MD2356 Apprenticeship Pilot Programme

The government’s apprenticeship levy was introduced in April 2017. The levy was designed to increase employer investment in skills and raise apprenticeship starts by requiring employers with a pay bill of over £3 million to contribute to a ring-fenced account for apprenticeships. However, there were 21 per cent fewer apprenticeship starts in London in the three months following the levy’s introduction than in the same quarter the previous year.

The Mayor, in his manifesto, committed to creating ‘thousands of new, high quality apprenticeships’ by maximising use of the apprenticeship levy in the capital. The Mayor continues to call for the ring-fencing and devolution of levy funds to London government to spend on meeting London’s complex skills needs. In the meantime, the Mayor is committed to working with London’s businesses to maximise the potential of the levy in the capital.

The Mayor’s Skills for Londoners strategy aims to increase employer investment in skills in the capital and includes a commitment to promote productivity by supporting employers to develop and make the best use of the skills of their current and future workforce. The Mayor’s Apprenticeship Sub-Group of the Skills for Londoners taskforce has helped to contribute to this objective by identifying how the Mayor can best support improvements in the quantity and quality of apprenticeships in London.

London has historically had fewer apprenticeship starts than other regions. In 2015/16 (before the introduction of the levy) there were 44,380 starts in London, which meant London had the second fewest starts out of any Government Office region in England, ahead of only the North East. On a per capita basis, London performed worse than any other region, with seven in every 1,000 Londoners starting an apprenticeship in that year. By comparison, 20 in every 1,000 North East residents started an apprenticeship over the same period.

The Mayor is keen to improve on this position because of the value apprenticeships offer to London’s economy and businesses, and the opportunities they provide to individuals. Seven in 10 apprenticeship employers report apprentices have improved the quality of their product or service, and individuals completing a Level 3 apprenticeship could earn, on average, between £77,000 and £117,000 more over their lifetime than those holding a Level 2 academic or vocational qualification. Increasing the number of quality apprenticeships in London would also help to ensure the city’s skills system is prepared for the challenges presented by Brexit and technological change.

However, London’s historically comparatively low number of apprenticeship starts is compounded by a fall in apprenticeship starts following the introduction of the apprenticeship levy in April 2017.

Research conducted by the GLA suggests London’s apprenticeship start rate is comparatively low in part because of the city’s sectoral composition, lower levels of employer demand for apprenticeships, and the higher likelihood of Londoners to pursue Higher Education.

London’s jobs are less weighted towards apprenticeship employing sectors. In employment terms, professional services is London’s largest sector but across England the sector employs fewer apprenticeships as a proportion of the workforce than any other industry. Similarly, the information and communication sector has the second lowest apprenticeship to job ratio in England, but it represents significantly more of London’s labour market (7 per cent) than England’s as a whole (4 per cent).

However, London’s sectoral composition does not account for all of the capital’s comparatively low apprenticeship start rate. London has fewer apprenticeship starts in every sector compared to England, and analysis by GLA Economics (2018) find that sectoral composition only accounts for 12 per cent of the gap between London and the rest of England.

Overall demand for apprenticeships appears to be lower from employers in London than across England. The Employer Perspectives Survey (2016) shows that a smaller proportion of London’s employers are planning to take on apprentices in the future than other regions and LEP areas.

This low level of demand might be explained by another employer survey’s finding that London employers are less likely than employers in other regions to view apprentices as their ideal recruit (17 per cent in London, 45 per cent in the Midlands and 43 per cent in Scotland). The report of the King’s Commission on London (2018) suggested employers in some of the capital’s key sectors, like construction, do not have access to apprenticeship standards or courses that meet their specific skills needs. The competitive nature of entry-level jobs in many of London’s key sectors may also mean employers are restricting jobs to graduates, even when non-graduates could excel in the roles.

As well as lower demand, there is also a relatively smaller supply of apprentices in London compared to other areas of England. This is primarily because young Londoners are significantly more likely to enter Higher Education than young people from elsewhere in England: 49 per cent of Londoners in state-funded schools enter Higher Education by age 19, compared to 38 per cent across England as a whole.

