What change is still needed to apprenticeship funding?

February 2, 2024

Last week First Intuition sponsored the Association of Employment and Learning Provider’s (AELP) patron dinner, with Managing Director Amy Forrest speaking alongside the Skills Minister, Rt Hon Robert Halfon MP and AELP’s new CEO Ben Rowland about the key challenges facing the FE sector. It was great to hear the AELP’s concerns surrounding apprenticeship funding are aligned with First Intuition’s, and that they are echoing communications to senior policy makers in government to find solutions to these concerns.

It was also reassuring that the Skills Minister is so passionate about apprenticeships and the role they play in offering social mobility and opportunities for all.

One key challenge is the shrinking funding for skills in real terms, as static funding bands in the face of rapidly inflating delivery costs have left many colleges unable to resource course programmes, forcing providers to significantly reduce, or entirely discontinue, their apprenticeship programmes.

Although some positive changes have been made to apprenticeship funding in recent years, still a lot more change is needed to ensure apprenticeship programmes continue to be utilised to their full potential, and to deliver their countless benefits to as many apprentices and their employers as possible. A well-funded accountancy sector enables training programmes to keep pace with evolving practices, regulations and technological advancements needed to maintain a skilled workforce.

This article highlights some of the positive steps that have previously been made to apprenticeship funding in the accountancy and finance sector, as well as the change that is still urgently needed.

Positive changes made to apprenticeship funding in the accountancy sector: 

1. The increase to the level 3 funding band
As of the 1st of August 2023, the Institute for Apprenticeships and Technical Education (IfATE) updated the Level 3 Assistant Accountant Apprenticeship Standard. The funding band for the standard was increased from £8,000 to £12,000 to reflect new content.

This means that training providers such as First Intuition can continue to deliver high-quality training to learners at a time when delivery costs have been inflating so quickly. Until this change, funding bands for the accountancy apprenticeship standards had seen no increases to account for inflation, despite substantial increases in the costs of delivering apprenticeships through rising salaries and operational costs.

Since the increase to the level 3 funding band, First Intuition has seen the highest number of students on the level 3 apprenticeship programme in five years.

2. The mandating of the AAT level 3 qualification
Along with the 50% increase to the Level 3 Assistant Accountant Apprenticeship Standard funding band, the AAT Level 3 Diploma in Accounting was mandated within the standard. From the employer’s perspective this means that additional costs can now be covered by the funding, whereas in the past they would have to budget separately for these. These newly eligible costs include the student registration fee for Level 3, first-sitting exam fees plus the exam fee for a resit.

3. The removal of the non-levy reservations ‘cap of ten’
In 2021, all non-levy reservation levels were reset to nil allowing non-levy employers to continue recruiting and starting apprentices. In early 2023, after Gareth John met with the Skills Minister, Robert Halfon MP, to raise the issues this was causing SME’s, the non-levy reservations ‘cap of ten’ was thankfully abolished.

What change is still needed: 

1. The need for an increase in funding bands for all apprenticeship standards
Following the changes to level 3, increases to the funding bands for accountancy apprenticeships at levels 2, 4 and 7 are urgently required to prevent providers and employers from abandoning them. All providers have experienced rapid inflation in costs of delivery, and it is becoming more difficult for them to cover these costs with funding bands that remain unchanged.

2. Automatic inflationary increases to funding bands
Linked to the point above, inflationary increases to funding bands should be an automatic annual process across all apprenticeship standards so that providers are not expected to do ‘more for less’ or to constantly battle for sensible increases in funding to match their inflating delivery costs.

3. The full amount raised from the Apprenticeship Levy should be allocated to the Apprenticeship Budget
The government should ensure they spend the entire amount raised from the apprenticeship levy on the training and development of apprenticeships that it was designed for which is not currently the case. This change would ensure that levy funds raised for skills development are spent on what they were intended for rather than returning a significant proportion to Treasury. In the long-term, the government should look at increasing funding to the skills sector through a combination of both government and employer contributions.

4. Alternative funding options at level 2
Currently, level 2 apprentices are required to be on-programme for a minimum of 12 months and a day before moving forward to their End Point Assessment. This is proving to be a big blocker to the adoption of the level 2 standard as a year is simply too long at this level. The level 2 AAT qualification can be completed in 4 to 6 months and ambitious young adults don’t want to be penalised by being an apprentice.

The impact of this is highlighted in the fact there has been a 16.5% decrease in level 2 starts since the previous year. The issue is depriving many young adults from developing critical employability skills and behaviours that they need as they enter the workforce. An alternative option for funded employability skills training should therefore be available at level 2 where programmes can be completed in less than a year.