Two years since the levy launched, skills minister reflects on success of a ‘carrot and stick’ policy

Employers with a payroll of £3 million or more made their first monthly apprenticeship levy payment in April 2017 and if they do not use it by the end of this month they will lose it forever.

But despite many apprenticeship courses still in the design phase, the government will not reconsider taking the funds off employers as part of its “carrot-and-stick” approach, Anne Milton has said.

FE Week was speaking to the skills minister in the week that marks the second year of the levy, a policy that she says has made “phenomenal progress”.

The two-year mark brings with it the first 24-month ‘sunset period’, in which employers will lose all of their first monthly payment if they’ve not spent or transferred it yet.

In March, Keith Smith, the Education and Skills Funding Agency’s director of Apprenticeships, told the public accounts committee that employers are expected to lose around £12 million next month, or 9 per cent of what they paid in April 2017.

One key reason why employers have not spent all of their funds is because the apprenticeship standards they want to use are still in the design and development phase. The NHS, for example, has at least 20 standards still being developed that it plans to use to up-skill its workforce.

Asked whether it is fair that the health service will lose a chunk of its public funding next month, Milton said: “It’s quite a tough thing for employers to suck up but it’s only a month’s worth that they lose, not all of it.

“There is an element of carrot and stick in this.

“Would we’ve got the standards in place if there hadn’t been an imperative to do it because the funds were running out? I have to ask myself that question.

“I think it’s tough but we want the skilled workforce and this is the way we get it, and the money will be recycled into apprenticeships.”

Speaking to FE Week last month, the national programme manager for apprenticeships at Health Education England, Lucy Hunte said the NHS expects to lose “huge amounts” this May when levy payments begin to expire.

But Milton argued if “they’ve got big levy funds then they should transfer them out, there is a lot of bodies, charities that delivery NHS services”.

In January the Confederation of British Industry said employers should be allowed to appeal for more time to spend their apprenticeship levy cash if the standards they want to use are still in development.

Under such a system employers would have the right to request an extension on the 24-month limit for spending their levy funds “as long as the business commits the funds” in their accounts.

Asked if the proposal was something that the government was considering, Milton said no.

“The difficulty is that if we make exceptions, then everyone wants to be an exception.”

She added that the levy transfers that are expected this month from big levy payers “could be significant” and “I know a couple of transfers that will take place that will be in favour of the public sector”.

Considering that employers, like the NHS, have not had the full necessary suite of standards ready to use, some will not have been able to make strong progress on the government’s public sector apprenticeship target.

The target, which came into effect in April 2017, obliges public sector organisations to make sure that new apprentices make up at least 2.3 per cent of their overall workforce numbers on average over the next four years.

The NHS had 13,800 apprenticeship starts in 2017/18, which represented 1.2 per cent of a total headcount of 1,194,614.

Asked if there was any view to rethink the target, Milton said: “No, there is not.”

“I actually think that some delegations should probably have more ambitious targets. If you look at some NHS Trusts I visited during National Apprenticeship Week they are doing a fantastic job.”

Since the levy was launched in April 2017, there have been two notable policy changes: upping the amount employers can transfer to other employers from 10 per cent to 25 per cent, and halving the co-investment to 5 per cent.

Asked if there were any other changes in the pipeline, Milton said: “We are really open minded.

“If we introduce flexibilities we have to be able to police that. Most employers are very responsible and will spend it on the things we allow the flexibilities for but there are always people that will try and stretch the envelope and spend on things we don’ think it should be spent on. So we have to be very careful.”