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Make the most of devolution: a lesson from the apprenticeships grant

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Recently, there have been increasing calls to devolve more responsibilities to local government. The rationale is that the local government might be better suited to face local challenges, thus adapting national policy to local needs. However, devolution could also prove costly, in terms of time and resources, especially if local powers are not able to balance national and local requirements. It is, therefore, crucial to better understand whether and how the devolution of powers is beneficial.

Devolution is also affecting “education and skills”, e.g. with the Adult Education Budget being managed locally form 2019/20. With this in mind, the All Party Parliamentary Group on Apprenticeships (@ApprenticeAPPG) organised a special session to discuss devolution, where we were invited to present findings from our recent study on the devolution of the Apprenticeship Grant for Employers (AGE).

The Apprenticeship Grant for Employers was a governmental scheme to incentivise employers to hire one or more apprentices. Originally a national programme, introduced in 2012, it was designed to encourage apprenticeships take-up by employers who had never had apprentices (or had only a few). When the national scheme was reformed, 40 local authorities in devolved areas negotiated additional flexibilities through the City Deals, implemented in either 2015 or 2016.

The goal of our research, a joint project between the What Works Centre for Local Economic Growth and the Centre for Vocational Education Research, was to evaluate the effectiveness of the devolution on the apprenticeship take-up.

We compared the growth in the number of apprenticeships starts in local authorities where AGE was devolved with the growth in those that followed the national scheme, using a difference-in-difference approach. Of course, some areas are very different from others and it may be difficult to compare them. To take this into account, we also only considered very similar local authorities. Additionally, we used another econometric technique (called ‘synthetic control’) to further control for differences across areas.

Regardless of the method, the results indicate that the devolution of AGE had close to zero effect on the take up of apprentices.

One possible explanation is that the devolution may have been too incremental to be useful at the local level, given that our analysis suggests the impact of the national scheme was small at best.

Another possible explanation, however, is that flexibilities were negotiated on the wrong margins. The evaluation of the national scheme (BIS, 2013) suggested that take up was much more prevalent among very small firms than in any other group. Yet the negotiated flexibilities generally focused on continuing to provide support to larger firms. One could argue that efforts should have focused to make the system more generous for smaller firms, rather than expanding subsidies to larger firms where take-up had been poor in the national scheme.

More generally, this study highlights the importance of accompanying devolution by appropriate structures to discern how to use resources effectively in the local context. Otherwise, there is a danger that devolution multiplies bureaucracy (with associated costs) while doing little or nothing for local economic growth.