This preference for Higher Education is partly explained by the fact young Londoners (16-24) are significantly more likely to believe studying for a degree at university will be positive for their career (82 per cent) than undertaking an apprenticeship (70 per cent). The survey also showed significant proportions of young people also think apprenticeships lead to lower skilled jobs than they are looking for (21 per cent); that there are not apprenticeships for the type of work they are interested in (18 per cent); and that they will earn less in the long run by doing an apprenticeship (14 per cent).

As a result, London also has a lower apprenticeship take-up from young people. Only four per cent of people in London aged 16 to 18 undertook an apprenticeship in 2015 to 2016, compared to seven per cent in England. And the proportion of people aged between 19 and 24 undertaking an apprenticeship in London (two per cent) is half the proportion in England (four per cent).

Research conducted so far suggests improving employer demand for apprenticeships, with a focus on strategically important sectors, is the key to increasing London’s relatively low apprenticeship start rate.

The supply-side research with young Londoners indicates the views of employers are a key factor in determining young people’s perceptions of apprenticeships. 22 per cent of 16 to 24 year olds said if more employers viewed real world experience as of equal importance to academic qualifications they would be more encouraged to undertake an apprenticeship, and the same proportion said they would be more encouraged if apprentices were given the same career opportunities within companies as graduates. This suggests an increase in demand from employers would create an increase in supply of apprentices.

Business engagement will be key to increasing demand for apprenticeships in London. Business surveys show that London’s businesses are less likely to report they are aware of and have a good knowledge of apprenticeships (42 per cent) than businesses in England as a whole (46 per cent) and that 17 per cent of London businesses would be more likely to take on apprentices if they had more and better information on how to do it and the benefits of doing so.

The apprenticeship levy provides an opportunity to engage London’s businesses with a view to increasing demand. GLA Economics analysis finds that London’s businesses account for around 32 per cent of levy payers in England, and collectively contribute around 45 per cent of the total spend of the levy. However, apprenticeship starts have fallen in England since the levy’s introduction and a number of surveys have suggested up to one half of levy paying businesses may not make full use of their levy or completely write it off.

The key objective of the programme is to increase the quantity and quality of apprenticeships in London by maximising utilisation of the apprenticeship levy. The programme will be undertaken in two phases: phase one is a feasibility analysis to identify the best means to achieve the programme’s aims, and phase two is a series of business engagement pilots in London’s key sectors.

PHASE 1

The first phase of the programme will be used to analyse apprenticeship provision in London, identify which sectors, occupations and employers should be targeted in phase two of the programme, and produce insight into how phase two of the programme can increase and improve apprenticeship provision in London.

The GLA will commission two pieces of analysis with the support of TFL procurement.

The first piece of analysis (‘apprenticeship mapping analysis’ in the budget) will identify the sectors, occupations and firms with the greatest potential to maximise utilisation of apprenticeship levy funds. This mapping exercise will directly inform the shape of the business engagement work in phase two.

The second piece of work (‘increasing demand review’ in the budget) will include two areas of research. The first will include qualitative research with London businesses to develop a better understanding of barriers businesses face in hiring apprentices in particular sectors, and how the Mayor could support an increase and improvement of apprenticeship provision in London. The findings of this research will inform the business engagement approaches in the delivery of the pilot programmes in phase two of the programme. The review will also look at why apprenticeship starts are higher in other English regions across all sectors, why quality is reported to be higher, as well as a review of successful apprenticeship creation programmes conducted by local enterprise partnerships, local and devolved authorities, sector bodies, and non-governmental organisations. This research will identify the viability of different models for increasing apprenticeship starts and maximising the use of levy funds. The findings of this review will inform the engagement methods used in phase two.

PHASE 2

In phase two of the programme, the GLA will establish and commission employer engagement pilots designed to maximise the utilisation of levy funds, support in-work progression and meet London’s skills needs.

The programme of work will include the engagement of large levy paying and small non-levy paying employers; support and guidance for the businesses in the use of their levy funds; convening businesses in sectors and supply chains to coordinate levy use, testing delivery vehicles and models, and evaluation and dissemination of the pilot findings to inform how London’s employers use the levy in the future and what delivery vehicles could support them.

