Chancellor George Osborne’s decision to impose a levy on employers to fund apprenticeships is a positive move if carefully and fairly implemented and if the unintended consequences and opportunities for fraud are thought through in advance.

Training prescribed by industrial training boards was funded by a statutory levy until abandoned by Margaret Thatcher in the 1990s. My first work-based learning job was with the Hotel and Catering Industry Training Board, one of 32 training boards funded by a statutory levy.

Compulsion to take an apprenticeship will probably drive the completion rates down from their current highest ever level into the 60 per cent range

In those days, most companies paying the levy ensured they undertook sufficient prescribed training to claim back in full their levy payments. As it was compulsory, some employees and employers benefited from the training delivered and others begrudged it.

But this is no different from today when a head office HR department imposes apprenticeship programmes across the whole company without explaining to the site managers, supervisors and potential apprentices the benefits and responsibilities.

Any taxation, which is what the levy is, has to be perceived as fair by all required to pay it. The danger lies with limiting it to companies with at least 250 employees.

They will see themselves paying and training staff, who, when competent, will be poached by smaller companies.

The levy should encompass all employers, apart from the very small, say those with fewer than 25 employees.

The powerhouse for economic growth is the small and medium-sized enterprises, so they should be encouraged to take on apprentices, albeit through the imposition of a levy.

The increased income raised by including all employers in the levy, apart from the very smallest, would allow those employers with fewer than 25 employees to have free apprenticeship training.

Of course there will be consequences. Being forced to undertake an apprenticeship so their employer can recoup their levy payments will drive up early leavers.

Our statistics show the highest number of early leavers come from employers who demand the age grant and only pay the minimum apprentice wage.

Compulsion to take an apprenticeship
will probably drive the completion rates down from their current highest ever level into the 60 per cent range. However as Prime Minister David Cameron’s target is only for 3m starts, completions and early leavers will not figure and most early leavers will not join the unemployment register.

How the levy is raised is being pondered by government, whether on a company’s turnover or a headcount of employees.

In some sectors, this may induce employers to make their staff self-employed to avoid paying the levy. It is common practice in hairdressing for the saloon owner to rent out ‘chairs.’

This could convert into other sectors, for example self-employed waiters could ‘rent’ tables from the restaurateur. I have no doubt a whole industry of ‘levy advisers’ will evolve to show employers how to avoid or minimise payments. These people will creep out of the woodwork in the same way there are a plethora of ‘consultants’ who trade sub-contracting around FE colleges and providers for a ‘small’ fee.

I think it is important that the smaller companies and enterprises, ie those with 25 or more employees are brought into the levy as well as large employers.

The overwhelming message from government is the 3m target. If this is not met by manufacturing and service industry employers, it will be easy for the government to switch the tap on for national and local government departments and the NHS to ‘fill their boots’ with apprentices.

While this may benefit the efficiency and productivity of the government departments concerned, the emphasis for apprenticeship recruitment should be concentrated on manufacturing and service employers who need the improved efficiency and productivity a skilled workforce can bring and thus contribute through taxes to the Treasury to fund and improve state services.

And if there is not enough money in the pot to pay for all these increased apprenticeship and there is no other source of government funding, simple — just raise
the levy.