Fee cap hits businesses using apprenticeship levy for MBAs

Only £18,000 can be used on masters level degree courses – the Financial Times

Businesses hoping to use the money they are required to set aside for apprenticeships to fund MBA and leadership courses for senior executives have been frustrated by a new fee cap. The Institute for Apprenticeships, the agency created by the Department for Education to administer the levy, has ruled that no more than £18,000 can be spent on master’s level degree courses. This is short of the £47,000 average fees charged by the 14 British business schools ranked by the Financial Times among the top 100 global MBA programmes. It is also several thousand pounds less than the average cost across the UK market, according to the Chartered Association of Business Schools. “A lot of people cannot believe that there could be such a short-sighted approach to funding of something that we know we need,” said Anne Kiem, chief executive of the Chartered Association of Business Schools. Many business schools will now drop plans to develop levy compliant courses, according to Ms Kiem.

Companies booked on more expensive courses will now either have to top up the difference themselves or switch executives on to cheaper programmes offered by less reputable business schools. Simon Littlewood, a partner at Grant Thornton, which jointly devised a part-time MBA course launched by Cranfield School of Management in September, said the tragedy was that the cap would block many British companies from accessing what is world class leadership training. “It feels like an opportunity lost,” he said. But businesses have “reluctantly” decided not to challenge the decision because it might delay further what has already been a protracted course approval process. “Pragmatism rules the day rather than principle,” said Petra Wilton, director of strategy at the Chartered Management Institute. The introduction of the masters degree apprenticeship programme is already starting several months later than originally planned due to delays by IFA committees setting the standards for levy-compliant courses, Ms Wilton noted. “We just have to be realistic that there now won’t be that much movement in business education,” she said. The government introduced the apprenticeship levy in April, setting a goal of creating 3m additional apprenticeships by 2020 in the public and private sectors as part of efforts to improve the UK’s poor productivity record. Any company or public sector body whose salary bill exceeds £3m has to pay the levy, which is a 0.5 per cent tax on their payroll, and they then claim vouchers from the government to spend on courses for their apprentices. Research commissioned by the Department for Business, Innovation and Skills in 2012 concluded that best practice management development can result in a 23 per cent increase in organisational performance.