London Progression Collaboration Pilot

As part of this programme of pilots, the GLA will establish a partnership with the Institute for Public Policy Research (IPPR) to engage employers to make maximum use of the apprenticeship levy. The ‘London Progression Collaboration’ (LPC) will be delivered in-house by a joint IPPR and GLA team. The team will work closely with employers to develop new ways to leverage levy funds and support them to create new apprenticeship opportunities and increase in-work progression.

The project team will be governed by a Project Board co-chaired by the GLA and the IPPR. The Project Board will steer and oversee the recruitment of the project team, the delivery of the LPC, all external messaging, and all financial, strategic and other key staffing systems relating to the LPC. Members of the project team will provide regular reporting at agreed intervals on the delivery milestones, risks and evaluation.

The goals of the LPC will be to improve social mobility for low skilled and low paid Londoners, to raise the productivity of London’s businesses in key sectors, and enable London to test and showcase ways in which the levy could be adapted to maximise its impact through sector-wide interventions and initiatives across supply-chains.

The LPC will begin with an initial feasibility phase running until January 2019. This phase will be used to identify employers who wish to be involved with the pilot, analyse the skills needs and the methods and products the pilot can use to support them, and develop the outcomes for the remaining two and a half years of the pilot. The initial feasibility phase will be targeted at the construction, food (including retail and hospitality) and transport and logistics sectors, which all have acute skills needs and links to ongoing work at City Hall. The initial feasibility period will have the following target outputs:

• Staff team in place to deliver the project
• Secure commitment from at least one employer association in each of the three target sectors
• Secure commitment to participate in the pilot from 10 large employers in each sector
• Secure commitment to participate in the pilot from 10 non-levy payers in each sector
• Delivery of an interim report with analysis of 3 sectors, including apprenticeship statistics, levy retention, and employer survey
• Delivery of a final report setting out how to make the apprenticeship levy work, recommendations for action and a detailed project plan for the rest of the work of the pilot

The final report from the feasibility stage will set out recommended approaches and target outcomes for the remaining two and a half years of the pilot. A decision to proceed with the remainder of the pilot will be made by the Project Board based on an assessment of the pilot’s feasibility and IPPR’s ability to secure continued funding to support its contribution to the pilot (see 4.1). Notional outcomes for the full pilot (with figures to be confirmed), subject to confirmation following the feasibility stage, are set to include:

• Increasing the proportion of apprenticeship levy funds which are utilised by employers involved in the pilot for the relevant sectors in London, relative to before the pilot.
• Increasing the number of apprenticeship opportunities within the organisations involved in the pilot, their supply chains, their wider sector and local area, relative to before the pilot, to other sectors in London, and to the same sectors outside of London.
• Increased progression opportunities for individuals, with increased earnings, and progression into better quality jobs at the employers participating in the pilot.
• Providing learning opportunities for how strategic regional employment engagement can increase quality apprenticeship opportunities.

GLA commissioned apprenticeships pilot

Two additional pilots will test a wider range of engagement methods in sectors that are not targeted by the LPC. These pilots will be put out to tender for organisations to submit their proposals on how to increase demand for apprenticeships through maximising utilisation of the apprenticeship levy in a specific sector or occupational area. The specification for these pilots will welcome proposals in the digital sector and creative industries, the two sector areas outlined in the Mayor’s skills strategy that are not covered by the London Progression Collaboration. However, the specifications will also welcome proposals for work in other sectors and occupational areas where the prospective delivery partner can demonstrate there is an opportunity to engage employers to address acute skills needs through better use of apprenticeship levy funds.

The outcomes for the pilot delivery providers will include:

• Increase in apprenticeship starts at engaged businesses, including at both non-levy and levy paying businesses (see Table 1).
• Ensure that at least 75 per cent of these apprenticeships are sustained for at least 12 months (see Table 1).
• Increase the number of businesses accessing funding to support apprenticeships, including both non-levy and levy paying businesses.
• Increase the proportion of levy accounts spent by engaged levy-paying businesses. Development of sustainable delivery models to facilitate greater use of levy funds.

