With the CITB having operated a training levy in the construction sector for half a century, it’s view of Chancellor George Osborne’s levy announcement on Wednesday (November 25) was formed of experience. Steve Radley outlines the CITB view of the Budget.
Chancellor George Osborne’s Spending Review statement has provided more clarity on the government’s approach to apprenticeships that includes a fair amount of good news for employers but at the same time leaves a number of questions unanswered.
As we examine its plans, the key questions are will it help to deliver more apprenticeship starts and will more employees complete high quality and relevant apprenticeships?
As an organisation with 50 years’ experience of running a levy, we previously identified a number of yardsticks for the apprenticeship levy.
These included whether the money it raised would be ring-fenced to support high quality training; whether employers feel a sense of ownership; and, whether it helps firms of different sizes to work together to invest in apprenticeships.
The Chancellor’s announcement looks to have ticked the first two boxes but we still need to hear a fair bit more on the last point.
We will be consulting industry and gauge attitudes towards making the apprenticeships levy and existing construction levy work in tandem
Starting first with the apprenticeship levy, the £15k allowance to offset against the levy payment means that only 2 per cent of UK employers will contribute to it, according to the chancellor.
Given the long-tail of small employers within construction, we estimate that just over 700 firms out of 325,000 in the industry will be liable — just 0.2 per cent.
With firms only paying the 0.5 per cent on paybills of £3m and more, the average rate paid by many firms will be significantly lower than the 0.5 per cent marginal rate.
The government has also taken steps to ensure that the apprenticeship levy directs support toward higher quality apprenticeships.
It has effectively agreed a settlement that matches the greater contribution required by employers with giving them a greater say over standards.
Importantly, the new Institute for Apprenticeships, which will be independent of government and led by employers, will regulate the quality of apprenticeships.
The Treasury’s commitment that ‘funding caps will be significantly higher for programmes which have high costs and are of high quality’ will also support employers in sectors such as construction where the average cost of an apprenticeship is £26,000, compared to health and social care where it costs less than a quarter of that.
The Statement also addressed some of employers’ concerns over the capacity of the FE sector to deliver high quality training by protecting core education funding in cash terms and maintaining the base rate of funding for all students aged 16 to 19.
However, a number of questions remain unanswered. These include the rate of support for apprentices under the age of 19 — close to six-in-ten of all apprenticeships are in construction.
For smaller firms not paying the levy, there are also important issues to resolve. These include the support available for smaller companies and whether firms paying the apprenticeships levy will be able to pass their digital vouchers on to other firms in their supply chains.
These are critical issues, given that some 60 per cent of construction apprenticeships are delivered by firms with fewer than 50 employees. With the government also announcing ambitious targets to build more homes, we need an approach that helps the major home builders and their supply chains to work to build a more skilled workforce.
The apprenticeship levy also poses challenges for organisations like CITB that already run one. The most important is whether the existing levies are still needed and whether employers will be prepared to pay them.
Our consultations with employers found most of them answering yes on both counts. However, with employers now working out what they must pay to the government, we will be consulting industry and gauge attitudes towards making the apprenticeships levy and existing construction levy work in tandem.
In construction we need a highly skilled workforce to build the new homes, roads and energy infrastructure that the Chancellor announced. We now need to ensure the apprenticeship levy helps to deliver this.