EEF response to the Future of Apprenticeships in England
– Funding Reform Technical Consultation
Overview
1. EEF, the manufacturers’ organisation is the voice of manufacturing in the UK,
representing all aspects of the manufacturing sector including engineering, aviation,
defence, oil and gas, food and chemicals. With around 6,000 members employing almost
one million workers, EEF members operate in the UK, Europe and throughout the world.
2. Manufacturers continue to focus on innovation, research and development, bringing
more sophisticated products to market and improving processes. This has led to an
increasing demand for higher-level skills. Only by acquiring these skills can UK
manufacturers compete with lower cost economies. Apprenticeships play a pivotal role in
delivering the skills manufacturers need. Access to the right skills then allows the UK’s
manufacturers to compete on a world stage.
3. Some 66% of EEF members plan to recruit a manufacturing and engineering apprentice
in the next 12 months and some 39% plan to recruit a non-manufacturing and
engineering apprentice.1 Manufacturers are committed to developing the skills of
employees through apprenticeships. What they now need to see is a long-term
commitment from all stakeholders to make the necessary changes to drive quality, not
just quantity. Funding reform will play a central role in this and we must ensure that we
chose the right model that is sustainable and not susceptible to the constant change we
have seen in the past.
4. Creating a responsive training market can be achieved by placing the funding in the
hands of the employer, allowing the employer to become the customer, able to choose
their apprentice, provider and what will be apprenticeship standard. Through such a
model employers can demand the provision they need as well as hold providers to
account on delivery. However, there are companies who have built up strong
relationships with both public and private providers, who are responsive and fully
understand industry needs. If employers currently feel able to demand the provision they
need and are happy to delegate aspects of the funding system to a provider or agency
such as a GTA, then they should be able to do so. Employers must have the choice and
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flexibility to adopt a model that works for them and government needs to take this into
account.
5. The proposed funding reforms are a fundamental change to apprenticeships.
Employers have long waited for government to commit to changing the
apprenticeship system so that is responsive to business needs and increases the
number of high quality apprenticeships. Such reform is not easy, or simple, and
transition needs to be careful and slow.
6. We are concerned that this consultation has been published on the assumption that the
systems will be simple and easy to use. We are not convinced that government has yet
thought out how the proposed models and wider apprenticeship reforms will work in
practice. Government would benefit from slowing down the reforms and better engaging
with industry, particularly those leading the Trailblazers to determine exactly what a new
system should look like. Such a system would need to ensure that key performance
indicators for apprenticeships would not be negatively impacted.
7. Moreover, government must continue to consult from the bottom-up and we believe
further analysis is needed of companies that do not currently offer apprenticeships, and
better understand how funding reform will influence their decision to offer apprenticeship.
8. After full and careful consideration we have concluded that the Apprenticeship Credit
Model is unworkable and we believe that the only credible model proposed is that which
uses the HMRC platform. There is still much work to be done on the proposed model
and the wider reforms and further consultation with industry is required.
Focus must be a responsive, demand-led system
9. All businesses need a functional skills market which meets the demand of all employers
and this will only be achieved by shifting the balance of power towards the employer.
The outcome of this consultation must be provision that is relevant and responsive to
employers’ needs and high quality apprenticeships.
10. Creating a responsive training market will only be achieved for all employers by
placing the funding in the hands of the employer, allowing the employer to
become the customer, able to choose their apprentice, provider and what will be
apprenticeship standards. Through such a model, employers can demand the
provision they need as well as hold providers to account on delivery.
11. The current model of public providers drawing down funding regardless of the provision
they offer has been the reason many employers have struggled to find the training
provision their business needs. The status quo is therefore unworkable in meeting the
needs of all businesses.
12. However, there are companies who have built up strong relationships with both public
and private providers, who are responsive and fully understand industry needs. Whilst
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some providers have failed to meet businesses needs we must not let this consultation
or indeed overall funding reform discount the fact that we have a significant number of
high-quality, responsive providers in England.
13. We have concerns that the concept of ‘employer-routed’ funding has become a
distraction for the overall goal of what we are trying to achieve – a demand-led,
responsive system. Creating a responsive market must remain the ultimate goal of this
reform – other factors such as increasing demand for apprenticeships should be a
consequence of the overall changes to the skills landscape.
14. We see no reason why employers, who do not wish to have the funding flow
directly through their business, would need to do so in order to create a
responsive training market. If employers feel they are able to demand the
provision they need and are happy to delegate all aspects of the funding system to
a provider or agency such as a GTA then they should be able to do continue so.
Employers must have the choice and flexibility to adopt a model that works for
them and government needs to take this into account.
