Osborne looks to tax credits and mandatory employer cash contributions for apprenticeships

Chancellor George Osborne confirmed the government will introduce an HMRC-based funding system alongside a mandatory employer cash contribution for apprenticeships through his Autumn Statement.

He said the government will develop a model which uses HMRC systems to route apprenticeship funding direct to employers.

The Treasury subsequently announced it will launch a consultation on the technical details of the system in early 2014. It is unclear whether the PAYE tax system will be used, as suggested in the government consultation.

The government will also be looking at the option of an “alternative funding route for the smallest businesses”.

A compulsory employer cash contribution for a significant proportion of the external training costs of an apprentice (excluding English and maths) will also be introduced.

During his speech in the House of Commons, Mr Osborne said: “The government will put business at the centre of the apprenticeship system by enabling employers to receive funding for the training costs of apprentices directly through an HMRC-led system and ensuring that employers contribute.”

The Treasury also confirmed it will provide £40m to deliver an additional 20,000 higher apprenticeships starts in the 2013/14 and 2014/15 academic years.

It will provide an extra contribution to the costs of training for 16 to 17-year-olds and consider the approach for 18-year-olds.

Several caps will be introduced on the maximum government contribution per apprentice.

A proportion of apprenticeship funding will be withheld for a “payment by results” approach.

Read more about the Autumn Statement in the next edition of FE Week.