Millions of pounds in taxpayers’ money is being used to part-fund university courses for top executives earning more than £100,000 a year, an investigation by The Independent can reveal.
The spending is happening despite government attempts to stamp out such use of the apprenticeship levy two years ago.
Industry bosses, think tanks and politicians say that subsidising executive MBAs is not what the levy was meant to achieve and warn that the young and new entrants to the labour market are losing out. They say that the scheme 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 in the last three years have averaged just 330,000. This has been accompanied by a dramatic shift in their make-up: there has been a collapse in entry-level apprenticeships (equivalent to five GSCE passes), down from 53 per cent of total apprenticeship starts in 2017 to 24 per cent today, with the number of under-25 apprentices plummeting 36 per cent since 2016.
At the same time, the number of higher and degree-level apprenticeships for management and high-flyers has sky-rocketed, more than tripling from 34,643 apprenticeships in 2016-17 to 110,026 apprenticeships in 2021-22.
At the top end, an estimated £100m of the apprenticeship levy has been used to subsidise top earners getting their executive MBAs.
Ken Murphy, Tesco CEO, said: “It is clear the apprenticeship levy is not working. Those looking to gain valuable experience with an entry-level apprenticeship are missing out over people already in senior management positions. With proper reform, we could help to redress the balance and ensure the levy is spent on creating thousands of opportunities where they are most needed.”
Toby Perkins, the shadow skills minister, said: “Apprenticeship starts are in free-fall under the Conservatives and advanced opportunities are being pressed at the expense of young people and adults looking to retrain or up-skill from entry-level opportunities.”
The apprenticeship levy is a charge that businesses with annual payrolls over £3m must fork out, paying over 0.5 per cent of their wage bill which they can use to recruit and train apprentices, but any levy that remains unspent after 24 months has to be returned to the Treasury as a tax. It affects around 2-3 per cent of employers.
The practice of firms using their apprenticeship levy to directly fund MBAs was banned by the government in 2021 when former education secretary Gavin Williamson responded to negative press and said he was “unconvinced it was in the spirit of the programme” or that it provided “value for money”.
But our investigation has revealed that several of the UK’s top 10 business schools – including Henley Business School and Cranfield School of Management – still tout for executive MBA candidates with the message on their websites that prospective candidates can use the apprenticeship levy to fund most of the credits – up to two-thirds – needed 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 candidates for senior leadership apprenticeships who go on to become MBAs has never been published, but experts say the number is “tens of millions” and – given the high business school conversion rate of senior leadership apprentices into MBAs – estimated to be at least £100m.
Cranfield said their indicated 2022 conversion rate was 100 per cent. Cranfield had 125 starts on their Senior Leader Apprenticeship + Executive MBA programme in the calendar year 2022, with the SLA component funded by the levy. All 125 students have indicated they would continue to the eMBA component. For all these MBA candidates, over half the total cost, currently set at £27,000, is subsidised by the levy.
The beneficiaries are almost exclusively high-earners. The average salary of executive MBA candidates at Henley and Cranfield are £136,000 and £102,000 respectively, according to the latest business school rankings by the Financial Times. The FT also reported that graduates receive an average salary rise of 45 and 37 per cent respectively on completion of the MBA.
Tom Richmond, director of EDSK, said: “It is enormously frustrating that the government continues to spend tens of millions of pounds every year from the apprenticeship levy on subsidising MBAs for senior executives at big companies when they could instead have focused that precious funding on helping young people, particularly those from less privileged backgrounds, to get started in their career.”
Asked if he supported the use of millions of pounds of the levy to part-subsidise MBAs, Robert Halfon, minister for skills, apprenticeships and higher education avoided the question and reiterated the Williamson amendment.
He said: “We have removed the MBA part of the highly popular Level 7 senior leader apprenticeship, so levy funds can’t be used to take this qualification.” The DfE added: “Following a review in March 2021, the MBA qualification was removed from the senior leader standard as the review concluded that it wasn’t required to be an effective senior leader.”
Asked if he was concerned about the precipitous 59 per cent fall in apprenticeship starts by under 19s since 2014-15, Mr Halfon replied: “Young people under 25 accounted for more than half of all apprenticeship starts in 2021-22. This is great news, but we know there is more to do to make sure more young people can climb the ladder of opportunity.”
The levy has been a boon for some business schools who have circumvented the Williamson ban by dividing their MBAs into two parts: a “senior leadership apprenticeship” costing £14,000 that can be funded by the levy pot, and some additional modules to add the MBA qualification at a cost of between £7,700 and £13,000 to be paid for by the candidate or their firm.
By disaggregating the 180 credits needed for an MBA into three stages and calling stages one and two a senior leadership apprenticeship worth 120 credits, universities and companies have together found a way – wholly within the rules – to use the apprenticeship levy to train high-level executives to their mutual advantage. And they can do this because the government turn a blind eye.
Dozens of levy-paying firms in a variety of sectors are still actively deploying the levy to part-fund top executives doing senior leader apprenticeships together with MBAs. Henley Business School boasts that it works with over 190 employers for this standard. This includes most of the heavyweights in the banking and financial sector, though firms are not obliged to disclose this activity. A spokesperson for HSBC said: “We don’t publicly reveal that data.”
It comes as spare capacity in the system has worryingly been reduced to almost zero. In the last financial year, just £11m of the government’s near £2.5bn apprenticeship budget remained unspent. More and more of the pot is going on higher- and degree-level apprenticeships, which have surged from 7 per cent of starts six years ago to over one-third today. At the elite end, level 6 and 7 apprenticeships, including expensive senior leadership apprenticeships and part-funded MBAs, now comprise 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 underspends during Covid years allayed fears – until now.
The biggest losers are the young. A 2023 report from the Chartered Institute of Personnel and Development (CIPD) analysed apprenticeship starts by age and said: “The drop in apprenticeships for young people is particularly worrying as evidence suggests they most need and benefit from apprenticeships.”
The CIPD also reported a “sharp fall in the number of apprentices in more deprived parts of the country”. It suggests, they added, that “the apprenticeship system has undermined apprenticeships as a vehicle for supporting social mobility and levelling up”.
A spokesperson for Henley Business School said: “We are delighted to see many of Henley’s Senior Leader apprentices wish to continue their learning. We offer learners the opportunity to continue onto an MBA programme if they so wish, but this is not funded by the apprenticeship levy.
“We are also keen to play an important role in expanding degree apprenticeship opportunities for young people starting out in their careers.”
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.”
Additional reporting by Thomas Kingsley
