Sector leaders have reacted positively after Chancellor George Osborne fleshed out how the new apprenticeship levy on large firms would raise £3bn a-year.
Mr Osborne confirmed that from April 2017 employers would have to pay 0.5 per cent of their pay roll costs towards the levy — offset by a £15,000 allowance meaning that most employers would not have to pay.
“I am setting the rate at 0.5 per cent of an employer’s paybill. Every employer will receive a £15,000 allowance to offset against the levy — which means over 98 per cent of all employers — and all businesses with paybills of less than £3m, will pay no levy at all.”
The levy, due to be introduced in April 2017, will fund £900m of apprenticeship spending and comes with a new employer-led Institute for Apprenticeships, which will set standards and quality and be fully operational in time for the levy launch, according to a Department for Business, Innovation and Skills spokesperson.
Stewart Segal (pictured right), Association of Employment and Learning Providers chief executive, said “large employers will be encouraged to increase their apprenticeship programmes to make the most of their levy fee.”
“The levy will also apply to more businesses than we expected,” he added.
John Allan (pictured left), national chairman for the Federation of Small Businesses, said: “We support the decision to use payroll as a measure to determine which businesses pay the levy, as opposed to headcount. It recognises that not all businesses will be able to afford to pay.”
Confederation of British Industry director general Carolyn Fairbairn (main picture above) said the levy would be a “significant extra payroll tax on business”.
However, she added: “We welcome the creation of a levy board to give business a voice on how the money is spent.”
The government response to its levy consultation came out the same day as the Budget and addressed the issue of existing levies operated by the Construction Industry Training Board (CITB) and Engineering Construction Industry Training Board (ECITB).
“We understand employers in sectors where a levy is already in place want clarity,” it said.
“We are working with the relevant industry training boards to consult with their members ahead of the introduction of the levy on how existing arrangements will be affected and whether any changes are required.”
Chris Claydon (pictured right), ECITB chief executive, said: “There is still a great deal more detail our members require on how the sector will operate with two levies.”
Steve Radley, director of policy at CITB, said his organisation had asked members “whether the existing levies are still needed and employers will be prepared to pay them” and “most answered yes on both counts”.
Click here for an expert piece by Mr Radley covering the Budget’s levy announcements.