Government U-turns on crackdown to stop repeat of £100m apprenticeship rip-off

The government has backtracked on its pledge to crack down on the use of taxpayers’ money to fund university courses for high-flyers earning six-figure salaries, despite the minister in charge previously describing it as “gaming the system”.

Last month, Robert Halfon, the minister for skills and apprenticeships, promised to “take appropriate action if there is evidence that the levy is being spent on ineligible courses, such as to fund an MBA”.

His vow followed an investigation by The Independent into misuse of the apprenticeship levy, which revealed that £1bn of public money had been used to fund masters courses, with £100m of that going specifically to part-fund MBAs, between 2017 and 2022.

But in follow-up emails, the Department for Education performed a sharp U-turn, saying that the levy can be used to part-fund MBAs “because of overlap with the senior leader apprentice standard”, and stating that there would be no further investigation.

Now, The Independent can reveal that in 2020, when Mr Halfon was chair of the education select committee, he called on the apprenticeships minister at the time, Michelle Donelan, to put a stop to the “gaming of the levy system” that he said had led to “more than £100 million of apprenticeship levy funds [being] spent on masters degrees for managers”.

The Hansard record of the House of Commons debate on the levy on 11 February 2020 shows that Mr Halfon said: “Unfortunately, there has been gaming of the levy system. The Times Educational Supplement has published a report today saying that more than £100 million of apprenticeship levy funds have been spent on masters degrees for managers ... We need to reform the apprenticeship levy so that funds are used more productively.”

Mr Halfon later repeated the accusation and made clear the dividing line between what he thought was a reasonable use of the levy and what was beyond the pale.

He said: “We also need to do more to ensure that the disadvantaged have access to degree apprenticeships ... I am not talking about the gaming of the system for master’s degrees, but degree apprenticeships in law and engineering.”

Since that time, the amount spent on funding master’s degrees, a practice that was condemned by Mr Halfon, has exploded tenfold, from £100m to £1bn.

Asked why he now seemed content to allow it to continue and for that figure to have spiralled on his watch, Mr Halfon declined to respond.

The Department for Education reiterated its previous response, saying: “The senior leader apprenticeship no longer includes an MBA qualification and hasn’t since 2021. The senior leader apprenticeship only includes content deemed essential by employers and the independent body responsible for apprenticeship standards, some of which overlaps with the MBA. 

“Training providers are not breaking any rules by advertising an MBA qualification as something that senior leader apprentices may progress onto after completing their apprenticeship. But employers or the apprentice must fund the additional training and assessment themselves separately.”

One critic of the government’s approach, former children’s commissioner Anne Longfield, said Mr Halfon’s refusal to outlaw the use of the levy to part-fund MBAs was “bizarre” and flew in the face of what it was meant for.

Ms Longfield, now chair of the Commission on Young Lives, said: “When budgets are tight and employers are desperate for skilled young people, it is bizarre that any of the apprenticeship levy is being diverted towards MBAs benefiting people who already have well-established careers. 

“I urge ministers to think again and ensure all this funding goes where it’s needed most.”

And Anne Milton, the former Conservative MP who was skills and apprenticeships minister between 2017 and 2019, echoed those comments, saying: “For some years there has been a good case for putting a salary limit on apprenticeships, above which qualifications can be part or wholly funded by either the apprentice or the employer.”

The Liberal Democrats’ education spokesperson, Munira Wilson, said: “This is a government in denial. Ministers have taken their eyes off the ball when it comes to upskilling people across the country. We need to reform the apprenticeship levy to ensure that those who need high-quality apprenticeships most have access.”

The apprenticeship levy is a charge applicable to businesses with an annual payroll above £3m, who must pay 0.5 per cent of their wage bill towards it. They can use this money to train apprentices. Any levy that remains unspent after two years must be returned to the Treasury.

Since 2017, £100m of taxpayers’ money has been used to fund executive MBAs, despite a government attempt to stamp this out three years ago. Our investigation also exposed that the levy has been used to fund 55,000 executives and graduates, at a cost of £1bn, to take two master’s-degree-equivalent courses badged as apprenticeships. This use of the levy has come at a cost to young people, with 100,000 fewer under-25s starting apprenticeships than before it was introduced in 2017.

The use of the levy to subsidise MBAs has drawn criticism from former Tory education secretary Gavin Williamson, former Labour education secretary Alan Johnson, and London mayor Sadiq Khan, as well as from think tanks, high-street bosses, and representatives of various industries, including hospitality and tech, who have called for urgent reform of the system. The CEO of Lush, Mark Constantine, also spoke out, as did Tesco chief Ken Murphy, who said “It is clear the levy is not working.”

Julia Hobsbawm OBE, an author and an expert on the future of work, also added her voice to the call for reform, saying: “Any government worth its salt needs to be able to reform or drop bad policies which don’t work. The apprenticeship levy’s failures are well documented. The money should be going in its entirety to enlarge the pool of unskilled entrants to the job market. Instead, as a result of bureaucratic loopholes being exploited, it is being egregiously used to top up training for well-qualified, highly paid mid-market managers. Urgent action should be taken.”