Will Alison Wolf persuade the Treasury and PM to levy smaller employers?



The apprenticeship levy could be in for a shake-up, following the appointment of Baroness Alison Wolf to the policy unit at Number 10 to advise the Prime Minister on skills.

In early July 2015 the Social Market Foundation published a report authored by Wolf, entitled Fixing a Broken Training System: The case for an apprenticeship levy.

Exactly one week later, the then Chancellor of Exchequer, George Osborne, announced to general surprise that the government would indeed introduce a levy to fund apprenticeships.

But, the levy would only be charged to employers with a payroll in excess of £3 million per year, making up less than 2 percent of all employers.

Wolf thinks limiting the levy to only the largest employers was a mistake.

She told the education select committee in June 2016 the decision to introduce the levy seemed to have been made “the night before” the budget announcement.

“One of the mysteries to me remains why – well, I can imagine why politically – we created another problem for ourselves by saying there is only going to be limited number of employers who are involved in this, and there’s going to have to be a completely separate system for small businesses.”

The professor, who was part of Lord Sainsbury’s panel looking into technical and professional education reforms as well as the more recent Augar Review, continued: “Nobody in government has given me an explanation, and why would they?

“I suspect it was one of these things that was decided the night before.”

As FE Week reported at the time, she went on to say: “If you’re going to have a proper apprenticeship system, and one that’s attractive to young people, you’ve got to get small and medium employers involved.”

Extending the levy to smaller employers is an option being explored by the recently re-elected chair of the education select committee, Robert Halfon.

In 2018, the former skills minister said: “Once we are clear about what works best, we could then make a powerful case for expanding the levy.”

And in an interview with FE Week this week, he said: “I do definitely think we need to look at the levy. I don’t have all the answers because I would love our committee to hopefully do an inquiry on reform of the levy.”

He anticipates that there “will be reforms” by this government and says his preference is for the levy to be extended by the number of companies that pay it.

Halfon said the £3 million threshold could be reduced to £2 million.

And the Guardian is reporting today that the Chancellor will announce, what the newspaper calls, “a further expansion of apprenticeships”.

 



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2 Comments

  1. interesting article Nick, not sure if the below helps.

    When i carried out some analysis on this, it would raise about an extra 3-4% by lowering the threshold to £2million.

    back in october there were about 28,872 companies paying the levy, lowering it to £2million would be about 36,744 companies paying the levy.

    o 36744-28872 = 7872 extra employers that would pay the levy
    o If we assume that they pay £12500 on average into the levy then 7872x£12500= an extra £98,400,000 into the levy pot
    o £2,675,000,000 + £98,400,000 = £2.773 billion

    o It was projected to raise £2.675 billion in its first year of operation.

    it’s only an extra 3-4%. sorry for the napkin maths, might not be 100% accurate 🙂 *raw data taken from Bureau van Dijk as of October 2019

  2. Or why not do it like the NHS, everyone pays in to one pot according to ability to pay, and everyone takes out according to need.

    So employers with turnover of

    Up to £1m pay 0.1% (max £1000)
    £1m-£2m pay 0.2%
    £2m-£3m pay o.3% etc up to £5m – £6m

    Then everyone calls on the pot as they recrtuit Apprentices, if we need more money in the system rates can be adjusted. e
    Everyone pays in, everyone takes out of one simple system. As i say like the NHS. Can you imagine what people would say if we suggested funding the NHS like we currently fund Apps. Everyone with their own pot, people who earn a lot pay a levy, thoes that dont pay 5%, if there is enough left after the rich ahd taken theirs. No one would dream of suggesting it as it would be completely mad. But it is good enough for fundung our future talent pool.

    Also should look at Apps funding. The total amount doesnt matter, it is the amount of funding a month that matters.
    So a base rate of
    X for L2 per month
    Y for L3
    Z for L4 etc

    Then have a mulitplier for technicality. We all know a L3 Electrical costs more to deliver than a L3 Accountancy, just because of the equipment/facilities involved.