Employer groups call on Sunak to reform levy funds in his spring statement

Many levy-paying businesses have found it challenging to use for their training needs

Many levy-paying businesses have found it challenging to use for their training needs

20 Mar 2022, 6:00

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Employer groups are calling on the chancellor to allow apprenticeship levy funds to cover the cost of apprentice wages and transport expenses in next week’s spring statement – but there are conflicting views on whether other training programmes should become eligible. 

The apprenticeship levy was introduced in 2017 and aimed to help increase investment in training. However, many levy-paying businesses have found it challenging to use for their training needs. 

A 2020 report from the Confederation of British Industry said that many businesses that pay into the levy – those with an annual pay bill of over £3 million – claimed it had become a “barrier” to increasing their investment in training. 

At the time, the CBI recommended the government turn the apprenticeship levy into a “flexible skills and training levy”, which could be used for short modular courses, pre-apprenticeship programmes, product training, professional courses and soft skills training. 

However, to date, these calls have fallen on deaf ears, and joint minister for FE and HE Michelle Donelan told FE Week last month that there were no plans to introduce big changes to the system any time soon. 

Despite this, employer groups are continuing to call for reforms ahead of chancellor Rishi Sunak delivering his spring statement on March 23. 

The British Retail Consortium (BRC) wrote to secretary of state for education Nadhim Zahawi urging the government to use the statement to introduce “much-needed flexibility” to the levy. 

“Bringing about more flexibility in the apprenticeship levy would not cost government or businesses a penny but could help bring about an estimated 8,000 new apprenticeship places across the retail industry,” Helen Dickinson, chief executive of BRC, said. 

BRC said the government should allow levy funds to cover associated training costs – including transport, or backfilling roles to free up staff for off-site training. 

Like the CBI, the BRC also said the government should allow a wider range of courses to be supported through levy funds – allowing funds to be used to support more young people through “vital” pre-employment and pre-apprenticeship programmes. 

Make UK, a group that represents manufacturers in the UK, wants to see a portion of levy funds being spent on apprentice wages and meeting other costs, such as capital expenditure. 

“Make UK has called for simple changes to the apprenticeship levy to make it work better for employers,” said Jamie Cater, employment senior policy manager at Make UK. 

“While apprenticeship starts in manufacturing and engineering have recently increased significantly – a trend we expect to continue this year as employers recover from the impact of Covid – the government could do more to support businesses to recruit and retain apprentices. 

“Allowing a portion of levy funds to be spent on apprentice wages and meeting other costs, such as capital expenditure, would remove some of the immediate barriers to employers investing more in apprenticeships and reduce the amount of unspent funding returned to the Treasury.” 

Using unspent funds from the apprenticeship levy to cover apprentice wages is a policy switch favoured by the Labour Party. 

Other employer groups highlighted how the government needed to do more to meet employers’ needs. 

“Many of our businesses are small and medium-sized and do not necessarily understand the scheme and how it can be applied to their business, or deem it overly bureaucratic,” Claire Steiner, chair of education and training at the Institute of Travel and Tourism, told FE Week.

 “More ‘how to’ communication aimed at smaller businesses would be beneficial to encourage take-up and investment in skills in the workplace.” 

While groups were calling for change, the Federation of Small Businesses warned against “well intentioned” reform of the levy. 

In a letter to Sunak, the FSB said the levy should not be turned into a broader training levy if this leads to levy funds drying up for those smallest employers. 

“We would ask you to apply appropriate scepticism to superficially attractive changes to the levy which will not lead to positive results in the small firms in which the majority of the employed population work,” said Mike Cherry, national chair, and Martin McTague, national vice chair, policy and advocacy, at FSB. 

Surprisingly, none that spoke to FE Week called for employer cash incentives, which were introduced to help recover apprentice starts post Covid-19 at a price of £3,000 each, to be extended. The cash bonuses end this month.

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  1. Just Saying

    More flexibility would occur if employers could if they wish, use the Levy to fund Level 2 and 3 entitlement ( including new L3 Skills funding) for their current workers or new recruits. This would help alleviate some of the problems and frustrations caused by the AEB procurement and contracting shambles of recent times, and also the enormous cost of duplication through devolved Mayoral mechanisms. Existing funding mechanism for these entitlements are simply not getting through to the many good quality providers that are able to support learners effectively so this would help engage this delivery capability. Providers would be on ROTAP and OFSTED approved so delivery quality mechanism is well established too.