The Treasury has denied the apprenticeship levy is under “formal” review, despite the chancellor promising to “consider” and “examine” its effectiveness.
Rishi Sunak delivered his spring statement on Wednesday and told the House of Commons he would “consider” whether the current tax system, including the operation of the apprenticeship levy, is “doing enough to invest in the right kinds of training”.
Final decisions from this apparent review are set to be announced in the autumn budget, he told the chamber.
Accompanying documents published after Sunak’s speech added: “The government will consider whether further intervention is needed to encourage employers to offer the high-quality employee training the UK needs.
“This will include examining 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.”
But in what one expert described as a “bizarre” backtrack, the Treasury has now played down the review when FE Week approached the department for further details.
FE Week understands the prospect of a formal review into the apprenticeship levy is strongly opposed by officials in the Department for Education who, sources say, pushed back against the Treasury following yesterday’s spring statement.
The Treasury has now said: “There will not be a formal review of the apprenticeship levy or system.
“All taxes are under constant review and we will continue to engage with businesses on the levy. We are committed to protecting the quality of apprenticeship training and improving the system to respond to the legitimate concerns raised by employers.”
Calls for greater flexibilities of the apprenticeship levy have come from employer representatives for years, with various groups welcoming yesterday’s news, as many want to use funds for other training courses and associated apprenticeship costs, such as travel and wages.
Ed Reza Schwitzer, who worked in the DfE for six years before becoming an associate director at public policy think tank Public First, said he suspects the chancellor is likely to announce a “discrete tax credit” in the autumn budget, rather than wholesale change of the apprenticeship levy.
“From what I can pick up from government, this is fundamentally about looking at the skills landscape more broadly and how the current tax system does or doesn’t incentivise the best possible behaviours from business in terms of training and retraining,” he told FE Week.
“Whether this was clear in the original statement is definitely up for debate, but I’m assured that while Treasury will want to ensure any proposed changes work well in tandem with the existing levy set-up, they are not intending to substantially unpack the levy itself.”
He added: “Given the chancellor is clearly working to develop his own personal brand and ‘offer’ to the electorate, I would suspect what would suit the chancellor most is to announce a discrete tax credit of some sort in the autumn budget.”
Tom Bewick, chief executive of the Federation of Awarding Bodies, said it was “frankly bizarre that the chancellor would tell parliament on one day that he was reviewing the levy, only to be flatly contradicted by government officials the next”.
Bewick said no one is expecting the levy to be scrapped, or for an entirely new system to be adopted, but to “try and pretend there is no discussion to be had about the efficacy of the levy is to be tone deaf to what has actually happened to the performance of English apprenticeships” a decade on from the Richard Review.
The Institute of Directors called on the Treasury to clarify its plan for engaging with business on this issue as it believes greater flexibilities are needed in the levy, which was echoed by the Confederation of British Industry.
Jane Hickie, chief executive of the Association of Employment and Learning Providers, urged for details of any type of review to be made available as quickly as possible.
And Toby Perkins, Labour’s shadow skills minister, said the apprenticeship levy itself “demonstrates the government’s chaotic failure to deliver a plan to drive forwards the training opportunities needed to help individuals and the economy prosper”.