A new Prime Minister… and a new direction for apprenticeship policy?

An article by Jonathan Bourne, CEO of Damar Training

I got back to the office last week after some holiday. Inevitably, when I was away, my mind turned occasionally to apprenticeships, the much loved but, frankly, little understood part of the education sector that has kept me busy for the last 20 years.

Our new Prime Minister and the Skills Minister stand at a crossroads. Take one course, and apprenticeships have the power to make a real difference to some of the country’s most intractable problems. Take another, and they will continue to impact some individuals and organisations but do little more than scratch the surface nationally.

Andy Burnham inherits an overflowing in-tray and the same challenges as Kier Starmer. His power to effect change is at its greatest right now.

Getting early policy decisions right is crucial, therefore. And so, whilst apprenticeships won’t be at the top of the list, here are my thoughts on sensible policy direction and some things that, logically, seem likely.

The detail is below but, in summary:

About 200,000 more early-careers apprenticeships are needed each year if we are to seriously impact the NEET crisis and deliver parity between apprenticeship and academic routes.
Current policy “nudges” are too complicated and not bold enough to achieve the desired results.
Employers’ investment in apprenticeships needs to be better recognised, for example through the introduction of a tax “super-deduction” for early careers apprentices.
In return for enhanced tax incentives, linkage between Growth and Skills Levy-spend and early careers apprenticeships could be considered.
Better management of apprenticeship spending would free up funds for high-quality all-age, all level apprenticeships, including in some areas that have been de-funded. This would reduce economic inactivity across the working-age population and support productivity.
A range of further measures would improve the attractiveness and impact of apprentices to employers and prospective apprentices alike.

First though, let’s remember what apprenticeships should help deliver for our country and our people.

Growth, thanks to a better skilled, more productive and more inclusive workforce.
Fewer young people not in work, education or training. So-called NEETs (a dehumanising acronym I hate) now top 1m, including more than 300,000 graduates. As Alan Milburn’s recent report said so eloquently, this is a moral crisis and a strategic economic risk.[i]

Apprenticeships policy should be viewed solely through the lens of these two linked priorities.

Apprenticeships can and, in many cases already do, deliver fantastic outcomes at individual and organisational level. If you are in any doubt, take a moment to read some of the case studies of the work done by our brilliant team, employers and apprentices at Damar.[ii] But there are too few apprenticeships. There are certainly too few delivering the outcomes we need.

So, how do we get enough apprenticeships and, at the same time, ensure they are as impactful as possible?

There are about 630,000 young people in England in each year group[iii] (skills policy is devolved). About 300,000 English 18–24-year-olds start undergraduate degrees each year.[iv]

Ignoring the debate on whether 300,000 is too many or too few, this means we need about 300,000 early careers apprenticeships in England each year. Parity of esteem and volume are closely linked – good vocational routes are never going to be equally valued if young people can’t access them. By “early careers”, I mean an apprenticeship that someone undertakes as their first or second role since leaving full-time education. As they progress into higher level roles, some then progress to other apprenticeships.

In a few days’ time, A level and other level 3 qualification results will be released, with around 400,000 young people receiving results.[v] However, the Government’s Find an Apprenticeship website, which advertises some (but not all) vacancies, listed only 69,820 vacancies between August 2025 and June 2026, 23% below the same period the previous year.[vi] At any one time, there are usually between 5,000 and 7,000 vacancies listed.

The shortfall is eye-watering.

The DWP does not publish the number of early careers apprenticeships. However, about 170,000 16–24-year-olds begin apprenticeships in England each year (total apprenticeship starts are about 350,000).[vii] The 170,000 includes progressions (e.g. level 3 to level 4) and apprenticeships for those already in work. Bearing in mind the lower completion rate than for university (about 65% currently^[viii]) and we probably need 200,000 more early careers apprenticeships a year.

How do we get them?

An apprenticeship is a real job, with training. The Government cannot create a single apprenticeship outside the public sector. Training providers like Damar cannot do so either.

Apprenticeships can only be created by employers. They will only do so if they need the output of the apprentice, once qualified, and it makes economic sense compared with other hiring options. Any strong moral argument in favour of apprenticeships is trumped by the economic one.

The current policy approach nudges employers and providers. For example, by removing funding from some programmes most used by the over 24s and all level 7 apprenticeship funding for the over 21s. By creating entry level “foundation” apprenticeships and limiting the new administration assistant apprenticeship to the under 25s. Smaller, cheaper apprenticeship units have been created, in part to deter older workers from embarking on a full apprenticeship to get the skills they need. Three different grants are now available for employers recruiting young apprentices: £1,000 for 16-18s; £2,000 for 18-24s (smaller employers); and £3,000 for 18-24s who have been on Universal Credit for 6 months. The 5% funding contribution for SMEs enrolling 19–24-year-olds has been removed.[ix]

In a letter to Skills England on 22 June, the Skills Minister, Jacqui Smith set out an ambition for 50,000 more young people to start an apprenticeship by March 2029.[x]

The modesty of this ambition is itself an acknowledgment that the changes will not move the dial sufficiently. They will certainly not encourage the creation of 200,000 new opportunities a year and will not make a material dent on the NEET figures.

The grant schemes are well-meaning but too complex and their eligibility restrictions means employers cannot include them in their annual budgets. Few employers want foundation apprentices.[xi]

Nudges are not what the system needs.

Meaningful change demands bolder action. Carrots and, almost certainly, sticks.

