Wednesday 6 March 2019

Devolution at any cost?

Since the introduction of the apprenticeships levy in April 2017, local leaders up and down the country have relentlessly called for it to be devolved. The rationale is that local leaders know better than the central government when it comes to understanding and meeting employers’ needs.

However, as with every new policy, there are key questions that need to be answered: 
  1. is the policy effective, i.e. likely to achieve the expected results? And 
  2. what's the best level to implement this policy? Is it better to implement it at the national level or are local authorities more likely to achieve a positive impact?

This new report, undertaken jointly by the Centre for Vocational Education Research and the What Works Centre for Local Economic Growth provides a real life example of how these questions play out in practice by looking at the impact of devolution of the Apprenticeships Grants for Employers (AGE) to the local level through City Deals.
The report first looks at whether the AGE was at all effective in driving apprenticeships numbers. It provides some evidence suggesting that the programme – at the national level – had a limited but positive effect in driving apprenticeships take-up for small and medium size businesses.
The bulk of the report considers whether the devolution of AGE to several local authorities had a more positive effect on take-up of apprenticeships in these areas. To do so, the report compared apprenticeships take-up in local authorities that have negotiated devolution of AGE in their City Deals with those who did not. The report finds that devolution had close to no effect on apprenticeships take-up and in some instances even had a negative effect.
The report offers one possible explanation. Most of the flexibilities granted through the City Deals were around eligibility of large employers, or firms taking more than one apprentice. Results for the national scheme suggest that it didn’t matter for large employers. The report also provides statistics showing  that most smaller firms don’t take on more than one apprentice. As such, the limited and even negative effects of devolving AGE might be the result of local authorities negotiating flexibilities on the wrong margins. This suggests that future efforts might be better targeted at other means for increasing the number of apprenticeships (our apprenticeship toolkit covers some of the possibilities).
The natural conclusion of this experiment is that devolution per se is no silver bullet in promoting local economic development. Before negotiating over powers, central and local government need first and foremost to have an excellent grasp of how a policy works in practice at the national level and in local area. Only in this way, can local policy-makers hope to use their closer position to employers to improve the effectiveness of local labour market policies.

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