With the news that the levy will effectively function as a tax, Smita Jamdar asks whether government will succeed in its aim of making it simple and attractive for employers to offer high-quality apprenticeships.

Last week, FE Week reported that employers will have to enter into contracts with the Skills Funding Agency when they access the money they are entitled to under the apprenticeship levy scheme. This seemed to take everyone, including, I must admit, me, by surprise. Having reflected further, perhaps it shouldn’t have. 

The levy was introduced as part of this year’s Finance Act, which states that “a tax called the apprenticeship levy shall be introduced”. So, the levy is just another tax which, once paid, becomes public money. As others have observed, it is, by UK standards at least, an unusual tax because it is hypothecated, with the money ring-fenced for a particular purpose. 

Hypothecation has never been a strong feature of our taxation system, largely because governments have rarely shown themselves responsible enough to be trusted to continue to spend the money in the way initially proposed. But nevertheless that is what the levy is.

There is a risk that apprenticeships will be among the most prescriptively documented forms of provision we have

The effect is that when the money is drawn down by employers, conditions will be attached on the draw-down to ensure that it is spent on the things it should be spent on and not those it wasn’t intended for. This is both a general feature of prudent custodianship of public funds and the only way for government to fulfil the hypothecation. Prudent custodianship requires broadly three things:

1. A clear set of expectations as to what the funds must be used for; 

2. mechanisms for ensuring compliance with those expectations through a combination of assurances from the recipient of the funds and audit; and 

3. the capacity to claw back funds or terminate the right to funding where there is the evidence of abuse.

In this case, the confirmation from the SFA that a contract with employers would be necessary came in response to an FE Week query about how the SFA intended to tackle misuse of the funds, specifically concerns about the prospect of employers requiring providers to ‘pay to play’. 

So in some ways, the requirement for funding conditions was so blindingly obvious that one wonders whether it was news at all. What makes it news is, I suspect, the fact that it is another example of the confused and incremental nature of announcements related to the levy, which have made it difficult for both employers and providers to take plan properly for its implementation.

Employers are in any event right to be apprehensive about the requirement. The conditions the SFA has traditionally attached to funding have been complex and onerous, and ensuring compliance with them has spawned an industry in its own right. It would be really unfortunate if an overly bureaucratic approach undermined the key rationale for the levy, which was to put employers at the heart of developing high-quality, flexible and responsive skills provision.

There is a risk that apprenticeships will be among the most prescriptively documented forms of provision we have

Already there is a risk that apprenticeships will be among the most prescriptively documented forms of provision we have. In addition to the contract between employers and the SFA, there will be the contact between the employer and the provider. 

There will also be a contract (whether formally described as such or not) between the employer and the apprentice, and between the provider and the apprentice. In relation to both the employer/apprentice and provider/apprentice relationships there will be a raft of legislation that affects the relationship that isn’t captured in the contracts. On top of all that, there is an expectation that the employer, the provider and the apprentice will enter into a threeway commitment statement summarising the responsibilities of each. 

The stated aim of the government’s reforms is to ensure that there is the swift required growth in skills by making it simple and attractive for employers to offer high-quality apprenticeships. It remains to be seen if the levy achieves these aims.

 

Partner and head of education, Shakespeare Martineau LLP