Last edited 08 Feb 2019

Apprenticeships levy

See also: New apprenticeship levy.

In the 2015 Emergency Budget, the Government announced that it would introduce a levy on large employers to help fund 3 million new apprenticeships by 2020 to help develop the skills base and drive productivity.

On 21 August 2015, the Department for Business, Innovation & Skills began a consultation on a new apprenticeships levy for employer owned apprenticeships training in England.

In a press release accompanying consultation, it was suggested that the apprenticeship levy would be introduced in April 2017 to increase investment in training and apprenticeships and ‘level the playing field’ so every big company plays their part. Ref PM unveils plans to boost apprenticeships and transform training.

Investment in training in the UK has fallen over the last 20 years, and it is thought this is harming productivity, with UK GDP per hour worked 17% lower than the average for the rest of the G7 and 30% lower than the US and Germany. The government points to research that indicates for every pound invested in adult apprenticeships at Level 2 and Level 3, the country benefits by £26 and £28 respectively.Reduction in training 1995 to 2014.jpg

Skills Minister Nick Boles said, “Skilled people are the lifeblood of a strong economy but for too long UK businesses have invested too little in developing their employeesskills to meet the demands of a competitive, global market. The apprenticeship levy will ensure that businesses invest in skills and training, and will act as a much needed shot in the arm for the country’s productivity.”

The apprenticeship levy will be applied to all ‘large’ employers, who will have an online 'voucher account' showing their levy contribution and digital vouchers that they can use to purchase apprenticeship training. In addition, there will be a requirement to take a company’s apprenticeship offer into account when awarding large government contracts and new ‘industry standards’ will be published.

Within the construction industry, the Construction Industry Training Board (CITB a non-departmental public body that reports to the Department for Business, Innovation and Skills) already has a mandate to collect a levy from construction employers and to use this to support training and skills. However, this mandate is due for renewal in March 2018.

It is intended that the construction industry will be within the scope of the new apprenticeships levy, and the consultation document suggests that the industry will need to decide how best the existing levy arrangements respond to the apprenticeship levy, suggesting:

‘One option is for employers in the construction and engineering construction industries to pay the apprenticeship levy whilst continuing to pay the existing industry levy. If this were to happen we would expect companies in the industries to fund their apprenticeships using the apprenticeship levy.’

‘Another option is to potentially remove the statutory industry levy arrangements completely, so that employers only pay the apprenticeship levy. This would represent a significant change to training arrangements in the construction and engineering construction industries and we would need to understand what effects this would have on the skills and capabilities of the UK construction industry.’

In October 2015, a proposal which would involve large employers paying a levy on their PAYE payroll into the BIS fund, while a levy on their labour-only subcontractors would be paid to the CITB, was backed by 59% of 212 large employers surveyed by the CITB. Ref Construction Manager Magazine 13 October.

In March 2017, the cross-party sub-committee on Education, Skills and the Economy criticised the scheme, saying, “We recommend that the government, as part of its continuing review of the operation of the levy, consider whether a single rate is the best approach and explore ways of restructuring the levy on a sectoral and regional basis…. The government has not set out how its increase in apprenticeship numbers will help fill the country’s skills gaps. The current balance of provision is skewed towards sectors with low wage returns and few skills shortages and we are not convinced that tinkering will bring about the major changes necessary.”

The levy went live in April 2017.

Julia Evans, Chief Executive, BSRIA, said: “Apprenticeships provide the backbone for a career in engineering for many employees and no compromises should be made regarding them... In essence: the levy must meet industry and apprenticeship needs."

BSRIA suggested that industry concerns included:

  • Some firms face paying for the levy but being unable to access new or updated training standards, or have no approved providers available locally.
  • A lack of accessible information for employers about the government’s list of approved providers and their quality of training.
  • Government should give employers longer than 24 months to spend their levy vouchers, if current issues remain unresolved in the first year.
  • Ineffective careers guidance in schools about available apprenticeship options.
  • The government should consider a more flexible skills levy, to not only support apprentices, but also retraining for adults.

In June 2018, the Federation of Master Builders suggested that the levy was not working, and called for a re-think. FMB chief executive Brian Berry said; “The government’s own statistics show a 28% per cent plunge in apprenticeship starts over the current academic year so far. The Apprenticeship Levy was introduced in April 2017 to boost apprenticeship training across all business sectors but so far it seems to be having the opposite effect.”

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