the levy, will be required to pay 10% of training costs for their apprentice, with the Government subsiding the remaining 90%. They won’t have, for now, a digital voucher to tap into; instead the Government will invite apprenticeship training providers (such as college or an independent training firm) to tender for funds, and the training providers can then negotiate an agreement with small employers looking to hire an apprentice. In practice, we have little way of knowing which levy payers will actually spend their digital voucher on apprentices, let alone predict the levy’s impact on the type and level of apprenticeships offered. There have been fears that despite an injection of employer-derived funding into the system, actual apprenticeship numbers could, at least for a short time, slow or fall. Some of this fear is down to operational factors: that it will take time for levy payers to familiarise themselves with the new funding system and its processes. However, there are also concerns that the current amount of funding available to non-levy payers is down from previous years: some training providers have stated that their allocations are lower than last year, and they cannot meet demand from their pre-existing small business clients. At this very early stage, we had our first hint at how the levy is playing out, as the DfE published figures on the number of apprenticeship vacancies that employers posted during May – the first month in which the levy funded system operated. So far, it’s hard to measure impact. The number of vacancies posted during May was down only slightly (3%) from May of last year while the number of employers posting them was down 18% from May 2015-16.The more significant falls happened during April, when postings were down 21% and the number of employers posting them were down 33%. It’s difficult to tell how these trends will play out, particularly given pledges made in the 2017 Tory Party manifesto that include allowing larger employers to share their levy funds with smaller non-levy payers on their supply chain, and allowing employers to access levy funds in order to pay for their employees’ training leaves. The Queen’s Speech did not provide any new clues. So we shouldn’t be too surprised if we see slight volatility in apprenticeship figures over the coming months but it is definitely worth studying for clues. While it will be some time before we can draw any firm conclusions about the levy’s impact on apprenticeship numbers, there are other areas of adult and technical education where the warning lights are flashing. Despite growth in apprenticeships, we should be concerned about the overall drop in adult education and training Apprenticeships are just one form of skills provision: school, college and university-based education for both teens and adults remains critical, particularly as the full-time apprenticeship model in no way fits all learner, worker and employer needs. And yet, adult skills and education participation on the whole – excluding university but including 19+ apprenticeships, colleges, publicly-funded work-based training, and community learning – is on the decline. Despite a renewed focus on apprenticeships, last week’s figures told us that between 2011-12 and 2015-16 there was a 26% drop in the number of people participating in the wider suite of adult skills and education. The causes behind this are multiple and certainly exceed the limits of a blog post. In some cases, such as (publicly funded) workplace learning, they represent the phasing out of old programmes. In others they are at least partially driven by changes to the way adult education is funded. But the impact is problematic. We seem to be at a tipping point: with labour becoming more expensive, more people sitting at the wage floor and a tighter supply of workers coming from abroad reduced migration, the importance of the skills agenda continues to rise. While the major political parties had some warm words for technical education during the election debate, there appears to be, for now, a mixed picture in practice. Although it’s increasingly hard to be heard in the current political debate, skills and training need to be front and centre – that is why we’re starting a new series of notes to track how our adult and technical education system is holding up. Watch this space.  Government will contribute an additional 90% for training spend in excess of levy pot  However, where an employer has fewer than 50 employees and hires a 16-18 year old apprentice, they will receive a subsidy equal to 100% of training costs. As the IFS pointed out, levy payers comprise just 2% of all UK employers – although these employers cover about 60% of UK employees.