15. Nonetheless, we expect many manufacturers will want to take direct control of funding as
currently they find it extremely difficult to access pots of funding for skills. Some 43% of
manufacturers disagree it is easier to access skills funding now than two years ago,
compared to just 17% who agree. 2Whilst apprenticeship funding has been maintained in
recent years this has yet to be seen by employers. The proposed reforms will help to
bridge this gap.
16. There are a number of advantages of placing the funding in the hands of the employer –
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A functional skills market
An interested purchaser
Incentivising quality
Incentivising the creation of Industrial Partnerships – where employers take end
to end responsibility of the skills system
Increasing competition in the training market
Encouraging more innovative approaches to training
Closing the gap between supply and demand of apprenticeships.
Employers able to hold providers to account on delivery
Freeing up the price of training
17. We also accept that such an approach potentially has potential disadvantages –
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Numbers of apprenticeship starts, particularly at lower levels, may fall
More responsibility for employers, may increase burdens on employers
Some providers may exit the market
Some sectors may not co-invest and therefore look to forms of training other
than apprenticeships.
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Certainty and stability on funding
18. Whilst this consultation offers some additional detail following the previous funding
reform consultation, there remain a number of unanswered questions. Government has
committed to simplifying funding rates – yet there is no indication on what these rates will
be. It is of most importance to provide clarity on this as manufacturers require certainty
and stability if they are to make significant investment in skills. We are disappointed that
even indicative funding rates have not been consulted upon or communicated ahead of
the publication of this consultation.
19. Manufacturers also need to know exactly how much public funding is available over the
full period of the apprenticeship training. Three-quarters of EEF members say their
apprenticeships typically last up to four years3 – during this period the funding rates,
once decided, must not change. We are concerned that the new funding rates will be
subject to change year-on-year as is currently the case, acting as a dis-incentive to
taking on an apprentice.
20. Government has indicated that employers that recruit an apprentice aged 16 or 17 would
receive additional funding, but has yet to state how much this would be. The funding
available for 16 to 18 year old learners should be equivalent to the funding available for
learners that undertake other educational or training programmes (e.g. AS/A levels) and
should not differ between the educational establishment that a learner is studying and/or
training at. The new, simplified, funding calculation must require the minimum
information from the employer. Calculating the level of public funding should take
minutes only for an employer new to apprenticeships and require nothing more than
access to a simple, one page, on-line tool. The basic model contained within the
consultation is still too complex, and requires further, significant, simplification.
21. Government also needs to be clearer on how the proposed funding changes will impact
on Higher Apprenticeships. Four in ten manufacturers we surveyed recently said they
would be encouraged to offer Higher Apprenticeships if funding was routed directly
through employers. However, additional factors will also play a role – for example over
half of companies said better information would encourage them to offer Higher
Apprenticeships.4
Overview – The Apprenticeship Credit Model
22. Our response to the earlier Apprenticeship funding reform consultation highlighted a
number of concerns on the proposed models. In particular we were concerned that
businesses would take a cash-flow hit, as they would be paying out for training before
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then being able to recover it from their national insurance contributions (under the PAYE
model).
23. The government’s response has been the introduction of a new model – the
Apprenticeship Credit Model. This model we believe is significantly and fundamentally
flawed. It will require substantial public funding to build and sustain. Indeed in
discussions with members it was clear that employers had a number of questions that
could not be answered within the consultation and had difficulty in understanding how,
with so little detail, it could have been proposed.
These questions included, but were not limited to:
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Who owns the account? Whilst we assumed that the online account would be an
addition to the online system on the gov.uk website, ultimately someone would need
to own the balance in the account, and maintain it. Ownership of intangible property,
such as credit account balances in mixed accounts is legally complex, and we
wonder whether the complexities involved have been foreseen. It is inevitable that at
some point a business will want to withdraw a single or a number of credits. This
may, or may not, be to the original account used to credit the account. What would
be the process for this?
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What about interest on payments? The consultation explains that employers can
deposit their contribution, which then triggers the government contribution giving
them the total they can spend on training. However, employers need time to shop
around for their training provision and negotiate terms. There is currently no time limit
on this and therefore companies asked whether such funds would acquire interest. If
so, who would own this?
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Would there be an account or sub-account for each learner? Employers did not
understand how, if making a number of payments for a single or different learners,
the account model would work. Would the employer have the total of all funds
available that they then spent as they saw fit? They could, for example, recruit an
engineering apprentice as well as business and admin apprentices and access the
combined funding for both into one account but not spend the allocated amounts on
any particular apprentice.
