What are the most promising aspects, or “glimmers of hope”, that you see in this Budget for improving skills provision?
The government trailed the Budget as involving ‘difficult choices’, with public finances tight and economic growth lower than historical standards. This meant that, to some extent, further education was always going to be feeding off scraps of funding, particularly with government priorities on health, early years, defence and schools. While the changes to National Insurance contributions will cost independent training providers (ITPs) anywhere between tens of thousands and millions of pounds a year, there were some promising announcements made, which offer some hope.
First, the Chancellor recognised skills as one of her seven pillars for growth. She backed this up with some small funding pots for skills, including £300m for further education and £40m for Foundation Apprenticeships. We await more information on the former, and while the latter may be a small amount of funding, it is better funding.
The National Insurance changes may be challenging for providers and employers, but a side effect is that hiring apprentices under 25 and on wages under £50k will be more attractive, as they remain exempt from National Insurance contributions.
As always we could have got more, but what sector isn’t saying that?
What are your main concerns with the Budget’s key features and their potential repercussions?
Providers of all sizes are telling us that the changes to National Insurance employer contributions are going to have an enormous impact on skills delivery. While public sector bodies, such as colleges, will get some or all of their costs reimbursed, independent training providers will not. These costs will mean fewer resources for quality skills delivery, fewer resources for engaging with employers and fewer resources for recruiting staff in key sectors, such as those outlined in the government’s industrial strategy green paper.
The concern is amplified by the changes in the apprentice minimum wage. It is welcome to see the government aiming to tackle low pay, and I would not begrudge apprentices earning more, particularly in a cost-of-living crisis. However, I hope the government conducted an impact assessment of the changes to the minimum wage along with the changes to National Insurance on the number of young apprentices and the provider base. After all, increasing the number of young apprentices is a stated aim of the government.
Where might the Budget have overlooked some important issues facing the skills, apprenticeships and FE sectors?
The Budget did overlook some big issues facing the skills sector. First, on apprenticeships and the Growth and Skills Levy, the biggest issue is the ever growing disparity between levy receipts and the budget handed down by Treasury. Treasury is set to top slice £800m from the levy this year. That is money raised for skills not being spent on skills. This is at a time when the government and the sector are trying to encourage businesses to invest more in upskilling their workforce. Gradually bringing the apprenticeship budget into alignment with levy receipts would help facilitate the government’s priorities around greater flexibility in the levy, and protect SME apprenticeship funding. It would also allow an increase in funding bands in line with inflation, a principle the government has already conceded with recent announcements on university tuition fees. This is a live debate in the sector and the Spending Review in Spring will be another chance to make the case.
It is welcome to see the government aiming to tackle low pay ... [but] I hope the government conducted an impact assessment of the changes to the minimum wage
Away from apprenticeships, perhaps the most pressing issue facing the skills sector is the coming increase in 16-19 student numbers. There will be 110,000 more 16- to 18-year-olds in England by 2028. ITPs deliver 16-19 programmes to some of the most disadvantaged young people in the country but are hamstrung by arbitrary growth caps on student numbers. Lifting this growth cap would help ITPs meet this growing demand. We know from the Minister’s remarks that the £300m announced in the Budget will likely be leaning on the increase in 16-19 numbers.
What advice would you offer the government to effectively deliver on its skills commitments - including levy overhaul, funding for foundation apprenticeships, and an increase in the apprenticeship minimum wage - to create a cohesive, accessible and future-focused skills system?
The commitments the government has made could go a long way toward transforming skills delivery, making it more relevant for employers and learners. How these commitments are implemented, though, will go a long way toward determining their success. For example, the Growth and Skills Levy could be transformational. Rather than creating a wild west of flexibilities, the government appears to be taking a more measured approach, exploring programme flexibilities first. The government should continue this approach and think about how it can integrate changes into the current apprenticeship model. For example, if it leads to a full apprenticeship, the Foundation Apprenticeship programme should go some way to counting towards the full apprenticeship, acting as a ‘ramp on’. This would incentivise employers to use the Foundation Apprenticeship while incentivising them to continue a learners journey.
There are other programme flexibilities that would allow apprenticeship funding to go further, such as including the end point assessment in the duration of an apprenticeship. Programmes could be modular, with a base of mandatory content, and some flexibility on content depending on the employer or the region. The government could also look at the 20 per cent off the job training duration, allowing some wiggle room in this – after all 20 per cent is itself arbitrary and may not work for some sectors. These are just a few changes that could help make the system more attractive.
Meanwhile there are other areas the government could look at. If I was to offer one piece of advice about a structural change it would be on Adult Education Budget (AEB). A written question in parliament revealed the non-devolved AEB has a £300m underspend since the pandemic. The government should explore more effective ways to distribute this funding, starting with individual learner accounts, which were recommended by Lord Blunkett’s Council of Skills Advisors in 2023. The current funding model is clearly not working.