Tesco boss: Reboot apprenticeships to kickstart economy

Exclusive: Supermarket CEO says ministers must end scandal of public funds meant for young workers being spent on City high-flyers

Taxpayer-funded apprenticeships must be rebooted to help kickstart the economy, the boss of Tesco has said, as he hit out at the rising number of courses for high-earners.

Ken Murphy said the number of people completing apprenticeships equivalent to bachelor’s and masters degrees, including MBAs, had soared by more than 400 per cent in the eight years to 2022, from 20,000 to more than 100,000.

However, during the same period, lower-level training equivalent to GCSEs, typically undertaken by the young, had plummeted by 70 per cent, from 300,000 to just 90,000.

The supermarket boss said the figures proved the apprenticeship’s levy was failing and serving the interests of highly paid executives over young people just starting their careers.

Calling for an overhaul of the system that would help bolster the workforce, he said: “Any scheme that supports MBAs for managers over opportunities to kick-start careers for all has lost its way. This was not the purpose of the levy and it is neither fair nor effective. That is why we need to fundamentally reboot the system and unleash the potential of our young people.”

He urged the government to make the levy more flexible so companies could use the funding for programmes that improve the work-related skills of young and inexperienced staff. He also called for firms to be able to use the money for sector-specific training, from food technology and finance.

“We’re confident that with the right reforms we could return the number of apprentices to pre-levy levels, resulting in thousands of opportunities across the retail sector,” he said.

Mr Murphy’s criticisms follow an ongoing investigation by The Independent that exposed how the levy is being “gamed” to pay for masters courses, with more than £1bn spent to subsidise these studies since 2017, including £100m used to part-fund MBAs for high-flyers.

This has led to a booming industry in which masters-level university courses are rebadged as “apprenticeships” and paid for using the levy at the taxpayers’ expense.

Today, we can further reveal that six universities involved in this practice have admitted to receiving more than £13 million in apprenticeship levy funding, mostly in the past two years, to subsidise around 1,000 candidates who have enrolled in their part-time senior leadership apprentice, which typically gives them two-thirds of the credits towards their executive MBA.

In response to Freedom of Information requests, Henley Business School, Teesside University and Cranfield University said the number of enrolments for this standard was 324, 244 and 239 respectively. Candidates typically get the course for free with the university receiving £14,000 for each applicant from their employer’s apprenticeship levy. Three other universities – the University of Portsmouth, University of Strathclyde and Loughborough University – also revealed over 200 starts collectively for this standard.

The apprenticeship levy is a charge that businesses with annual payrolls over £3 million must fork out, paying 0.5 per cent of their wage bill that they can use to train apprentices, but any funding that remains unspent after two years has to be returned to the Treasury as a tax. Government data reveals that £300 million of the levy has been used to fund the senior leadership apprenticeship standard.

The government initially responded to our investigation with a pledge to crack down on the use of taxpayers’ money to part-fund ineligible university courses such as MBAs, but then backtracked, saying it was happy with its part-funding model. This was despite Robert Halfon, minister for skills, apprenticeships and higher education, having previously described the use of the apprenticeship levy to pay for MBAs as “gaming the system”.

Tesco chief executive Ken Murphy (Ben Stevens/Parsons Media/PA)

Use of the levy to part-fund MBAs has drawn stinging criticism from former Tory education secretary Gavin Williamson, former Labour education secretary Alan Johnson, former children’s commissioner for England Anne Longfield, London mayor Sadiq Khan, Ofsted chief Amanda Spielman, Lush CEO Mark Constantine, as well as from think tanks and industry representatives who have called for urgent reform of the system.

Mr Murphy added that a huge opportunity was being missed, with hundreds of millions of pounds worth of unused levy funds handed back to the government in recent years as a tax because of the fall in low-level training intakes, including £600 million in 2021.

“That’s enough to fund 60,000 apprenticeships. That’s 60,000 lives that could be fundamentally improved in communities across the UK,” he said.

A Department for Education spokesperson said: “It is wrong to suggest a rise in degree-level apprenticeships is taking opportunities from younger workers. Seventy per cent of people starting an apprenticeship do so at a lower-level and under-25s make up more than 50 per cent of all starts. Thousands of employers, including Amazon and Asda, make good use of their levy funds to create hundreds of apprenticeship opportunities and last year 99.6 per cent of the apprenticeship budget was spent.”

Government figures show that £2 billion of the levy was returned to the Treasury in the past five years and that there are 100,000 fewer under 25s starting apprenticeships today than before the levy was introduced in 2017.