Current approach does not prioritise productivity or value, with level 2 and 3 schemes offering little or no economic return

The government has no concrete plans for how the increased use of apprenticeships will improve productivity or deliver value, according to a critical new report from the National Audit Office (NAO).

A focus on reaching three million apprenticeship starts in the five years to 2020 does little to demonstrate how apprenticeships impact on overall skills levels, address skills gaps or improve achievement rates, according to Delivering value through the apprenticeships programme – released just a few months ahead of the introduction of the apprenticeship levy, which will shake up the way apprenticeships are funded and delivered.

“Without establishing which indicators should be used to judge whether the apprenticeships market is working in the right way, the Department for Education (DfE) cannot know whether the systems and incentives in place are having the desired effect,” the report said.

Sir Amyas Morse, head of the NAO, said: “The DfE needs to chart and follow a course from having a lot of apprenticeships to having the right apprenticeships in order to help improve the UK’s productivity, and achieve value for money, in return for the costs of the programme.”

The report also found that different apprenticeships offer significantly different benefits, but the government is not clear about how it plans to use this evidence to maximise the value of schemes, echoing ongoing concerns from the CIPD and others about a lack of focus on the quality of apprenticeships.

Wage analysis suggests there are significant variations in apprentices’ earnings ‘premiums’ – increased earnings that successful apprentices receive compared with those who fail to achieve their apprenticeship – across different levels and sectors.

This includes particularly high premiums in the engineering and construction sectors, though overall the most common types of apprenticeship studied between 2010 and 2015 were not offering the biggest premiums.

On average, apprenticeships at levels 2 and 3 provide a greater return per pound of government funding than traditional learning, according to the report. But when total funding from government, employer and learner is considered, apprenticeships may offer little or no economic return, particularly level 2 apprenticeships, which made up more than 62 per cent of all apprenticeships during the period.

The government’s formation of ‘Trailblazers’ – groups of employers that design new apprenticeship standards intended to meet their needs – is also causing concern as it is leading to “narrow and overlapping standards” that may restrict an apprentice gaining transferable skills.

There were 88 Trailblazer groups by April 2016, and each had at least one standard in development, according to the report. It is currently predicted that there could be as many as 1,600 standards by 2020, compared with 224 previous frameworks.

The government points to the introduction of the apprenticeship levy, which is expected to raise almost £3bn per year, and the development of an independent and employer-led institute, which will regulate the quality of apprenticeships, as evidence of reform.

But the survey found that only a quarter of employers were aware of the new standards, while only 12 per cent had any knowledge of what they involve, and 8 per cent said they intended to offer the new standards within the next five years. “During our fieldwork, we also found that awareness of the reforms remains low among small businesses, a group that employs around half of all apprentices,” said the report.

People Management recently reported that one in six employers will cut apprenticeship places when the levy is introduced. And while employers found high levels of satisfaction with the training offered, one in five apprentices said they had not received any formal training at all, either at an external provider or in the workplace. Ofsted reports suggested that, overall, around a fifth of training providers needed to improve the quality of their training and the results they achieve.

Mark Dawe, chief executive of the Association of Employment and Learning Providers, said: “The NAO is right to highlight that further progress is needed to manage the risks involved in the reform programme because, if we don't get the transition process right, there's a real danger that the quality of apprenticeships will be adversely affected.”

The process of introducing the new apprenticeship standards has been resource-intensive and has taken longer than the DfE envisaged, said the report. Details of the levy were delayed and many organisations have urged the government to rethink the entire apprenticeship system. At April 2016, only around 2,600 people had started an apprenticeship under the new standards.