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How would the account operate? Businesses transfer money electronically,
following a PO and invoice system. Once a PO was signed, then the business would
be committed to the payment. Would the business at this point have to make a
payment into the credit account, to be sure that they would obtain the government
subsidy, or could they rely on the subsidy, its timing and amount, and pay their
contribution into the account at a later date? What if government wanted to change
the level of subsidy after a contract, or PO, had been signed? Would this mean that
employers would have to pay in their entire contribution into the account to be sure
that they would secure a certain level of funding? If so, this would have severe,
negative, cash-flow implications. If not, then government would have to commit to
future transfers into the credit account on a speculative basis. For many reasons,
including management of the skills budget, this seems very unlikely.
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How would the account track payment? It seems that an advantage is the ability
of the credit model to ensure that payments are only made to approved providers.
We fail to see how this is the case without substantial additional work. The on-line
account, unless operated as a regulated bank, at substantial cost which employers
will not fund, will only identify the destination account of a payment. We presume that
the credit model would operate the usual selection of commercial electronic
payments at no cost to employers. The destination account will need in some way to
be linked to the provider, requiring some administration and the ability to update this
information. Otherwise, any destination account could be used. There will therefore
need to be a database of accounts which the credit model can interface with. How, in
the event that a payment is to be returned to the employer, will the account operate?
Will the account track the payment from the account into which the employer paid in
and how will the credit be dealt with? It could, but might not, represent a credit
wholly owned by the employer, or it might not. Would the credit need to be made
from the same account that the employer made the original payment into, (one on the
database) or could be made from another account, which might not be a registered
training provider? Would it matter if a different account to that the money was sent to
was used, or different provider from that the payment was originally made to?
24. Companies that have Head Offices based outside of the UK or group financial rules
automatically ruled out this model, stating that their companies only work through a
central bank. They would not be authorised to hold money in another account such as
would be required under the Apprenticeship Credit Model. Even for smaller businesses,
they will need to be able to treat the account balance as their own money, and may need
to for cash-flow reasons.
25. The De-Regulation Bill suggested that ‘vouchers’ may be the alternative options to using
HMRC. However, we do not think the proposed apprenticeship credit model is
representative of a voucher model. Government might have looked at existing voucher
models to determine whether they could be replicated for apprenticeship funding. This
might not always be the case. Vouchers are often used as incentives, whereas the
apprenticeship funding reform is instead changing the flow of the funding towards the
employer.
26. The consultation confirms the Chancellor’s words in the Autumn Statement that
government would ‘develop a model which uses HMRC systems to route Apprenticeship
funding direct to employers, and would consult on the option of an alternative funding
route for the smallest businesses.’ However, it it is unclear whether the proposed
Apprenticeship Credit Model is an alternative funding route for the smallest businesses
or whether government plans a further consultation on this. If the latter, then this should
have been made clear in the consultation document and the government should have
consulted simultaneously to avoid confusion.
Overview – The PAYE Model
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27. The PAYE Model gained traction with many EEF members. Those that kept their payroll
in-house saw it as an addition to their Employer Payment Summary (EPS), which some
stated was simple to follow. They saw the model as moving sums of money from one
cost centre to another and this was seen as relatively simple and requiring very little
additional time.
28. The key issues around this model were around the rate of funding that the employer
would be able to deduct (as we stated above, employers remain concerned that funding
rates have yet to be announced) and at what point they would deduct from their returns.
Companies want to see clear timescales of when the funding would be received. Many
assumed the deductions would be monthly – the majority of members we spoke to paid
their providers on a monthly basis and saw this as workable as all made a monthly PAYE
return.
29. Other concerns were around the responsiveness of HMRC and authorisation. One
employer questioned whether if there was a query on the EPS this automatically would
lead to HMRC not allowing that deduction. Employers then shared some experience of
HMRC being slow to respond – there were some concerns that this could then become a
cash-flow problem whilst this issue was being ironed out.
30. In addition, companies raised concerns again around possible HMRC penalties for
employers who make mistakes. This is an issue we raised in our earlier consultation
response. There is no indication in the consultation response of what role HMRC would
have on the apprenticeship element of the return, particularly during the transition period,
when employers are most likely to make errors.
31. Whilst small and medium sized companies tended to undertake payroll in-house, others
referred to ‘pricey’ payroll providers. They stated that this addition would likely to
increase the cost of using payroll providers, however they hoped this would be a one-off
payment.
Funding principles
Q1. Whilst the principles of the new funding system are now firm, please detail any
issues relation to their implementation that you believe need to be taken into account
and, if so, how?
32. EEF’s 2012 skills survey revealed that whilst the majority (60%) of companies use a
combination of public and private funding to deliver their Apprenticeships, over a third
said they fund them entirely themselves.5 The reason why such a significant number of
companies fund apprenticeships themselves is that they cannot always find the provision
they need in the current market or able to understand the complex funding system, and
use private providers to deliver their specific needs. Access to funding remains difficult –
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the system itself is complex and overwhelming and in its current state lacks
transparency.
