Millions of pounds of taxpayers’ money is being used to part-fund university courses for top executives earning more than £100,000 a year, an investigation has found The independent can reveal.
The spending comes despite government efforts to scrap this use of the apprenticeship levy two years ago.
Industry bosses, think tanks and politicians say subsidizing executive postgraduate studies is not what the levy was intended to achieve and warn that young people and new job market entrants are losing out. They say the regime introduced by David Cameron in 2017 is failing and urgently needs reform.
Back then the aim was to create 600,000 apprenticeships a year, but starts over the past three years have averaged just 330,000. This has been accompanied by a dramatic change in their composition: there has been a collapse in entry-level apprenticeships (equivalent to five GSCE passes), from 53 per cent of total apprenticeship starts in 2017 to 24 per cent today, with the number of apprentices under 25 down 36% from 2016.
At the same time, the number of senior and degree apprenticeships for management and senior passengers has soared, more than tripling from 34,643 apprenticeships in 2016-17 to 110,026 apprenticeships in 2021-22.
At the top, an estimated £100 million of the apprenticeship levy has been used to subsidize top earners getting their executive MBAs.
Ken Murphy, Chief Executive of Tesco, said: “It is clear that the apprenticeship levy is not working. Those looking to gain valuable experience with an entry-level apprenticeship are missing out on people already in senior management positions. With the right reform, we could help redress the balance and ensure the levy is spent on creating thousands of opportunities where they are needed most.”
Toby Perkins, the shadow skills minister, said: “Apprenticeship starts are in freefall under the Conservatives and advanced opportunities are being squeezed at the expense of young people and adults who want to retrain or upskill from entry opportunities.” .
The Apprenticeship Levy is a charge that businesses with annual wages above £3m must pay, paying more than 0.5 per cent of their wage bill which they can use to take on and train apprentices, but any levy that remains unused after 24 months must be returned. to the Ministry of Finance as a tax. It affects about 2-3 percent of employers.
The practice of companies using their apprenticeship levy to directly fund MBAs was banned by the government in 2021 when former education secretary Gavin Williamson responded to the negative press and said he was “not convinced it was in the spirit of the scheme” or that it provided ” value for money”.
However, our research revealed that several of the UK’s top 10 business schools – including Henley Business School and Cranfield School of Management – still advertise executive MBA candidates with the message on their websites that prospective applicants can use the fee apprenticeships to fund most of the credits – up to two-thirds – required to achieve the MBA standard.
Around £300m of the levy has been used to fund 21,000 senior leadership apprenticeships in the five years to August 2022, according to education think tank EDSK. Of this, the amount used to fund or part-fund senior leadership apprenticeship candidates who will become MBAs has never been published, but experts say the figure is in the “tens of millions” and – given the conversion rate of senior business school apprentices leadership in MBAs – estimated to be at least £100m.
Cranfield said the current conversion rate was 100 percent. The head of media said: “We had 125 starts on the Executive and Apprenticeship MBA for Senior Executives in calendar year 2022, all funded by the levy and all 125 chose to go on to the eMBA component.” For all these MBA candidates, more than half of the total cost, currently set at £27,000, is subsidized by the levy.
Beneficiaries are almost exclusively high earners. The average salary of executive MBA candidates at Henley and Cranfield is £136,000 and £102,000 respectively, according to the latest business school rankings by Financial Times. The FT also reported that graduates receive an average salary increase of 45 and 37 percent respectively upon completion of the MBA.
Tom Richmond, director of EDSK, said: “It is extremely disappointing that the Government continues to spend tens of millions of pounds every year from the Apprenticeship Levy subsidizing MBAs for senior executives in large companies, when instead they could have focused this valuable funding in helping young people, particularly those from less privileged backgrounds, to launch their careers.”
Asked if he supported using millions of pounds of the levy to partially subsidize MBAs, Robert Halfon, the skills, apprenticeships and higher education minister, dodged the question and repeated the Williamson amendment.
He said: “We have axed the MBA part of the hugely popular Level 7 Senior Leaders Apprenticeship, so levy funds cannot be used towards this qualification.” The DfE added: “Following a review in March 2021, the MBA qualification was removed from the senior leader standard as the assessment concluded that it is not required to be an effective senior leader.”
Asked if he was concerned about the sharp 59% drop in apprenticeships from under-19s since 2014-15, Mr Halfon said: “Young people under 25 accounted for more than half of all apprenticeship starts in 2021-22 . This is great news, but we know we need to do more to ensure more young people can get on the ladder of opportunity.”
The levy has been a boon for some business schools which have circumvented Williamson’s ban by splitting their MBAs into two parts: a £14,000 “senior leadership studentship” that can be funded from the levy fund, and some extra modules to add to the MBA certification costing between £7,700 and £13,000 to be paid by the applicant or their company.
By splitting the 180 credits required for an MBA into three stages and calling stages one and two the 120-credit Senior Leadership Apprenticeship, universities and companies have come up with a way – in the eyes of the rules – to use the apprenticeship fee to training high-level executives for mutual benefit. And they can do it because the government turns a blind eye.
Dozens of levy-paying companies across a range of sectors are still actively implementing the senior executive levy co-funding senior executives doing senior leadership apprenticeships alongside postgraduate degrees. Henley Business School is proud to work with over 190 employers on this standard. This includes most of the heavyweights in the banking and finance sector, although companies are not required to disclose this activity. An HSBC spokesman said: “We do not publicly disclose this data.”
It comes as the system’s spare capacity has dwindled alarmingly to almost zero. In the last financial year, just £11m of the Government’s nearly £2.5bn apprenticeship budget went unspent. More and more of the pot is going into higher and degree apprenticeships, which have risen from 7 per cent of starts six years ago to over a third today. At the elite level, expensive senior leadership apprenticeships, including part-funded MBAs, now make up 18 per cent of all apprenticeships.
The National Audit Office saw this trend happening several years ago and warned that the direction of travel was not sustainable because higher level apprenticeships tend to be much more expensive than entry-level ones. Significant underspending during the Covid years masked fears – until now.
The biggest losers are the young. A 2023 report from the Chartered Institute of Personnel and Development (CIPD) looked at apprenticeships starting at age and said: “The decline in apprenticeships for young people is particularly worrying as evidence shows they need and benefit most from apprenticeship”.
The CIPD also reported a “sharp fall in the number of apprentices in more deprived areas of the country”. It suggests, they added, that “the apprenticeship system has undermined apprenticeships as a means of supporting social mobility and uplift”.
A spokesperson for Henley Business School said: “We are delighted to see so many of Henley’s Senior Leader apprentices keen to continue their learning. We offer students the opportunity to continue onto an MBA program if they wish, but this is not funded by the apprenticeship levy.
“We are also keen to play an important role in expanding apprenticeship opportunities for young people starting their careers.”
A spokesperson for Cranfield University said: “Cranfield University provides a successful and well-established Senior Leaders Apprenticeship program in accordance with the Government’s strict apprenticeship funding rules.
“We offer people moving into senior roles in the public and private sectors an opportunity to develop their skills. For many this is the first time they are studying for a formal qualification. Those who successfully complete the SLA have the opportunity to study other Masters qualifications, including the Executive MBA, at an additional cost.”
Additional reporting by Thomas Kingsley