Spring statement: Chancellor will review apprenticeship levy

The government will review the apprenticeship levy to check it incentivises investment "in the right kind of training" according to the spring statement.

The government will review the apprenticeship levy to check it incentivises investment "in the right kind of training" according to the spring statement.

23 Mar 2022, 13:15

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Rishi Sunak has announced that he will review the apprenticeship levy.

In his spring statement today, the chancellor said a review of the apprenticeship levy will be part of a new Treasury tax plan, which will be finalised in the autumn. 

“We lag international peers in adult technical skills. Just 18 per cent of 25-64 hold vocational qualifications, a third lower than the OECD average,” he told the House of Commons.

“And UK employers spend just half the European average on training their employees

“So we will consider whether the current tax system including the operation of the apprenticeship levy is doing enough to incentivise businesses to invest in the right kinds of training.”

Treasury documents published just after Sunak’s speech outlines the government’s new ‘Tax Plan‘. The plan has four themes; cost of living, capital, people and ideas.

Under ‘people’, the Treasury states that “the government is increasing skills funding significantly over the parliament. We want businesses to do the same.”

Calls for flexibilities of the apprenticeship levy have come from employer representatives for years, with various sectors wanting to use funds for other training courses and associated apprenticeship costs like travel and wages.

The Treasury appear to have heard calls for reform. In the main spring statement document, it states: “The government recognises that employers have frustrations with the way that these apprenticeship levy funds can be spent within the apprenticeships system and is delivering a suite of improvements to address these.

“As part of this, the government is looking at how more flexible apprenticeship training models can be supported, while ensuring apprenticeships remain a high-quality training route for employees of all ages and stages of their career.”

Skills sector bodies however have warned against going too far in providing employers with greater levy flexibilities.

Responding to today’s announcement, the chief executive of the Association of Employment and Learning Providers, Jane Hickie, said: “We would strongly advise that levy funding should remain ring fenced for training and assessment only.

“We look forward to seeing more details about the government’s plans to boost training investment and productivity rates by reforming the apprenticeship levy. Like everybody else, employers and training providers face rising costs over the coming months. Training providers will be disappointed there is little in today’s statement that offers the support they need.”

And speaking at yesterday’s FE Week Annual Apprenticeship Conferece, Association of Colleges boss David Hughes said it would be an “unmitigated disaster” to add radical flexibilities to the levy.

“The funding in the apprenticeship levy is for apprenticeship training, not for things like wage subsidies,” he said.

“I think it could be a really dangerous line to go down. In my view the levy is a tax to pay for training that leads to apprenticeships, it’s really simple. We shouldn’t let it be spent on other things.”

Tom Bewick, the chief executive of the Federation of Awarding Bodies, said the review of the levy was the “most welcome” in today’s spring statement.

“The brutal fact is that this payroll tax, levied on just 2 per cent of British companies, has not delivered on its original policy goals because we have fewer people and companies, overall, engaged in apprenticeships than we did in prior to 2017,” he said.

“We look forward therefore to making positive proposals to the government of how to improve the operation of the levy, but crucially, to bring an end to the decline in employer investment in training which has halved over the past decade.”

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