33. During consultation with our members it is clear that cost is not the single biggest issue
in apprenticeships, but quality of provision. Manufacturers already buy many good and
services, and pay more for higher quality products, which includes skills provision.
34. We support the principle of co-investment; however government must tread carefully
when setting co-investment rates, which are still to be decided. The recent research
paper into the impact of co-investment is a welcome contribution, however government
officials must work closely with industry experts to ensure that what is proposed is
reflective of companies’ ability to pay.
35. When setting co-investment rates, government must recognise the intangible assets
from employers that deliver high quality apprenticeship programmes. Large companies
for example are likely to have fixed infrastructure costs from investment in apprenticeship
training centres, equipment and trainers as well as consumable materials. Companies of
all sizes will have additional costs such as the cost of supervision of particularly younger
workers. If such factors are not taken into consideration then there is a risk that corners
may be cut in terms of quality to mitigate costs. Moreover, the numbers of apprentices
that manufacturers currently recruit may fall if the co-investment rate is set too high or
the promised funding simplification reduces the level of public subsidy available
36. There remain concerns about small companies’ ability to negotiate the price of training,
as small companies struggle to negotiate provision when they are not looking to recruit
apprentices in large numbers. In our previous consultation response we stated that
SMEs would benefit from collaboration so they would be better placed to negotiate with
providers. We welcome the support for this within the consultation document. We see a
continued role for GTAs, Sector Skills Councils and possible Trade Associations and
LEPs to broker these relationships. Giving small firms collective purchasing power is
likely to drive providers to compete on cost.
37. We also recommended that the government take forward the recommendation within the
Holt Review to introduce a Trip-Advisor model where employers have access to
information about providers, and the ability to offer, and read, feedback from users to
help them make informed decisions. The recently launched Employer View website,
which enables employers to lodge their views on providers, is a welcome introduction
and EEF will encourage its members to engage in this process.
Payment mechanism options – eligibility and registration
Q2. Please comment on how, or to what extent, the new funding principles and
mechanism can be applied in practice to ATAs, authorised non-employed apprentices
and the Armed Forces.
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38. The principles and mechanisms should be applied to all employers of apprentices. In
particular we do not see the case for ATAs not having to follow the same principles as
GTAs and businesses themselves.
Payment mechanism options – PAYE model
Q3. What sort of information would you need at the outset from a new employer
website for Apprenticeship registration and funding, to give you the certainty to
employ an apprentice?
39. Employers will want to know the maximum government contribution (MGC) per
apprentice that will be available. They will want to know exactly how much funding will be
available throughout the whole training programme – this is particularly important as
three-quarters of EEF members say their apprenticeships typically last up to four yearsthey will want to know the funding available for all four years.6 Government must also
clarify whether the MGC is based on a formula or the commercial rate which an
employers it able to negotiate.
40. At the point of registration there needs to be clear funding rules on the provision of
English and maths provision for those learners that have yet to achieve a Level 2
qualification. In manufacturing and engineering, we expect that the majority of the new
standards will require the learner to have at least Level 2, prior to undertaking the
apprenticeship.
41. We expect that many small employers would depend on their providers, or GTAs to
conduct much of this initial data collection and entry. Employers should be able to
delegate this responsibility if desired.
Q4. When, relative to recruiting an apprentice, would you want to know how much
funding you would be eligible for?
42. At the start of the apprenticeship. To date, employers have been left frustrated by the
lack of transparency and information on how much funding is available to take on an
apprentice and how much investment that they, the employer should make. The previous
funding banding based on apprentice age did not always translate to the payments
employers were making to providers. Even companies in our industry referred to
experiences where providers had said they could take on an apprentice for ‘free’
regardless of age or framework and with no employer contribution.
43. Employers will want to know how much funding they are eligible for before making a
written offer of employment to their apprentice. Businesses would struggle to make
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financial commitments internally until they are fully aware of the exact costs of delivering
training including the government contribution available. At this point, employers should
know the full amount available to them for the duration of the apprenticeship. Some 58%
of manufacturers have dedicated training budgets and they will want to budget for
apprenticeships accordingly. 7
44. At this initial point employers should know all additional payments they are entitled to
based on their company size and age of apprentice, given government has committed to
top-up payments for small firms and learners aged 16 to 17. Such additions must ensure
they do not complicate the system further. The aim of the funding reform must be to
create a simple, responsive training market. Any process that hinders this should not be
included.
Q5. How can data collection requirements be minimised in the reformed funding
system?
