Former Skills Minister Robert Halfon declared that his two favourite words were “degree” and “apprenticeship”. Throughout his tenure he bubbled constantly with enthusiasm at the growth of higher-level apprenticeships under the Conservative government. This was despite growing concerns that degree apprenticeships were consuming a larger and larger proportion of the available budget and effectively squeezing out younger students from disadvantaged backgrounds for whom getting a lower-level apprenticeship is a vital step on the career ladder. The recent announcement by the Prime Minister of a ban on Level 7 (post-graduate) apprenticeships shows the new government is sympathetic to these concerns.
A report just published by the Social Market Foundation (“A Level of Uncertainty: How to resolve the debate over the future of Level 7 apprenticeships”, Tom Richmond, 9th Jan 2025) has reignited the debate. It points out that one in six new apprentices are now university graduates who already have degrees and calls for a complete ban on graduates being able to access publicly funded apprenticeships. The suggestion is that such a move would prevent apprenticeship opportunities being colonised by those who have already benefitted from substantial public investment in their education and free up resources to support those who haven’t. Critics of the idea highlight the fact that around half the working population now have a degree, so removing their eligibility for apprenticeships would cripple the efforts of many employers to provide training to their staff.
How should we resolve this tension?
First of all, it’s important not to conflate apprenticeships with workforce training. There’s no doubt that apprenticeships are highly effective because they not only enable the development of technical skills but also develop the ability to apply those skills to real situations in real workplaces. But they are not – and shouldn’t be - the only game in town. Many other forms of workplace training are important, including short courses and on-line options that can be accessed flexibly and built up over time into larger qualifications. Most employers have argued that they need more of these to complement apprenticeship training, a fact which the Labour government has acknowledged through the move to a more flexible Growth and Skills Levy.
Secondly, there is a danger that any form of public subsidy for workplace training enables employers to duck their responsibility to invest their own resources into staff training and development. This country already has an endemic problem. As the Learning and Work Institute’s “Raising the Bar” report found, employers’ training investment per employee fell 28% between 2005-2019, taking UK performance below that of comparable countries (Stephen Evans, LWI, May 2021). Imran Tahir from the Institute of Fiscal Studies has recently reminded us, based on the history of previous schemes such as Train to Gain, that “much of the spending goes on training that firms would have provided – and paid for – even without the subsidy” (IfS Annual Education Spending Report 2024-25, p 68).
Thirdly, the design of the Apprenticeship Levy system provides a strong financial incentive for employers to recruit degree or graduate apprentices if they are to have any means of recouping their levy payments. Levy paying companies often employ a high proportion of graduates and have only a limited number of lower-level employees who might benefit from sub-degree apprenticeships. Research by City & Guilds and the 5% Club found that between 2017 and 2022 employers only managed to spend 55.5% of their levy funding on average, and only 4% managed to use the full amount of their allocation (“Levying Up: Delivering Sustainable Skills”, Jan 2023). Consequently, it’s highly unlikely that restricting the volume of higher-level apprenticeships will result in a rise in the number at lower level.
The introduction of the Growth and Skills Levy will hopefully ease the situation by enabling a greater range of subsidised workplace training. But it won’t solve the problem of declining employer investment in training, nor the challenge of reversing the decline in apprenticeship starts by younger and less advantaged workers. For that, other policy tools will be required. For example, introducing “Skills Tax Credits”, along the lines of the existing Research & Development Tax Credit system, would be an effective way of incentivising employers to invest more in training, as the LWI has argued.
The decline in Level 2 apprenticeships is stark. The IfS estimates that the proportion of the apprenticeship budget spent on L2 has fallen from 40% in 2017/18 when the levy was introduced to 15% in 2023/24. One key reason is the hidden cost to the employer of taking on young and inexperienced apprentices who typically require a high level of support while making a relatively low level of contribution – at least in the early stages of their training - to productivity and profit. Historically, many young apprentices were employed by small firms without the capability to provide high quality structured mentoring. A system that enabled employers to reclaim the costs of their in-house support might well be the best way to incentivise them to recruit more young people.
The education and training options available to the 60% of school leavers who, for whatever reason, are not ready or able to pursue the academic route to A-Levels and university, are already disturbingly limited. If access to fulfilling careers is to be widened for this group, then it’s critically important to expand the apprenticeship opportunities open to them.