Employers lose £11m apprenticeship levy after missing first monthly deadline

Employers lost access to £11 million of their apprenticeship levy funds in May – the first sun-setting period for the policy, the government has revealed.

The amount is 8 per cent of the £135 million they paid in May 2017, which is slightly lower than what officials had previously predicted.

As per the levy rules, big businesses with a payroll of £3 million or more who pay into the pot have a 24-month limit to spend their funds.

Once that time is up, the funds will expire on a month-by-month basis.

Keith Smith, the Education and Skills Funding Agency’s director of apprenticeships, told the Public Accounts Committee in March that “estimates suggest in May this year, the first month [in which] we get to the two years, we’re looking at a loss of potentially £12 million, or 9 per cent of what they paid in May 2017 – a fairly small amount”.

Answering a parliamentary question from Catherine McKinnell, the MP for Newcastle upon Tyne North, skills minister Anne Milton said yesterday: “The amount of funds entering employers’ digital apprenticeship service accounts in May 2017 was £135 million, of which £11 million in unspent funds expired in May 2019. This was the first month of expiry of funds.”

McKinnell also asked what plans the government has for those funds.

“As well as funding apprenticeships in levy-paying employers, levy contributions are also used to fund training for existing apprenticeship learners and new apprenticeships in non-levy paying employers,” Milton replied.

“We do not anticipate that all employers who pay the levy will need or want to use all the funds in their accounts, however they are able to.”

Academies minister Lord Agnew revealed in response to a parliamentary question in March that the Department for Education spent £1.6 billion in 2017/18 to fulfil employers’ demand for apprenticeships, but “lower than anticipated demand” led to an underspend of £400 million.

In a subsequent webinar with FE Week, Smith admitted the vast majority of the underspend, “just over £300 million”, was taken back by the Treasury.