New funding streams may be required as demand for degree apprenticeships grows, the chief executive of the Association of Employment and Learning Providers has said.

Speaking at a virtual Westminster Education Forum event on the next steps for developing degree apprenticeships, Mark Dawe said that a sustainable model for funding degree apprenticeships was needed and that a part-levy, part-loan system “felt the most appropriate”.

He said: “We do need to think of a sustainable model and the most extreme example is that the HE fee system should be funding degree apprenticeships – there has been a lot of resistance to that. 

“What could we have in between? Is it part-levy, part-loan? That feels the most appropriate in the sense of reflecting the HE loan criteria. I’m not saying which one is best, what I’m saying is money is running out and there is a great ambition to expand degree apprenticeships. We mustn't stop that but we must find a way of bringing more money in.”

What you need to know: Degree apprenticeships

More: Expanding apprenticeship levy 'won't help SMEs'

Apprenticeships: Over £100m in levy funds spent on master's for managers

Currently, big companies can use their apprenticeship levy funds to pay for staff to undertake degree apprenticeships, while non-levy-paying businesses and public bodies can receive government funding to support apprenticeships. However, as businesses spend more of their levy funding, less funding is available for the government to use to support non-levy payers. 

Funding for degree apprenticeships

Mr Dawe added: “I have no issue with levy payers spending all their levy on apprentices, but the point is that 50 per cent of that was meant to be to fund the non-levy and the government has got itself into a difficult position.

“We have to find a funding system that will support everyone else, and the non-levy-payers literally only have a few thousands in their accounts, if that.” 

The AELP has been calling for a standalone £1.5 billion annual budget to fund the demand for apprenticeships from non-levy SME employers.

Apprentices 'shouldering' some of the cost

Professor Quintin McKellar, vice-chancellor and chief executive of the University of Hertfordshire, suggested that to make the system sustainable, apprentices themselves should “shoulder some of the cost”.

He said: “I agree with Mark Dawe that apprenticeships under the age of 18 should be fully funded by the Department for Education. Employers should also make an appropriate contribution, either through the levy or through investment provision. How much that should be I’m not qualified to say. But how much is it worth to an employer to have a good highly-qualified employee?

“How can apprentices share the cost? I think they should be embracing some of the 20 per cent off-the-job [training] in their own time. Mechanisms need to be put in place to make sure they were not exploited… Full-time university students are paying for their courses and are undertaking extra part-time work to survive, so I think there is a rationale to say that apprenticeships should also be asked to shoulder some of the burden of the cost."

'It's an employer-led system'

Ann Potterton, head of apprenticeships at BT, said that the answer to a sustainable funding model for degree apprenticeships was not to take money away from levy-paying businesses.

She said: “We have got the pot and we aren’t spending anything like all of it. We are giving tons of it back but we would like to spend what we do want to spend on what we’d like to spend it on.

"To take more off us? The only thing that would do is reduce apprenticeships and none of us want that."

She said that BT was not making “rash decisions” when it came to hiring apprentices: “I do believe the way to look at [the funding pot] is to remember that this is an employer-led system. It is about employers using these qualifications, using these apprenticeships to fix the skills gaps they’ve got. We aren’t willy-nilly taking on apprenticeships left, right and centre. We still have to pay their salary. We aren’t making rash decisions – we are making sensible decisions.”

Without an increase in funding, degree apprenticeships will cease to be something police forces can offer, said Amanda Thomson, chair of the policing trailblazer employer group and senior learning and development delivery manager at Thames Valley Police. 

Since 2013, police forces across England have been able to offer a level 6 police constable degree apprenticeship. Ms Thomson said while forces were committed to delivering this, unless funding for it increased, many forces would have to revisit the entry routes. 

She said: “The real concern for the police service is that any reduction in funding and no increase in the funding band which currently is at £24,000 would see the service having to recruit through alternative entry routes, because we do have an entry route for those who have a degree."

Ms Thomson said that the £24,000 only just covered the off-the-job learning element of the apprenticeship and did not cover the extensive tutoring the apprentices receive on the job. She said that actually the cost to the forces was closer to £33,000. 

She added: “Obviously that would reduce apprenticeship starts, reduce what we can do for social mobility, and the workforce diversity of the police service. We are looking for a sustainable funding model. It’s about how we calculate funding bands.”