Starting with the former, we need to take better account of the size of the investment employers make when they hire an apprentice. Assuming the minimum apprenticeship wage of £8 per hour (many apprentices are paid significantly more) and a 35-hour week:

Salary cost, excluding pension contributions (there is no employer’s NI): £14,560pa
Back-fill of the off-the-job training time by a qualified colleague (about 1 day a week): £variable
Cost to supervise/check the apprentice’s work: £variable.
Liaising with the training provider; 12-weekly progress reviews; managing apprenticeship service account: £variable.
Contribution to training costs: between 0% and 25% of the delivery and assessment costs (larger employers will use their Growth and Skills Levy account).
Internal recruitment costs: £variable.

Most apprenticeships take at least a year, but longer and more complex programmes such as engineering require many times this investment. A year of an apprenticeship usually demands more investment than a year of undergraduate study. It is often more valuable.

A Damar, our experience is that investing in apprenticeships delivers great returns over the medium to long term. Even in year one, most apprentices make a positive contribution. Nor do employers expect a “free ride”. Most have always invested in staff training at all levels and understand that they have primary responsibility for sourcing the talent they need.

However, the country has a jobs and productivity crisis and, for many SMEs or larger businesses making modest margins, the up-front investment in high-quality early careers apprenticeships is a deterrent. And, whilst the apprentice’s salary may be modest at the outset, the wider cash and non-cash costs are significant.

During the pandemic, the Government introduced a temporary tax “super-deduction”,[xii] allowing businesses to tax-deduct more than 100% of the costs of investing in plant and machinery and bring forward the timing of the deduction. Rather than creating multiple grants for apprentices, one approach would be a super-deduction for investment in high-priority human capital, namely 16-24 year olds undertaking early careers apprenticeships. This could be set at a multiple of the minimum apprenticeship wage and apply to the first year of employment only.

As the apprentice progresses after year one, their income and productivity will increase and the employer’s profits, corporation and other tax payments will grow. Such a model is a co-investment in growth, a pre-payment by employers and taxpayers in the skills of our young people. Employers could factor it into their annual budgets; it would be simple to administer and doesn’t involve wage subsidies. The other grants could be removed.

As for “sticks”, for Growth and Skills Levy-payers, we may start to see linkage between Levy usage and early careers apprenticeships. The numbers are stark. Around 36,900 employers paid the Apprenticeship Levy in 2024/5,[xiii] contributing, in aggregate, £4.1b.[xiv] This equates to a total annual Levy-wage bill of £820b (the Levy is charged at 0.5% of wages over £3m). If each Levy payer were to hire one early careers apprentice for every £3m of annual wage bill (after the first £3m), roughly 270,000 young people would be able to access apprenticeships.[xv] Early-careers apprenticeships at SMEs could easily make up the shortfall to 300,000.

Combining both measures – a super-deduction for investment in early careers apprenticeships and some conditionality on Levy use for larger employers – would significantly increase the number of opportunities for young people.

But it isn’t just apprenticeships for young people that drive growth. We need the highest possible number of working age adults in good, productive employment. 21% of working-age adults are economically inactive,[xvi] and, even for those in work, skills needs are changing rapidly.

In some cases, apprenticeships are not the right vehicle. Most take at least a year and, with about a day a week of off the job training, they are only appropriate for those with significant skills needs.

But where the skills gap is big enough and the employer is prepared to make the co-investment described above (it is even bigger for those on higher salaries), apprenticeships bring significant value.

In recent years, some employers have been tempted to spend their Levy funds on programmes that are apprenticeships in name but, in reality, are training courses to fill smaller skills gaps. Here, the solution is likely to be closer monitoring of programmes to ensure, for example, that:

The job role and the apprenticeship standard are a close match.
Sufficient off-the-job training is taking place and that it is all delivered during contracted, paid, working hours, even for apprenticeships that require more than the minimum.

Doing so would free up budget for other priorities, including short courses in critical skills areas. It may also permit the reintroduction of some of the apprenticeships that have been “defunded” especially where this has impacted SMEs or reduced social mobility.

The measures above could all be introduced quickly. There are other actions too. Some will take longer, at least one is already underway. All will increase the impact of apprenticeships. These include:

Reducing the number of apprenticeship standards. 700 is far too many for the skills system to effectively deliver. Fewer, better (but broader) standards would drive quality and uptake.
Many apprenticeship standards are too narrow and inflexible. At the same time as reviewing which standards to keep, those that remain need reviewing to ensure employers and providers can flex the syllabus to meet local or emerging skills needs (technological change, including AI, is just one example).
Reviewing the linkage between other vocational qualifications and apprenticeships so there are clear progression routes. It makes no sense, for example, for a T level syllabus to overlap significantly with the most likely apprenticeship for the T level “graduate “, thus rendering them ineligible for the apprenticeship. We have seen this with the T level in law and the paralegal apprenticeship standard.
Ensuring all payments into the Growth and Skills Levy are spent on skills. Currently, over £700m goes back to the Treasury each year because funds paid in are significantly greater than the DWP budget and devolved payments to Scotland, Wales and Northern Ireland. The figure is expected to grow to £1.14b by 2028-9.[xvii]
A review of funding caps for some apprenticeships is underway and is to be welcomed, particularly for those standards where the funding cap has been unchanged for several years.
Increasing the point at which the Levy kicks in for small employers. Fiscal drag means far more employers now have an annual wage bill of £3m or more and, with Levy over-spenders now subject to a 25% co-investment fee, it is, perversely, the small(ish) employer that pays the most for apprenticeship training.
Testing modular accreditation for apprenticeships. Currently, an apprentice who leaves an apprenticeship part way through usually has nothing to show for it. This is unfair, particularly where they have left because their employer has gone out of business.