The government must take steps to reform the apprenticeship levy

22 Sep 2019, 5:00

Government policy on apprenticeships is not working as intended, says John Cope. What’s needed is further (and urgent) reform

Employers invest more than £44 billion a year in training and are, more than ever, passionate supporters of apprenticeships. They all agree that the apprenticeship levy helps to plug skills gaps, especially given the focus on delivering more of the high-quality training that firms need to succeed. But it’s two years since the levy was introduced and apprenticeship starts are down 31 per cent. It’s clear that government policy is not working as intended, especially for young people and smaller firms.

Common problems hold many firms back, such as small, independent companies going to local training providers and being told the money has run out, to large levy-paying employers struggling with the complexity and inflexibility of the system.

Despite its rocky start, employers want to support the government’s efforts to evolve the system and play their part in making the levy work. That’s why this week, the CBI published a new report, Learning on the job: Improving the apprenticeship levy, outlining four urgent steps the government must take to reform the system and make the apprenticeship levy a success.

First, firms rightly expect transparency around levy receipts and expenditure. They are confused and crying out for clarity on how their levy funds are being used.

They read speculation in the papers that the levy is overspent, but are themselves struggling to utilise their levy funds for training – something that feels totally paradoxical. It’s essential to be more open with employers about how the levy system is working, what’s being funded, and how their contributions are being spent. This includes clarity on levy money covering the apprenticeship provision for nonlevy payers.

Second, companies want the apprenticeship levy system to become more user-friendly – whether that’s helping smaller businesses switch to the National Apprenticeship Service, or much better guidance on the 20 per cent off-the-job rule so it doesn’t act as a barrier.

The levy risks becoming a roadblock to modernisation

The CBI also wants more locally-led “matching services” that allow large firms to pass on levy funds to their supply chains where appropriate.

In the West Midlands, local leaders are already making those crucial connections between SMEs and levy-paying firms. Since the initiative launched in March, large firms have supported more than 70 apprentices in the region.

In Greater Manchester, the combined authority has set up an online portal to link smaller businesses short of the necessary capital to invest in training with big local employers with the capacity to help.

There is no reason these successful projects can’t be replicated.

Third, given the financial press on the levy, making it sustainable is becoming more and more urgent. By introducing an immediate £100 million annual government top-up to the levy budget, employers can continue using the scheme in the short to medium term to take on apprentices of all ages and skill levels.

Without this, there’s a serious risk that the status quo can’t be sustained. Uncertainty is starting to undermine confidence in the apprenticeships brand with the potential, if it continues, to make employers rethink their programmes.

Finally, companies want the government to launch the public consultation promised in last year’s budget about the levy’s future. Reform was initially scheduled for 2020. That is just three months away.

Many companies want the apprenticeship levy to broaden into a more flexible “skills levy” to allow them to deliver more high-quality training that helps to grow their business and gives people successful careers. Such a change would involve an honest conversation, given the potential trade-offs and funding issues. That conversation needs to be had.

Without this urgent action set out in the CBI’s report, especially on transparency, the apprenticeship levy risks becoming a roadblock to the government’s wider and welcome efforts to modernise the skills system for employers and employees alike.


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