Labour must answer key questions about its Growth and Skills Levy

Plans for apprenticeship levy reform must be discussed with the whole sector and clear about all their financial implications

Plans for apprenticeship levy reform must be discussed with the whole sector and clear about all their financial implications

30 Mar 2024, 5:00

Superficially, Labour’s policy to introduce a Growth and Skills Levy – where employers could spend up to 50 per cent of their payments on non-apprenticeship training – is proving very attractive to many employers and their representative bodies. 

Levy-paying employers continually complain that they can’t spend their levy payments on apprenticeships. A training programme other than an apprenticeship will also, in many cases, be the skills solution that is needed by an employer and employees.

Labour’s Shadow Skills Minister, Seema Malhotra MP, is quite right to suggest that employers usually spend less than half of their levy payments on apprenticeships. She is also right to note that since 2017 billions of pounds generated by the apprenticeship levy have been retained by or returned to the Treasury. Such funds, however, have been used to fund other government expenditure.

UVAC has long argued that every pound raised through the levy should be used to fund apprenticeships, with under-spend used for other skills programmes. We welcome the shadow minister’s comments in this area.

There are however problems or, at best, unanswered questions concerning these plans.

In an excellent analysis last September, FE Week noted that In 2022/23 the apprenticeship levy raised £3,580 million. After expected transfers to the devolved nations this left a total of £2,972 million for England. In 2022/23, £2,458 million was spent on apprenticeships. Do the simple maths (2,972 – 2,458) and you are left with £514 million of ‘spare’ funds for other training programmes.

But with Labour’s proposal, if levy-paying employers spend 50 per cent of their levy payments on other training programmes, this would only leave £1,486 million to be spent on apprenticeships. UVAC would ask Labour for a commitment that they will match or exceed the current government’s spend on and budget for apprenticeships.

This is a massive issue. Under the current system, apprenticeships for non-levy paying employers are funded by levy funds that are paid by levy-paying employers that they do not use on their own apprenticeship programmes.

The skills sector is fragile. It needs certainty and clarity

As levy-paying employers will obviously spend significantly more of their levy payments under a Growth and Skills levy than they do now, Labour needs to guarantee that the apprenticeship funding currently available for non-levy paying employers will remain stable or increase when their reforms are introduced.

There are of course many potential answers to the above issues.  Labour could simply accept that there will be fewer apprenticeships. This seems unlikely. Alternatively, Labour could raise the levy rate from 0.5 per cent of payroll or increase the number of employers required to pay the levy. 

Employers would, of course, argue against such a proposal. But Labour could in return point out that UK employers typically spend far less on the training and development of their employees than their OECD counterparts. A Growth and Skills Levy would also provide employers with far more opportunities to spend their payments than the current system. 

UVAC would encourage Labour to invest more funds from general taxation in skills provision. This may be resisted by shadow treasury ministers, but spending on apprenticeships and skills is ‘investment’. Better-trained employees are more productive; employers can pay more in wages and make greater profits. This equates to a bigger tax take for government and a return on investment.

One final request UVAC would make of Labour is that it should discuss its proposals in detail with all types of employers and providers, colleges, independent training providers and universities. 

It was concerning that the shadow apprenticeships and skills minister, in her keynote address at the Annual Apprenticeship Conference 2024, made no mention of universities in delivery alongside her reference to colleges, training providers and employers.

The skills sector is fragile. It needs as much certainty and clarity as possible in policy proposals and recognition of the contribution by all types of providers to maximise provider investment and engagement in the skills agenda. 

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One comment

  1. Rob green

    The most telling point is the comment that ‘universities were not mentioned’. In truth apprenticeships as a route for young people ie school leavers has been crowded out by the advent of areas such as degree apprentices,many of which are older individuals, and the focus on adult apprentices in other guises.

    It’s positive to hope labour start to redress this and that rebadged company training is reduced out of the apprentice funding pot. There is a place for such training but the balance has tipped too far.