45. We have identified a range of measures that could be used to minimise data collection –
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Pre-populated entry fields – for those that regularly recruit apprentices at a similar
level and standard than this could become a ‘favourites’ style option.
Drop-down menus – again adopting a ‘favourites’ system so regular entries are
always near the top.
Using national insurance numbers of learners as opposed to individual learner
numbers which will then automatically populate the details of the learner
Pre-set calculations – once entry has been made in certain fields, the system should
be able to immediately calculate outcomes.
A seamless link to HMRC systems, automatically calculating the size of the
employer.
46. Overall, far more information is required on the level of evidence that employers will be
expected to provide and retain under both models presented in the consultation
document. Eligibility criteria also need to be clearly communicated to employers to
minimise mistakes, and possible penalties.
47. Furthermore, it needs to be clearly communicated to employers that such processes can
be delegated to an external body or organisation of the employer’s choosing. There has
been widespread concern that the changes will increase the administrative burden on
employers engaging with the apprenticeship system. This should not, and must not, be
the case. Some 17% of companies say a reduction in administrative burden and
bureaucracy would encourage them to take on apprentices. A complex model will deter
businesses from engaging with the new system.8
Q6. How would the PAYE model impact on the cash flow or your organisation?
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48. There were differing views on this during discussions with members. In some cases
companies felt PAYE was a function controlled typically by the company’s finance
departments – including when payroll was out-sourced- and therefore getting internal
allocations of apprentice training budgets and spend authorisations could become more
complicated to run.
49. On the other hand, many members who were directly involved in the payroll function of
their business could quickly and easily understand how the process would work in
practice. They referred to using the EPS system as they currently do for Statutory Sick
Pay (SSP) and Statutory Maternity Pay (SMP). These employers said funding for
apprenticeship as simply another ‘add-on’ to the system. Those who worked across HR
and payroll also said that such a system would allow clear visibility of funds.
50. Cash-flow impact would depend on at what point companies were eligible to reduce their
Employer Payment Summary (EPS) and at what point they pay their provider. If the
model worked in a way whereby the company paid the provider monthly in arrears and
retail time information (RTI) meant companies submitting EPS monthly then there could
be a relatively short timeframe between payment of the provider and the deduction on
the EPS. This does assume a perfect model where the HMRC and payroll systems were
set up to allow for this.
Q7. If you have multiple payrolls or outsource your payment, how would the PAYE
model work for your organisation?
51. Some employers alluded to the fact that external payroll providers were ‘pricey’, and that
additional changes to payroll may increase this cost. The cost of outsourcing payroll was
by many employers a reason to keep this in-house where possible. Those that did so did
not see the changes as a reason why they could no longer administer payroll in-house
and saw them as small and involving little additional time. We expect this would
particularly be the case for those companies that work across the devolved
administration and run national programmes.
Q8a. Do you envisage additional charges for the PAYE model, such as through the
update of payroll software?
52. Yes. Companies indicated that whilst an addition to the payroll may be a simply ask it
would likely to increase the costs of the payroll software but not excessively. Businesses
also said that external payroll providers were likely to increase the cost of their offer –
however, it was hoped this would be a one-off payment.
Q8b. Do you already have to regularly update the software you use and pay for those
updates?
53. Yes. Typically changes to software will come at a cost, but not always. Sometimes these
are already part of the platform offered, and changes are frequently required following
changes to PAYE and NI rates and thresholds
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Q9a. If you have multiple apprentices, how easy would it be for you to calculate your
PAYE deductions?
54. This would depend upon what information would be required in the new system. If there
are multiple data collection requirements then this could become a lengthy process. The
system would need to be set up so that it calculates the total amount an employer with
multiple apprentices can deduct. The system itself could have no room for error. An error
on the system would lead to the employer making errors on their EPS which could result
in a penalty from HMRC. Once an employer had established a system, calculation
should not be difficult – it will be the initial process that will carry the most risk if it is not
simple enough for employers to use.
Q9b.How confident are you that you would be able to calculate the correct
deductions?
55. Further to our comments for the previous question, we would add that HMRC needs to
be fit-for-purpose and fully resourced in order to respond to queries. If an employer has a
query on the calculation that is produced by the online system it is not clear who the
employer’s first port of call is.
9c. If you did make an error, are you confident that it would be simple to resolve?
56. There are a number of opportunities where errors could be made. The lack of information
and detail of the model has led employers to assume there is undoubtedly more
opportunity for error. This could be registering the apprentice, payment to the provider,
deductions from PAYE and so on.
