Apprenticeship levy is ‘at breaking point’

In 2017 the government’s apprenticeship levy came into place as part of its pledge to increase the number of apprenticeships. The levy works by all businesses with an annual wage bill of £3m paying in 0.5% of their staff costs into the apprenticeship fund which is then topped up the government. The levy is there to support the financial cost of undertaking an apprenticeship, which the companies can dip into, as a way of promoting more businesses to take on more apprentices. The government is still meant to co-fund apprenticeships if you are either too small to pay into the levy or have used all your ‘allowance’.

The Apprenticeships and Skills Minister, Anne Milton, has good news. They have seen a big leap in the number of higher-level apprenticeships started in the past year, and around 60% of the recently started apprenticeships are supported by the levy. The CMI research also shows that nearly half of all managers expect to see a rise in the number of new starts in the next 12 months. However, there has also been a large drop in the number of apprenticeships started since the levy came into play. The first quarter reported a 59.3% drop and the current start figures are 20-25% lower than this time last year. These figures have caused a split, with many worried this is a continuing trend, while others are convinced that this is just part of the process and that employers have needed the time to figure out the best way to use the levy and the fund effectively.

However, these aren’t the only concerns or complaints.

Paul Everitt, head of the aerospace trade body ADS has said, “The pitch for the levy was that for those already providing high quality training, they would be no worse off. However, we’re seeing many large businesses, which already spend significant sums on training, handing over far more than they get back.” Many employers are complaining that the funds given back by the levy do not cover the training costs, especially for those higher-level apprenticeships that are proving so beneficial, and so they are paying twice. Many have expressed the view that it is just another business tax, or discussed how difficult it is to navigate the system and the extra admin burden it is providing.

Many have also found that many of the training programmes they wish to use have not been certified, meaning they cannot send apprentices on the courses they require if they also wish to receive funding from the levy. This had lead to some employers stopping altogether because they cannot buy into the courses they want. The Institute of Directors has found that less than 1 in 5 are using contributions from the levy to take on more apprentices, and that while many “support the government’s drive to raise the quantity of apprenticeships and to improve the prestige of vocational education”, their survey shows there are significant issues and that “the levy is not working as intended. The new system was supposed to be employer driven but the narrow and centrally controlled design mean this is not happening” and that “many employers are unable to make the complex and restrictive rules fit their training requirements.”

With all these complaints and concerns, and data such as 1 in 7 employers saying it is not fit for purpose, it suggests that the apprenticeship levy is nearing its breaking point and the government has a limited in window in which to change things for the better. It is most definitely not a good sign that such a percentage of employers and businesses are complaining or expressing concerns about the way it is run and the amount it is costing them in time and money. The government has pledged a further £80m to help small business access the levy and thus increase their apprenticeship offering, yet there is real concern that this is just another example of ‘throwing good money after bad’ if they don’t get the system sorted.

The government needs to put the control back in the employers’ hands – it needs to be an easy to understand and navigate system for employers to put their money into the levy and draw their allowance back out of it. They need to be able to build the bespoke training programmes to suit their needs and the skills and experience their apprentices require for a career in that area, perhaps through a modular system of approved modules that will also allow more flexibility. The government needs to help employers adjust to the new system and do their part to promote apprenticeships of all levels and build their prestige and recognition. The digital apprenticeships service needs to have a wider range of registered training providers and allow small businesses to access it.

The main aim of the government’s plans and the apprenticeship levy should be to reduce barriers such as content, course costs and availability so all businesses and careers are able to increase their apprenticeship offering at all levels and help people of all ages gain the skills they need to be gainfully employed and fill the skills shortage.

At the moment, it doesn’t seem as though it will be successful, which is a shame, as it had a lot of potential.

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