Ministers in the dock on apprenticeship quality

A new report on England's expansive and diverse apprenticeship model finds internationally high drop-out rates and poor training practices.

The Scottish founding father of political economy had a rather dim view of English apprenticeships.

In his magnum opus The Wealth of Nations (1776), Adam Smith chided the situation south of the border: ‘Long apprenticeships are altogether unnecessary’, he said. Later, Smith added that this ancient form of skills acquisition:

‘Cannot well require more than the lessons of a few weeks; perhaps those of a few days might be sufficient.’ (1776; 2012: p. 128).

Since then, a fault line has opened up in the debate about what constitutes quality in apprenticeship instruction.

For those versed in European continental apprenticeship systems, the journey from novice to mastery has always been considered an extension of formal education. It is no accident that the established vocational schools (Berufsschule) sit at the apex of the German and Swiss ‘dual systems’ of apprenticeship.

In Britain, however, the highly regulated ‘guild system’ of apprenticeship collapsed at the dawn of the first industrial revolution. Throughout the nineteenth and early twentieth centuries, classical liberal governments saw craft apprenticeship training as almost solely the preserve of employers.

It wasn’t until the early 1980s, with the Youth Training Scheme and later Modern Apprenticeships, that Ministers got back into regulating and funding apprentices. They did so via a top-down, bureaucratic, market-oriented approach. (Discussed extensively in my new book).

That’s why the UK has hundreds of private training and apprenticeship providers and Germany does not.

Further education colleges, the rough equivalent of the Berufsschule, support only about 25 per cent of apprenticeship starts in England. The major players are Independent Training Providers (ITPs), or ‘intermediaries’ as my American friends call them.

This brief historical lesson is relevant because a new comparative report by a social mobility charity this week takes aim at a four-decades-old English model, which it claims:

While there are good quality apprenticeships in England, far too many fall below reasonable expectations of minimum standards, and below expectations of other leading apprenticeship countries.

Difficult to compare apprenticeship systems

Simon Field, a fellow expert on skills policy for the Sutton Trust, wrote the report. He has previously worked on a series of country skills reports for the OECD, which explains, I think, why his report on the English model is seen and analysed through the lens of the continental systems.

Of course, this is not to argue that it is impossible to apply some comparative metrics. Many of Field’s observations and criticisms in the report are pretty valid. However, some of the report’s assertions and policy recommendations are completely wide of the mark.

The implicit intention of the Sutton Trust report is to propose that England become more like the continental or ‘dual system’ model of apprenticeship. As well-intended as this belief may be, I think it is misguided because the institutional framework of the labour market across advanced economies is so fundamentally different.

Why do I draw this conclusion?

For over a decade or so, I have written extensively about the shortcomings of the English apprenticeship model. In 2013, I undertook a comparative analysis of England in the context of other anglophone countries such as Australia, Canada, Ireland and the US.

I found significant differences in the regulations, funding, multiple jurisdictions, and standard setting of apprenticeships.

Therefore, drawing direct comparisons between countries is almost impossible because the contextual factors driving apprenticeship delivery vary significantly.

I published a paper in 2015 that sought to define a ‘world-class’ apprenticeship. After undertaking this research, I concluded that some common principles shared between countries point to a strong sense of what ‘good’ looks like.

In 2023, before Labour returned to power, I wrote about the five things that still need to happen to secure a world-beating apprenticeship system by 2030.

Indeed, I was calling for the system to be rebalanced towards younger people and for the brand of apprenticeship to be clearly defined long before it became fashionable to do so.

But the issue of quality keeps cropping up. It stems partly from England's highly competitive regime regarding the ‘market’ for providing apprenticeship training compared to just about every other country in the world.

Market dynamics

When people hear the word market, they tend to think of a free-floating price mechanism and the ability of market participants to enter and exit a transaction at will. For example, the government doesn’t set the price of bread. And consumers are free to shop around.

The publicly funded apprenticeship system in England (and elsewhere in the UK) does not operate like a normal market. Civil servants set the price of the apprenticeship standards (or ‘training products’ as they call them). From this perspective, the British approach to skills policy has more in common with Gosplan - the central planning committee and price coordinating mechanism of the former Soviet Union.

With no free-floating price mechanism, providers compete on other factors to attract business from employers and apprentices. This could be geographical proximity, online delivery, or some other ‘point of difference’ that helps them win the contract.

Unable to compete on price, some providers will undoubtedly use sharp practices to boost their profit margins. One of these nefarious schemes will be to cut corners on the off-the-job training component or even to make up phantom apprentices.

This happens when Whitehall decides who can play in this ‘market’ by regulating the barriers to entry (via a national register) and the quality of the training via independent inspection bodies such as Ofsted.

In short, perverse incentives exist to ‘game’ the apprenticeship system. Determined scammers can move faster than the lumbering bureaucracy. British skills policy is littered with these scandals, from the collapse of Individual Learning Accounts in 2001 to 16-week supermarket shelf-stacking ‘apprenticeships’ that led to a crackdown on minimum programme duration in 2012 and the legal protection of the brand.