57. Businesses want to know the level of tolerance from HMRC when these errors occur. As
we highlighted in our earlier response to the funding reform consultation, companies are
concerned that penalties from HMRC could in fact outweigh the public subsidy the
employer was eligible to receive in the first instance. A hefty penalty in the early stages
would be suffice for employers to disengage from the apprenticeship system. Some
employers also spoke of long delays in responses from HMRC when a query had arisen,
but this was a symptom of poor service. Queries themselves were straightforward to
resolve. HMRC must be sufficiently resourced to respond to the queries that are likely to
arise if we move towards a PAYE model.
Payment mechanism options – PAYE model for employers with insufficient
PAYE payments
Q10a. How easy would you find the process of reimbursement funding?
58. We do not expect that many EEF members would be eligible for reimbursement funding.
Manufacturers have a proven track record in investing heavily in apprenticeships, and
pay their apprentices above average wages. We would expect however that those
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employers who are required to apply for a reimbursement would face some cash flow
problems depending on how quick HMRC were to reimburse the funding.
Q10b. What impact would this have on your organisation’s finances?
59. For this model to effectively work the system used needs to be simple, worthwhile and
have longevity. If the system does not deliver this then government risks employers
disengaging with the system. Additional complexity and administration would drive
employers to invest in other forms of training that aren’t recognised apprenticeships. This
would have a knock-on effect for learners, particularly young people. Developing a
simple, responsive system must remain the ultimate goal.
Q10c. Would this impact on your decision to employ an apprentice?
60. This question again depends on the system that is put in place. If we assume that the
system is simple, quick to use and create a responsive training market then companies
will continue to employ apprentices. However, if the system continues to be bureaucratic
with employers not able to find the provision they want then this deter employers from
taking on apprentices.
61. At the same time, government must acknowledge that there are a number of factors that
would encourage/discourage manufacturers from recruiting apprentices. For example
some 47% of EEF members said they would be encouraged to take on apprentices if
there was an increase in business demand. The quality of apprentice candidates,
relevant of frameworks and better information also play a role.9
Q11. Are there any other issues you would like to raise in connection with the PAYE
model more generally?
62. As with the previous consultation, this document lacks the detail necessary for
employers. The consultation document dedicates only a couple of pages to the models
themselves. In our previous consultation response on funding reform we recommended
that the government produced work examples of what the system would look like. We do
not think the diagrams in the consultation are sufficient.
Payment mechanism options – Apprenticeship Credit Model
Q12a. Do you already use online accounts, payment gateways and electronic
payments (in purchasing training or any other service or product for your
organisation?
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Q12b. What could be learnt in the design of an Apprenticeship Credit from any
existing online accounts and payment gateways that you use?
63. There were mixed responses to this question. However, it was regarded as irrelevant to
compare such online payments to the Credit Model.
Q13. What is the most important to you in relation to setting up an online account e.g.
simplicity, security etc.
64. Manufacturers would want a simple, secure system. Companies found it difficult to see
how the proposed Apprenticeship Credit Model could be simple or secure. In addition
employers raised concerns on the models ability to provide real time information and that
does not create delays in processing payments. An automated payment may be seen as
the Department’s ideal; however, we struggle to see whether this would really work in
practice. Would, for example, such a publicly created on-line bank account be subject to
financial regulation?
Q14. Would you want to set up your Apprenticeship Credit account before or after
negotiation and agreeing training with a training provider?
65. Before. Employers would want the ability to set their apprentice credit account prior to
employing an apprentice and negotiating and agreeing a deliver programme with their
chosen provider. The question assumes that the relationship would only be with one
provider; however in some cases the arrangements could involve more than one
provider, and potentially more than one employer. This will then increase the need for
accurate tracking of payment sin and out of the account down to the level of each
apprentice being trained.
66. For those employers that recruit a significant number of apprentices at different levels
and on different standards this could become a substantial burden. It is likely such
employers would have to resource for such a service. This is likely to be at some cost.
Q15. What might determine the frequency of your payments into the Apprenticeship
Credit account?
67. The current apprenticeship funding regime operates on the basis of monthly payments to
the training providers. Training providers will need to manage their own cash-flow and
are likely to invoice the employer in monthly or quarterly in advance or arrears. It would
be unreasonable to expect employers to suffer cash flow shortages without income from
government into the apprenticeship credit model immediately. If this is not the case, then
the model fails to mitigate concerns around cash-flow, as it was initially intended.
68. There is no indication in the consultation on how government proposes to operate the
frequency of payments and to whether they will be in a position to frontload all the
payment for a given apprentice, or indeed have variable payments based on some form
of agreed milestone. It seems unrealistic that government will frontload payment into the
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account to cover the duration of the apprenticeship programme. However, to alleviate the
concerns amongst employers that they will not have certainty on funding, government
must clearly set out the funding available for the whole training. Employers will not
accept the fluctuations in funding methodology and rates that have plagued the system
for the last decade.
