Department for Business, Innovation and Skills
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Government sets out radical plans to shake up apprenticeship funding

Employers could be funded directly to purchase the apprenticeship training they want as part of proposals which will put businesses in the driving seat, Business Secretary Vince Cable announced yesterday, 24 July 2013.

The government is consulting on funding reforms proposed by the entrepreneur Doug Richard. These will give employers freedom to choose the training that is most relevant to the needs of the Apprentices and their businesses, and which represents best value.

The Richard Review of Apprenticeships, published in November 2012, looked at how apprenticeships in England can meet the needs of the changing economy.

Three options are being presented, but alternative models will also be welcome. The three proposals are:

  • Direct Payment Model: businesses register apprentices and report claims for government funding through a new online system; Government funding is then paid directly into their bank account
  • PAYE Payment Model: businesses register apprentices through a new online system; they then recover government funding through their PAYE return
  • Provider Payment Model: government funding continues to be paid to training providers, but they can only draw it down when they have received the employer’s financial contribution towards training

Business Secretary Vince Cable said:

Employers are the best people to judge what training is worth investing in. These reforms will mean just that.

It gives them the power to train their staff to make sure their skills are relevant to the company, while choosing from the wide range of courses available.

These measures are all part of the wider reforms the government is making to the apprenticeship system. By putting quality ahead of quantity and giving the training that companies actually want, we are helping to create jobs and support business.

As well as consulting on long term measures to reform apprenticeships the government is also taking actions in the shorter term to make it easier for companies to take on an apprentice.

Companies with 1,000 employees or fewer can take advantage of a £1,500 Apprenticeship Grant for Employers (AGE) for another year, helping small and medium sized business to take on an additional 35,000 young apprentices.

Latest figures show that almost 30,000 young people have been taken on under the current grant.

Skills Minister Matthew Hancock said:

Small and medium sized businesses are the lifeblood of our economy and by extending the £1,500 grant for a further year we will give them the skills they need to grow and help 35,000 more young people into meaningful employment.

Currently there are many examples of outstanding apprenticeships but we want this to be the case every time so we are taking steps to make sure that they are more rigorous and as responsive to the needs of employers and individuals.

By radically reforming the funding system we will allow employers to agree with training providers the content and price of training ensuring greater competition both on quality and on price.

Michael Davis, Chief Executive of the UK Commission for Employment and Skills said:

The labour market has seen a long-term decline in the number of entry level jobs, and, critically, there are too few good jobs for young people. Apprenticeships are a proven way of delivering highly productive, well trained and loyal staff, access to a successful career for young people and strong benefits for the exchequer and the economy as a whole. Yet only 15% of UK employers offer them.

The Commission’s perspective is that we must return apprenticeships to their founding principle – a contract between the apprentice and the employer, valued and funded as such.

To increase take up among employers further the National Apprenticeship Service (NAS) will launch a new film ‘How to Hire an Apprentice’, on today to guide employers through the process of recruiting.

In addition Jason Holt, a small business and training academy owner, has also been appointed as an Apprenticeships Ambassador, to encourage smaller businesses to take on an apprentice.

Notes to editors

  1. A Consultation on Funding Reform for Apprenticeships in England will run for 10 weeks, from this week and will take into account what is best for employers, learners, training providers and further education colleges.

  2. The government’s response to the Richard Review can be found at

  3. The film ‘How to Hire an Apprentice’ can be found on

  4. The film features employers from a range of industry sectors, including CapGemini, SpicerHaart, and Ginger Nut Media, all of whom have experience of hiring their own apprentices as their businesses expanded.

  5. The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’, published at Budget 2011:

  • to create the most competitive tax system in the G20
  • to make the UK the best place in Europe to start, finance and grow a business
  • to encourage investment and exports as a route to a more balanced economy
  • to create a more educated workforce that is the most flexible in Europe

Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.

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