Collaboration, not top-down direction, is the key to unlocking the potential of Scotland’s graduate apprenticeships

The Scottish government has made a firm commitment to increase productivity and “meta-skills”. Its National Strategy for Economic Transformation aims to “make Scotland’s businesses, industries, regions, communities and public services more productive and innovative.”

Yet the most recent UK Employer Skills Survey found 15 per cent of Scottish employers reporting skills gaps. A £10m fund, the Flexible Workforce Development Fund (FWDF), was introduced in 2017 to pay for workplace training to help Scottish employers upskill and re-skill staff – but as a result of the recent Scottish Budget, there is now no funding available for FWDF in academic years 2023-24 and 2024-25. The Scottish Funding Council’s indicative allocations for the coming year have also scrapped the £7m Upskilling Fund.

Can graduate apprenticeships fill the upskilling gap that has been created?

Progress check

The graduate apprenticeship (GA) programme in Scotland showcases commendable performance, especially in terms of completion rates when compared to England – only 5.9 per cent of GAs left before completion in 2021–22. This figure could be positively influenced by an assessment structure that is designed to occur continuously, as opposed to relying solely on an endpoint assessment, as commonly observed in the educational framework in England.

Whereas in England existing apprentices are having to withdraw because they’ve been made redundant and no longer qualify for funding, in Scotland apprentices are able to continue to completion as the funding mechanism in Scotland is centralised. This gives ownership to the apprentice who can manage their tuition fees directly with Student Awards Agency Scotland (SAAS) and their learning provider, with no employer involvement. Looking at the 1166 enrolments in 2021–22, eleven apprentices were made redundant. Of those, eight were supported into another graduate apprenticeship with a new employer, with five benefitting from Adopt an Apprentice support.

Despite this comparative success, the figures show a lower percentage of the working population are enrolled in apprenticeships as a whole – 17 out of 1,000 members of the working population, in line with Wales and Northern Ireland, but lower than England’s 27 out in 1,000.

We also need to consider the profile of the GA, who tends to be an older candidate (25+), with 90 per cent employed by the company before enrolling on the apprenticeship. It’s upskilling, rather than training. This may occur in part because the entry routes to the GA are usually offered asking for traditional university entry qualifications and rarely mention that work experience can be an entry point into an apprenticeship. There are also wide variations in the initial salary offered to apprentices, and confusion over the entry routes. Some of the skills that are asked for to start the apprenticeship are the same as those that you’d expect university or college students to have on graduation.

Funding

Graduate apprenticeships in Scotland are funded by the apprenticeship levy which was brought in by the UK government in 2017 and applies to all UK employers. Scottish employers with an annual wage bill of over £3m are required to contribute to the fund, no matter where their workforce is based. Scotland’s share of the annual levy (estimated at over £200 million in 2019–20) is distributed to employers in Scotland operating a range of workplace development programmes, whether it’s labelled an apprenticeship or not.

Employers within Scotland are under no obligation to spend their funds on GA programmes, meaning Scottish employers have a great deal of freedom when it comes to spending their apprenticeship levy (e.g. modern apprenticeships, workplace training). GA formal training is fully funded by the Scottish government. All employers in Scotland can access apprenticeships regardless of their size or whether they pay the levy and there is no limit to the number of apprentices a business can have.

The actual funding system is in the hands of Skills Development Scotland (SDS) who agree a target number of apprenticeship places with the Scottish government and receive a budget relevant to delivering this number of places. For example, in 2019–20, SDS was expected to deliver 1,300 graduate apprenticeships. The Scottish government informs SDS about its strategic priorities for the apprenticeship system.

These financial contributions, which cover the entire apprenticeship programme, are based on the estimated costs of the framework, administration, taught elements, assessment and core and career skills requirements. However, the precise linkage with these factors is not always transparent, as the actual costs of delivery are often unknown.

SDS then identifies an estimate on numbers for the potential number of apprenticeship places in each occupational sector. These numbers are calculated by checking numbers on previous years and assessing labour market demand – a reactive rather than proactive process. SDS then invites tenders from training providers to deliver apprenticeships in these areas and allocates contracts. The training providers then liaise with employers to recruit candidates and deliver the programmes.

Employer-driven funding in England contrasts sharply with the centrally directed approach in Scotland where levy-paying employers can draw down funding. Funding is cumbersome, and making the processes more transparent could encourage more GA opportunities to flourish.

Making reforms

The current system is complex. The total number of apprenticeships is primarily a policy decision taken centrally by the Scottish government. The mix of provision, as between different occupational groups, SCQF levels, gender mix and age groups are determined by a sequence of decisions. The main players in the initial phases of the decisions are SDS and the training providers, with employers and potential apprentices coming into the decision-making at a later stage in the process. This complexity means that it is very difficult to be sure that the scale and mix of provision is meeting the needs of the labour market or of individuals present or future.

James Withers’ review of the skills delivery landscape last summer proposed a new Scottish qualifications body which would be responsible for accrediting everything post-school, including skills frameworks. He argued that it was “difficult to plan for skills at a national level” and the “shape of changes are difficult to predict” – firmly placing the ball back in the court of central government.

Whether increased centralisation is really the answer is hard to say. What’s really needed is for bodies like SDS, SAAS and SFC (or whatever combination of these is in place post-Withers) to work closely with employers and learning providers and other stakeholders to collaborate on how to adapt the funding system and apprenticeship development process – to respond quickly and be proactive to the future work demands coming with “industry 5.0”.

The OECD has also highlighted the need for collaboration between SDS and SFC, in particular on skills planning and skills alignment and considering how the provision is matched to labour market demand. Again, we’d say this could be expanded into a collaborative systems view of the apprentice ecosystem, benefitting from a collaborative approach between all stakeholders in co-creating the provision.

An agile system could be created with more input from employers and apprentices as stakeholders, rather than input only coming from government and training providers. The funding of the apprenticeship system would then be more directly responsive to labour market needs now and work skills needs for the future.

A proactive and collaborative approach designed to consider future work skills demand and collaborating with a range of stakeholders, training providers, strategist, employers and government would provide the opportunity to create a future-proofed sustainable offering. This could encourage employers to take on more graduate apprenticeships, as the training content would have more value for them.