Q16. How would the Apprenticeship Credit account affect your cash flow?
69. Ultimately this would depend on when the payments are made into the account and
when they are made to the provider. The model lacks any real detail on this to offer a
more informed answer.
Q17. Are there any other issues you would like to raise in connection with the
Apprenticeship Credit model in particular?
70. Employers have also expressed concerns about the level of authorisation and
governance that will be required to establish internally in order to track and insure
appropriate use is made of public and private funding. Please refer to our Overview
Apprenticeship Credit Model comments made earlier.
71. Employers also asked questions over the process whereby an apprentice left before
completing their apprenticeship. How they would secure the level of public subsidy in
these cases, and if the apprentice went to work for another employer, how would the
new employer operate the credit model? Employers were also keen to know how rebates
would work under the credit model and were concerned that without very extensive and
expensive IT support and regulation, the credit model could be susceptible to fraud. At
the very least, it would need processes in place to ensure financial compliance.
Assurance
Q18. What factors need to be taken into account in the development of an approved
register?
72. We understand the principle behind the approved register. However, we are less
convinced about how such a register allows for a free market approach. If, for example,
an employer wanted to use a provider that was yet to be registered, as this provider
delivered on both quality and cost, would this mean that the employer would not then
eligible for public funding? Would government be open to new entrants to the market
being fast-tracked through the register if they had industry backing? Enforcing an
approved register of providers may limit the flexibility of new entrants coming into the
market.
73. It may also limit the ability of Trailblazers to embed bespoke training programmes into
any new standards that they develop. These could for example be delivered by specialist
training providers or potential vendor equipment providers who would not want to go
through the rigger and cost of seeking approved training provider status.
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74. New apprenticeship standards that require high levels of capital investment to meet the
industry standards will need to be supported in the future. Employers acknowledge
government’s efforts to free up the past restrictions on only being able to fund colleges
with capital funding, however at present the reforms do not allow for a completive, free
market model. It is unclear for example whether all providers on the approved register
would be entitled to draw down capital funding. If providers are unable to draw down
capital funds they may be unable to deliver what industry demands.
75. We would like clarity over Ofsted inspections. It is our understanding that whilst funding
may come directly through the employer, the provider will continue to be subject to
Ofsted inspections. If employers were subject to Ofsted, this would act as a disincentive
for employers to engage with the Apprenticeship system. Only those employers that are
themselves providers should face an Ofsted inspection.
76. Some companies have found themselves designing their own ‘apprenticeships.’ We
have found these employers tend to be those left frustrated with the current training
market. This has to date made them ineligible to secure public funding. They invest
independently to ensure their ‘apprentice’ acquires the technical skills necessary to fulfil
the job which is far more valuable than accepting publicly funded provision that fails to
meet their needs. We do not want to be in a place where companies are developing their
own apprenticeships or training programmes which are not accredited or independently
assessed. We must instead move to a position where, whatever skills provision
employers demand, there is a provider in the market to deliver it.
Q19. How can burdens on employers be minimised whilst providing assurance for the
funding systems and enabling good budget management?
77. It is vital that any new funding mechanism does not place additional burden or
administrative tasks on employers. Small and medium sized companies in particular will
be concerned that they do not have the resource or expertise to administer certain
requirements under the scheme. Therefore the message needs to be clear that such
tasks can be delegated by employers to providers or other external organisations and
bodies if they wish to do so.
78. Those companies who wish to keep such processes in-house, as they may have the
necessary expertise and resource, should be encouraged and supported to do so.
Information will play a key role in this. Over half of EEF members have used or do use
the National Apprenticeship Service (NAS).10 If NAS is to continue to be the body that
both promotes Apprenticeships and supports businesses through information and
services related to apprenticeships, then it must be sufficiently resourced to respond to
queries when the new changes come into place. Step-by-step guides are an effective
tool for such information. However, given the extent of the proposed new changes, we
would expect that EEF members will want to speak to experts in this area. We see a
benefit of having such experts sit within the NAS structure.
10
EEF Skills Survey 2012
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Q20. What support should government provide to help employers manage the
relationship with their training providers to protect their investment and that of the
government?
79. Some manufacturers have established good relationships with training providers where
they are able to demand the provision their business needs. We must create a genuine
market in training, but also acknowledge that England has some exemplar public and
private providers. The challenge is to ensure that all providers are responsive to the
needs of business of all sizes.