Headline targets for apprenticeship starts and the number of those that are sustained are provided in Table 1 below.

When commissioning the additional pilots, GLA officers will give consideration to the sustainability of the proposed models. Preference will be given to models that could continue to operate after GLA funding ceases to support them. Sustainable models might include the creation and utilisation of pooled levy pots, gaining access to additional corporate social responsibility funds from partner businesses, or the development of a commercially viable agency model that charges businesses for its services.

The GLA’s specification will allow organisations to propose their own methods to achieve these goals, and tenders will be evaluated on (in addition to price) their ability to meet the desired outcomes. It is expected that a range of organisations will express an interest in delivering these programmes, including Apprenticeship Training Agencies, sector bodies, providers in partnership with employers, or other organisations that may be able to deliver the desired outcomes.

To determine the appropriate outputs and outcomes for this programme, the GLA has considered other similar programmes. These include:

• The Department for Business, Innovation and Skills Train to Gain employer engagement programme, which ran between 2006 and 2010 and had a unit cost of £970 per training start.
• The GLA’s access to apprenticeships programme, which ran between 2009 and 2011 and focused on supporting prospective apprentices through pre-apprenticeship training and into an apprenticeship, had a unit cost of £1,976 per apprenticeship start.
• The GLA’s employer-led apprenticeship creation programme, which ran between 2015 and 2017 and engaged SMEs and larger businesses to create new apprenticeship opportunities and had a unit cost of £500 per apprenticeship sustained for 13 weeks.

Based on the unit cost values of these programmes and the focus of this programme being on larger levy paying businesses, the GLA is expecting the commissioned pilots to create at least 747 apprenticeship starts at a unit cost of £1,100, of which at least 560 will be sustained for at least 12 months. The expected output and outcome targets will not be published in the specification for this programme to ensure value for money. It is proposed that 30 per cent of the total programme costs will be provided to support KPIs and start-up costs such as equipment and initial salary costs, 40 per cent of the costs will be awarded to support apprenticeship starts and the remaining 30 per cent of programme costs will be awarded as an incentive for quality and promoted through a measure of and payment for 12 month sustained outcomes. 75 per cent of apprenticeship starts are expected to lead to sustained outcomes, a stretch target on the existing 68 per cent average completion rate.

Using the same methodology, the LPC, which includes GLA funding matched to JP Morgan Foundation funding, is expected to achieve at least 1216 apprenticeship starts over the full three years, with at least 912 sustained.

In total, the LPC and the commissioned out pilots are expected to achieve at least 1,963 apprenticeship starts, with at least 1,472 sustained.

KPIs on engagement with employers (including agreement to take on apprenticeships or transfer levy funding) and the diversity of apprentices recruited will also be included, with minimum requirements for funding. This will ensure the programme is funding new quality apprenticeships, minimising deadweight and diversity is actively promoted.

GLA officers commissioned GLA Economics to undertake a review of apprenticeship participation amongst Londoners with protected characteristics, in line with the Public Sector Equality Duty. Reliable data was identified for age, disability, race and sex, and the findings of this review have informed the design of this apprenticeship programme.

The review from GLA Economics highlighted that women and BAME Londoners are under-represented in apprenticeship take-up in certain sectors, including construction and digital. Therefore, the pilots will have diversity targets built in to ensure providers find ways to support women and BAME Londoners to participate in apprenticeships. GLA officers are also working jointly with the ESFA to engage apprenticeship providers in London that have trained the highest number of BAME apprentices to understand how the work in this programme can learn from approaches taken to remove barriers faced by BAME Londoners and encourage BAME Londoners to participate in apprenticeships, and foster good relations between BAME Londoners and others with protected characteristics and those without protected characteristics.

IPPR’s contribution to the London Progression Collaboration will be funded by the JP Morgan Foundation, though no funding will come from JP Morgan to the GLA. The JP Morgan Foundation has approved six months of funding to IPPR to support the first phase of the project, including initial research, the development of a comprehensive project plan, and securing commitments from employers. The JP Morgan Foundation will meet in January 2019 to decide whether to award IPPR funding for the rest of the project.

