Autumn Budget and Spending Review 2021: So you want a revolution?

It seems that barely a week goes by without a senior Government minister reiterating the importance of technical and vocational skills. “Skills, skills, skills” was the mantra from the Prime Minister’s speech to the Conservative Party Conference in September. Not to be outdone, the Chancellor used pre-Budget briefings in late October to declare that a “skills revolution” was set to be delivered.

With the dust now settling, most commentators seem to agree that the Chancellor’s claim of a skills revolution may be stretching it. But the Budget and Spending Review contained several points of interest for apprenticeship employers:

1. Overall, a modest package of changes was announced. There was no substantial action to (for example) decisively address falling numbers of young people starting apprenticeships, and employers will be pleased that no changes were announced that might limit in-demand higher and degree apprenticeships among adults. On the latter, it may be no coincidence that summer 2021 saw a dip in apprenticeship starts, after an initial post-lockdown bounce in activity through Spring. This has eased concerns for now that Government’s apprenticeship budget might again come under pressure, as happened in 2019, when the Department for Education's top official warned MPs that "difficult decisions" would be required to prevent overspend.
   
   
2. The Chancellor announced further flexibilities to grow participation by small and medium-sized enterprises in apprenticeships. Pre-Apprenticeship Levy, SMEs comprised the bulk of apprenticeship demand. Now that situation is reversed, with Levy-paying employers starting around two-thirds of all apprentices (though this figure has edged lower in recent months). The new flexibilities (such as simplifying online systems and aggregating SME demand to secure a better deal from providers) look helpful but limited. Government seems resolute that key requirements such as 20% off-the-job learning rule and SMEs’ 5% contribution to training costs will not change.
   
   
3. Whitehall messaging is drawing a clear distinction between the Apprenticeship Levy and Government’s apprenticeship budget – the former supports the latter. Ministers have so far been firm that funds generated by the Levy can only be used to support apprenticeship training and assessment costs. But by drawing a distinction between the Levy and the apprenticeship budget, Government is giving itself room to direct the use of Levy funds in more flexible ways, should it wish to do so.
   
   
4. The Budget and Spending Review’s primary focus on skills was outside of apprenticeships. Government regards technical skills as key to unlocking opportunity for adults and young people, and accelerating productivity growth. As a result, this was a good Budget and Spending Review for further education, which will see a real terms increase in funding. Level 3 was a focus for the Chancellor, who announced an expansion of new T Levels for 16-19-year-olds (Government wants T Levels to offer a viable alternative to A levels); more funding to support adults to undertake their first level 3 qualification; and piloting the funding of second level 3 qualifications for adults on low incomes.
   
   
5. Finally on degree apprenticeships, no new light was shed on Government’s much-delayed response to the 2019 Post-18 Review (led by Philip Augar). Whitehall disagreements about the future of higher education funding are delaying progress, but ministers appear to clearly prefer growth in high-quality technical education over traditional HE undergraduate degree programmes. In time, this will have implications for employer early talent and graduate recruitment strategies. Along with the creation of new level 4 and 5 technical qualifications, degree apprenticeships are regarded as part of the solution. However, the majority of degree apprentices are over 25 and already in work. The number of degree apprenticeship starts by 18-year-olds is very small – under 2,000 per year, despite strong interest from young people. It remains to be seen whether Government will use its response to Augar to work with employers and universities to grow this market, giving more young people a work-based alternative to the traditional bachelor’s degree route from age 18.