80. The recently launched Employer View website, which enables employers to lodge their
views on providers, is a welcome introduction and EEF will encourage its members to
engage in this process. It will be up to Ofsted and indeed the Business Department to
decide what steps, if any, are taken to tackle any poor provision that then continues.
However, the aim of this reform should be to eliminate poor provision that has occurred.
Testing the funding principles with Trailblazers
Q21. What information or support needs to be provided by government and its
agencies to employers so that the funding principles can be tested via the first
standard-based Apprenticeships?
81. We fully support the introduction of Trailblazers. Standards designed by employers,
alongside the proposed funding reforms, will drive responsiveness from providers to
deliver the training sought by employers.
82. Apprenticeship funding reform must look closely and carefully at the rates of support
available for the new apprenticeship standards. Government is yet to confirm whether
the Trailblazers will input into the costing of the standard, which would subsequently
determine the amount of public funding an employer could draw down. Previous
estimates for the costs of deliver were often inaccurate, as highlighted in the Richard
Review of Apprenticeship. This led to some apprenticeship frameworks subsidising
others and the subsequent rise of ‘free apprenticeships’.
83. The timeline for the proposed changes is far too short. Employers remain unconvinced
that the government will provide sufficient detailed information, that is digestible for
employers, on the proposed funding mechanism prior to the proposed Autumn start for
apprentices on new Trailblazer standards.
84. Furthermore, the government proposes to test the new principles using existing funding
distribution mechanisms, but it is unclear how the maximum government contribution
cap, the negotiations of price between the employers and chosen provider and the cash
contribution requirements can be tested under the existing mechanisms.
85. It is also unclear whether government has set aside funds for trialling the new model with
the Trailblazers standards and how this will be resourced. Not only will funds be needed
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to trial the model but the pilot will undoubtedly raise issues that will then need to be
overcome, possibly at a cost.
86. If employers are to recruit an apprentice on the new standard, which in the automotive
and aerospace sectors are more demanding and costly to deliver – then government will
need to publish the funding rates for the new standards before July 2014. This gives very
little time for government to fully consult with the Trailblazers, providers and industry
more widely to capture the true cost of delivering the new standards.
87. Whilst we have made suggestions above on what the system may look like and how best
to minimise the burden on employers, we think the best approach is to ask those
employers leading on Trailblazers to form working groups to develop the new systems.
Such a working group must include input from SMEs. EEF would be happy to support
the facilitation of this.
Helping employers, providers and other stakeholders prepare for full
implementation
Q22. What needs to be included in a sector readiness programme for all employers,
providers and other stakeholders to support full implementation of reformed
Apprenticeships?
88. Manufacturers are committed to developing the skills of new and existing employees
through apprenticeships. They now need to see a long-term commitment from all parties
to make the changes needed to drive quality, not just quantity. Once government has
confirmed the mechanism which will be used going forward, it must develop a substantial
clear communication strategy to ensure that all stakeholders are able to plan for full
implementation.
89. The introduction of skills funding loans is a good example of this. Working groups were
established and detailed models communication. However, even with this example,
insufficient detail was considered such as the application of VAT between commercial
providers and public colleges who are themselves exempt from VAT. The introduction of
loans did not fully assess the impact of apprenticeship numbers. As a result the loans
system was recently withdrawn.
90. Government must fully consider the impact of the new changes. We expect that there will
be a reduction in the number of apprenticeship starts. However, we expect these to be
the low-level, low added-value apprenticeships. Manufacturers have a proven track
record in offering high-quality apprenticeships, increasingly at a higher level and we
expect these to continue.
Transition from frameworks to standards
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Q23. Please detail any particular funding issues or concerns that you believe need to
be taken into account during the transition period
91. Companies are facing multiple changes to the skills landscape. As well as funding
reforms and move towards new standards, changes around qualification structures and
governance and the future role of organisations and bodies such as Sector Skills
Councils. Communicating these changes to industry and other relevant stakeholders is
key. For that reason we call on government to allow sufficient time for employers in
particular, to prepare for the new changes.
92. The consultation document outlines the potential introduction of a new funding model in
2016, however it is unclear when exactly this will be. For example, the Skills Funding
Agency (SFA) runs from 1st August to 31st July, whereas the HMRC year is 1st April to
31st March. Clarity around the timings is needed. Moreover, a more detailed plan will
need to be published that gives employers sufficient notice to consider the changes and
any potentially increase to costs they may incur (this is likely to depend on the maximum
government contribution).
FOR FURTHER INFORMATION CONTACT:
Tim Thomas
Head of Employment Policy
EEF, the manufacturers’ organisation
020 7654 1523
[email protected]
Verity O’Keefe
Employment and Skills Policy Advisor
EEF, the manufacturers’ organisation
020 7654 1572
[email protected]
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