Victory for The Independent as minister vows crackdown on apprenticeships for executives earning £100,000 a year

Exclusive: Ministers vow to investigate scandal that has cost taxpayers £100m in subsidised MBAs for top executives

David Cohen
Investigations Editor
Monday 13 March 2023 20:33 GMT
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<p>The apprenticeship levy applies to employers in England who have an annual pay bill above £3m</p>

The apprenticeship levy applies to employers in England who have an annual pay bill above £3m

The government has agreed to take action to stamp out the misuse of apprenticeship levy funds to subsidise “ineligible MBA courses” for top executives, after an investigation by The Independent.

The climbdown by the skills and apprenticeships minister Robert Halfon comes ahead of his appearance before the cross-party Commons education committee, where he is expected to face questions on young people missing out as apprenticeship money is spent on courses for high-flyers.

The minister had originally insisted, in the wake of our reports earlier this month, that levy funds “cannot be used to take MBAs”, despite evidence that the courses continue to be subsidised since a government crackdown two years ago. Up to £100m has been spent part-funding the courses in the past five years.

But after The Independent sent the Department for Education (DfE) verbatim examples of how universities appear to game the system by marketing their MBAs to prospective candidates as “part-funded” by the levy, the minister has vowed to crack down on abuse of the scheme.

Mr Halfon said: “If there is evidence that the levy is being spent on ineligible courses, such as to fund an MBA, we will take appropriate action.”

In examples sent to the DfE, Loughborough University boasts on its website: “The 3-year Loughborough Executive MBA has been designed to also meet the requirements of the Level 7 Senior Leadership Apprenticeship”, adding that “this enables applicants and their employers to utilise the Apprenticeship Levy to partially fund the MBA programme”.

Cranfield University, too, says: “This [web] page is for students seeking a Senior Leader Apprenticeship +Executive MBA via the Apprenticeship Levy. Eligible organisations can use their apprenticeship levy to cover Part 1 of the programme tuition fee.”

Sources close to the DfE said there had been an acknowledgement that our investigation had raised valid points around the use of the levy to part-fund MBAs, and the overlap of content between the MBA and Senior Leader Apprenticeship standard.

The DfE also accepted, sources said, that it needed to be more transparent about the apprenticeship levy data, so that the public can see where the money is being spent.

The apprenticeship levy is a charge payable by businesses with an annual payroll over £3m, who must pay 0.5 per cent of their wage bill which they can use to train apprentices. Any levy that remains unspent after 24 months must be returned to the Treasury as a tax.

Our investigation has revealed that more than £1bn of taxpayers’ money has been used over the past five years to fund 55,000 already high-earning executives to take two level-7 courses that are equivalent to a master’s degree but are badged as “apprenticeships”.

We also revealed that £100m of this has gone on funding MBAs, many for executives earning more than £100,000 a year – despite a government attempt to stamp this out two years ago.

The rise of apprenticeships for management candidates appears to have come at the cost of the young, with 100,000 fewer under-25s starting apprenticeships than before the levy was introduced six years ago.

Robin Walker, chair of the Commons education committee and a Conservative MP, said: “I am in favour of employers investing in apprenticeships at every level, and growth of higher-level and even degree-level apprenticeships is a good thing.

“However, it is concerning to see the levy being used to support already highly qualified high-earning executives. The intent of the levy was to support people entering work, through a combination of earning and learning, and it should be used to support people who haven’t had the opportunity to take degrees. Ministers have spoken about a ladder of opportunity, and it is vital that a significant proportion of levy funding is focused on the first steps on that ladder.”

Former education secretaries Gavin Williamson and Alan Johnson have called on the government to act to stop apprenticeships funding going to top executives

Jeremy Hunt is also under pressure to rethink the levy in this week’s Spring Budget, following an intervention by the cabinet minister who introduced it in 2017. Justine Greening, along with eight business leaders and former skills minister Anne Milton, has written to the chancellor saying that the levy “will not level up Britain” without serious reform.

We have also reported how former education secretaries across the political divide, Gavin Williamson and Alan Johnson, have called for ministers to reform the levy system. And we reported similar pleas by London mayor Sadiq Khan, Ofsted chief Amanda Spielman, former children’s commissioner for England Anne Longfield, and high-street CEOs Ken Murphy of Tesco and Mark Constantine of Lush.

Today, we can report further criticism of the use of the levy, by industry representatives, think tanks, and a former university boss.

Lemn Sissay, former chancellor of the University of Manchester and currently honorary chair in creative writing at the institution, asked: “Millions of pounds in taxpayers’ money used to part-fund university courses for executives earning more than £100,000 a year? Isn’t this institutional corruption?”

He added: “We did not come out of the pandemic to deprive new entrants to the labour market of funds. Subsidising top executives is not what this fund is for. This misuse of the levy needs to be stopped now.”

Industry bodies and think tanks also weighed in. Kate Nicholls, chief executive of advocacy group UK Hospitality, said: “Reform of the apprenticeship levy is urgently needed. A much-needed overhaul of the system would enable businesses to go even further in their skills investment. I urge the chancellor to commit to reform of the levy in the forthcoming budget.”

Julian David, CEO of the technology trade association techUK, said: “There has been a lot of controversy about the levy, not least it being used to fund MBAs. The solution is to review and reform the levy. Now is the time to institute a full review.”

Lizzie Crowley, of the Chartered Institute of Personnel and Development, said: “The use of apprenticeship levy funds to pay for MBAs for highly paid senior executives is clearly not good use of public funds – but more than that, it diverts opportunities away from the very people the system was designed to support. This highlights the urgent need to reform the system to ensure young people do not continue to lose out.”

Shazia Ejaz, a director of the Recruitment and Employment Confederation, said: “Most businesses agree that the apprenticeship levy has not worked. MBA use of it is further proof of this.”

Think tank boss Stephen Evans, chief executive of the Learning and Work Institute, said: “The current apprenticeship levy can’t pay for everything, so we need to agree how to prioritise limited investment – which would surely be more about young career starters and less about MBAs for well-paid executives.”

A spokesperson for Cranfield University said: “Cranfield University provides a successful and established Senior Leaders Apprenticeship programme in line with the government’s strict apprenticeship funding rules.

“We offer people who are moving into senior roles in the public and private sectors an opportunity to develop their skills. For many, this is the first time they have studied for a formal qualification. Those who successfully complete the SLA have the option to study other master’s qualifications, including the Executive MBA, at additional cost.”

Loughborough University declined to comment.

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