GLA Officers will mitigate the risk of discontinuation of JP Morgan Foundation by recruiting programme posts on initial 6 month contracts, with further work subject to the availability of funding. If JP Morgan Foundation funding is discontinued, the London Progression Collaboration will cease to continue, and the GLA will use the remaining funds to support the commissioned pilots. In this event, the GLA will ensure that, as far as possible, all learning, relationships and work from the London Progression Collaboration are transferred into the commissioned pilots.

This apprenticeship pilot programme will interact with and be complemented by ongoing work elsewhere in the GLA, including the expansion of the London Enterprise Adviser Network, the GLA’s coordination of apprenticeship ambassador activities in London, the Mayor’s Good Work Standard, the Skills and Employment Knowledge Hub, and the Growth Hub.

The total estimated costs of this programme is £1.265m and will span 4 financial-years from 2018-19 to 2021-22. An estimated project budget and the funding source for the programme is detailed below:

The programme will be funded from within existing Development, Environment & Enterprise budgets, a combination via the current Apprenticeship budget (£930,000) held within the Skills & Employment Unit and the DEE Minor Programme (£335,000) previously agreed as part of the 2018-19 budget process. With regards to the Apprenticeship budget, the £930,000 will require re-profiling, with future years allocations being adjusted and built into the Apprenticeships base budget as part of the 2019-20 budget process currently underway. For information, the Apprenticeship budget of £930,000 is currently profiled as follows:

• • 2018-19 - £430,000
  • 2019-20 - £110,000
  • 2020-21 - £390,000

The expenditure upon the programme will be a combination of staffing resource, procurement of services and grant funding. In line with the Authority’s Funding Agreement Toolkit, any commissioning of grants as part of the overall Apprenticeships programme will be subject to satisfactory due diligence to ensure that the GLA minimises any financial risk associated with the grant award and maximises the potential for successful delivery of the programme.

The foregoing sections of this report indicate that:

- the decisions requested of the Mayor concern the exercise of the GLA’s general powers, falling within the statutory powers of the GLA to do such things as may be considered to further, and or be facilitative of or conducive or incidental to the furthering of, the promotion of economic development and wealth creation in Greater London; and

- in formulating the proposals in respect of which a decision is sought officers have complied with the GLA’s related statutory duties to:

(a) pay due regard to the principle that there should be equality of opportunity for all people;

(b) consider how the proposals will promote the improvement of health of persons, health inequalities between persons and to contribute towards the achievement of sustainable development in the United Kingdom; and

(c) consult with appropriate bodies.

In taking the decisions requested, the Mayor must have due regard to the Public Sector Equality Duty; namely the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by the Equality Act 2010, and to advance equality of opportunity and foster good relations between persons who share a relevant protected characteristic (race, disability, gender, age, sexual orientation, religion or belief, pregnancy and maternity and gender reassignment) and persons who do not share it (section 149 of the Equality Act 2010). To this end, the Mayor should have particular regard to section 3 (above) of this report.

Expenditure to be incurred on:

- The procurement of works, services or supplies: officers must ensure that the works, services or supplies are procured in accordance with the GLA’s Contracts and Funding Code and that appropriate contract documentation is put in place and executed by the proposed providers and the GLA before the commencement of any works, services or supplies;

- Any award of grant funding: officers must ensure that the proposed funding is disbursed in a fair and transparent manner in accordance with the GLA’s Contracts and Funding Code and a funding agreement is put in place between and executed by the GLA and proposed recipients before any commitment to the provide funding is made; and

- Staffing costs officers: must ensure that they comply with all GLA HR policies and protocols (including HoPS approvals if applicable) in this regard.

Given that the programme proposed extends beyond the current mayoral term officers must also observe the principle that an incumbent administration should not unreasonably fetter the discretion of any future administration, ensuring that all of the necessary documentation contains provisions enabling the GLA to terminate at any point for convenience and any project milestones, outputs and claims and payments are structured so as to minimise the impact of the exercise of such termination rights.

Project timetable:

Gantt chart for first eight months of delivery: