Employers use just 14% of their levy in first 18 months

Employers have used just under 14 per cent of their apprenticeship levy funds in the first 18 months since the policy was introduced, FE Week can reveal.

Last month, skills minister Anne Milton revealed the total balance of employers’ apprenticeship service accounts was £2.7 billion as of the end of September.

 In response to a Freedom of Information request from this newspaper, the Department for Education said that £370 million of this had been drawn down, amounting to 13.7 per cent.

Large employers have been made to pay the apprenticeship levy since it was launched in April 2017. The money goes into a pot, which employers have two years to claim back for spending on apprenticeship training.

But concerns have been raised that employers are not spending their funds quickly enough. Last week, for example, Health Education England urged NHS trusts to use or transfer their levy cash with greater speed to avoid losing the money.

Recent policy changes have aimed to increase levy spending. From April 2019, levy-paying employers will be able to share more of their annual funds with smaller organisations, when the levy transfer facility rises from 10 to 25 per cent.

And in last month’s Budget, the chancellor Philip Hammond announced that the 10 per cent fee small businesses have to pay when they take on apprentices will be halved.

Levy money also has other purposes. Unspent funds from the national pot are used in ways that include funding apprenticeships for small, non-levy paying employers, for English and maths qualifications and for extra support for apprentices who are care leavers or have special needs.

 FE Week asked the DfE how much of the levy pot has so far been used on these different areas, but it refused to say.

Mark Dawe, chief executive of the Association of Employment and Learning Providers, said the government “needn’t panic over these figures” and said the new measures will “allow more headroom for small and medium sized enterprises to engage” with the levy.

“More employers are engaged than before but it takes time to build strategies and pilot programmes. However, there are obstacles such as inflexibility in the off-the-job training rule which needs sorting,” he said.

John Cope, head of education and skills policy at the CBI, said employers are “committed to high-quality apprenticeships and making the levy work” but warned that “big challenges remain”.

 He added: “The government was right to say in the Budget that it’ll work with business in the lead up to the spending review to evolve the system into a more accessible skills levy.”

 The government had hoped the apprenticeship levy would encourage more employers to invest in training and help it hit its manifesto target of three million apprenticeship starts by 2020. However, starts have fallen dramatically since its launch.

The latest figures, released on October 26, revealed that apprenticeship starts for July were down 43 per cent on the same month in 2016, before the introduction of the levy.

In June, FE Week reported that employers had used just 10 per cent of their apprenticeship levy funds in the first 12 months since it was introduced, with £207 million being drawn down out of a budget of £2.01 billion.