Conversely, very few apprenticeship models internationally have the same level of end-to-end supervision as the English system. However, it is a ‘market’ defined by being a protected ‘insider’ instead of an open market where anyone can compete to provide employer training and therefore challenge poor provision. Whether a more open provider market system would root out the bad actors or encourage many more is a moot point.

So, when analysts use international data to criticise poor quality, they are misinterpreting how market dynamics in different countries operate in relation to apprenticeship training.

For example, in Germany and Switzerland, most apprentices are upper secondary school leavers who live at home. They enrol in a programme with an employer who is culturally adept at taking on young people. These youth apprentices will attend the local Berufsschule for the off-job part of the training, meaning there is hardly any ‘provider competition’. Because these employers are paying them so little (below their marginal product in the jargon), they tend to be relaxed about their apprentices spending more time in the vocational school before passing them as fully competent.

One reason why drop-out rates from apprenticeships in the Germanic systems are about half those experienced in Australia and England is that the former is organised as an extension of formal education in those countries. In other words, an apprenticeship is part of staying on beyond compulsory schooling.

In contrast, most English-speaking countries organise apprenticeship training as an adult labour market intervention. That’s why England has evolved a completely different model. Most apprentices are over 25. They operate not only in a regulated provider market but also in a competitive labour market.

When Field draws attention to higher apprentice dropout rates in England, he is perhaps simply underscoring the fact that British employers may be more inclined to offer older adults a pay rise to keep them in the business (or poach them from another employer), than to make them complete the apprenticeship, which, by definition, usually pays lower rates.

In other words, this may have nothing to do with the quality of the apprenticeship programmes but is a feature of a competitive labour market where adults are hungry for quicker progression.

Quality surveys and empirical data from the former Institute for Apprenticeships and Technical Education bear out this phenomenon. The most common reason for an apprentice dropping out was being offered a pay raise.

World-class traits of the English model

For all the shortcomings of England’s apprenticeship model, I am generally supportive of a system that is world-leading in at least three key ways:

1. A Universal Funding Mechanism for apprenticeship via the employer-paid Levy ensures that firms, not general taxpayers, provide access to the resources required to train apprentices. The problem with the current Apprenticeship Levy is that it is collected via HMRC (the tax authority) and passed over to the Department for Education (or Devolved Administrations) instead of being decentralised to employer/union-owned sectoral industry bodies to administer. The scope of collection is currently too narrow — only 2 per cent of UK firms pay in, when it should be closer to 75 per cent of organisations that collectively contribute to apprentice training. For example, I would cut the current 0.5% payroll levy on firms with wage bills that exceed £3 million and lower it to 0.25%, although I would apply it to wage bills over £1 million per annum. It would collect more funds for the government’s planned Growth and Skills Levy and deal with the ‘free rider’ problem by ensuring that more firms contribute.

2. The ‘All-age, All-levels’ nature of apprenticeship in England makes it the only system in the world with complete parity with the academic qualifications pyramid. In other words, someone can join at Level 2 (GCSE equivalent), progress within an occupation, or trade up to Level 7 (Master’s equivalent). It applies to any age, whether the apprentice is 16 or 60. This innovation has improved the ‘brand’ status of apprenticeships more than any other vocational and technical education reform since the Second World War. One of the reasons for reports of a ‘middle-class grab’ of apprenticeships in recent years is that younger generations from more prosperous backgrounds are turning their backs on traditional forms of higher education that don’t lead to good wages and career outcomes. It’s why England is leading the way in degree apprenticeships, much to the envy of countries like Germany.

3. End-Point Assessment (EPA) of apprenticeship standards has significantly improved the system's overall quality. Field dismisses the EPA because of the 98 per cent pass rate, but that is to fall back into the academic world of passing exams, where regulators deliberately manipulate attainment boundaries to ration top grades to manage the fact that there are limited places at elite public universities. Occupational competence thresholds are not relative; a person has either passed the required theory and practical test to drive safely on our roads, or they have not. The same applies to bakers, butchers, cyber security operatives and lab technicians. Besides, most EPAs are graded from pass to distinction. However, I have some concerns about the gradual chipping away at the independence of the EPA. Recent ministerial announcements, while dressed up in cutting red tape, may result in training providers returning to the bad old days (pre-2017) of ‘marking their own homework’. Shorter duration programmes, doing away with foundational skills like English and Maths and allowing more on-programme assessment could cumulatively set off another race to the bottom, or what Field calls a ‘low-cost, low-commitment model’.

I wholeheartedly agree with the Sutton Trust that we need to ensure more widespread access to apprenticeships. Labour market mobility matters. The fact that only 10 per cent of school leavers currently get this chance is a national scandal. Even during the days of mass youth unemployment in the early 1980s, 14 per cent of school leavers went onto an apprenticeship.

Next time you read an international report criticising England's apprenticeship system, remember that no country has devised a perfect model. Yet, they may all have world-class traits.