Alarm bells: three funding changes that could affect you

You’ve got until 5 September to feed into the DfE’s proposed apprenticeship funding changes. While there are lots of positives, particularly for small businesses, some proposals could potentially be a problem. Jake Tween rounds up how three of the most contentious funding proposals could affect you

Jake Tween, Funding and Apprenticeships manager

The Department for Education (DfE) recently released proposals for how funding for apprenticeships will change with effect from May 2017. We rounded up the key changes in our recent blog, but there are three particular changes we think will have the biggest potential impact on you.

As well as lots of incredibly positive suggestions - like small businesses receiving more support and funding for apprenticeships - there are a few proposals that might have a more negative effect on provider customers, including higher education institutions.

If you'd like to respond, you have until 5 September to feed into the consultation on the Government's website.

Below we've outlined some of the key challenges the proposals could cause, as well as examples of how these could affect providers in real life.


Proposal: 20% of funding is held back until the apprentice takes their end-point assessment (EPA)

Issue  Example
 

Providers will have to pay for their EPA up front, which could cause a potential cash flow issue.

 

A small independent training provider is delivering 20 apprenticeships at £5,000 each. When they come to pay for EPA, they could be paying out £20,000 in advance from their own funds.

 

Most EPAs are 10-15%, not 20%. In reality, the money being held back is more than the cost of the assessment, meaning the provider will effectively be paying up front for some of the training too.

 

An apprenticeship is priced at £9,000. The cost of EPA is 10% of that, so £900. In reality, £1,800 is being held back (20% of £9k). If the apprentice doesn’t take their EPA for any reason, the provider loses that £1,800. They won’t have to pay the £900 for EPA but they have lost the ‘extra’ £900 they paid because 20% was held back, not 10%.

A potential solution to this is to lower the amount held back to 10%, or to vary the amount held back depending on the actual % cost of each EPA.

 

The apprentice may not take the EPA. This is particularly risky with degree apprenticeships. In order to be eligible for the EPA, the apprentice must complete their degree programme. Given that they have just got their degree, many apprentices (and some employers) may not be bothered about getting their apprenticeship certificate so will not put in for EPA.

 

The Chartered Manager Degree Apprenticeship costs £27,000, however the EPA is just 5% of that…. £1,850. The amount being held back, however, is £5,400. If the apprentice gets their degree and decides to drop out, the HEI stands to lose £3,540*

* they don’t have to pay the £1,850 because the apprentice doesn’t do the EPA, however they don’t get back the remaining £3,540 that was also held back.


Proposal: SASE Frameworks will be assigned one of the 15 new caps (or ‘upper limits’) 

Issue   Example
 

The amount assigned will be based on the average adult learner who has taken that apprenticeship. This will result in a significant cut to the rate for 16-18 year olds, who are currently fully-funded. Also, funding will be assigned to the nearest cap, even if this is lower than the average amount calculated by SFA.

 

A provider delivers Level 2 Team Leading to 16-18 year old apprentices. They currently drawn down £5,000 per apprentice. The ‘average’ apprentice is funded at £2,700, so from May, this framework is assigned to the nearest cap, which is £2,500. The amount of funding for these apprentices is halved.

It is worth noting that this is an effort to push people onto the new standards, and that the L&M frameworks are set to expire in July 2017 anyway.

  

Proposal: Area cost and disadvantage uplifts will no longer exist

 Issue Example 
 

At the moment, framework rates are boosted by area cost uplift (for delivery in the South East) and disadvantage uplift (for delivery in areas of deprivation).

 

Providers who make use of these uplifts will see a cut in funding for framework apprenticeships. Combine this with the reduction in rates for 16-18 year olds and this will cause major cuts to funding for some providers. For example, if you currently delivery 16-18 apprenticeships in a poor part of London, your funding rates will become a fraction of what they currently are.

It is worth noting that this is an effort to push people onto the new standards, and that the L&M frameworks are set to expire in July 2017 anyway.

 

Interested parties have the opportunity to get involved in the consultation and feed in views until 5 September. You can share your views on the Government consultation site.

 

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