A Freedom of Information request made by the Open University (OU) has revealed that £3 billion in Apprenticeship Levy funding remains unused, meaning that only 14% of available funding is being utilised by employers.
Further research carried out by the OU revealed that although employers agree in principle with the Apprenticeship Levy, many have been left feeling ‘frustrated’ with the scheme. A handful of employers stated that the process for applying for funding has ‘put them off’, while 66% reported that they find the system confusing.
Furthermore, some employers said that the apprenticeships available are ‘not flexible enough to meet their needs’, while others revealed that government changes mean that they are ‘unable to make long-term strategic decisions’.
Of those who have embraced the Apprenticeship Levy, 27% stated that it has been good for their organisation, while 20% said that working with apprentices has delivered ‘significant benefits’.
Commenting on the matter, David Willett, Corporate Director at the OU, said: ‘Employers are missing out on a golden opportunity to close skills gaps and ensure that their organisations are equipped with the ability, agility and knowledge required to handle upcoming challenges.
‘With so many employers experiencing skills shortages, it’s crucial that they make use of the Levy and invest in training to ensure that their organisations remain strong and competitive in the future.’
The Confederation of British Industry (CBI) has published a report outlining the next steps that must be taken in order to successfully reform the UK’s apprenticeship system.
The report suggests that the government should give the Institute for Apprenticeships (IfA), the principal body for vocational skills in England, the ‘independence and clout it needs’ in order to reform the UK’s apprenticeship system.
According to the CBI, the IfA must ‘speed up the apprenticeship standards approval process’ so that businesses can start using them, and outline how T-levels and higher T-levels will fit in the skills system.
The business group has also called for the government to give employers ‘longer to spend their money where apprenticeship standards remain in development’.
John Cope, Head of Education and Skills Policy at the CBI, commented: ‘This business-backed blueprint needs to be taken seriously to make sure the English skills system supports, rather than frustrates, employers, offering a first step to people in their career.
‘This must include giving the IfA the independence and clout it needs to create a world-class skills system in England.’
More than half (53%) of employers currently paying the apprenticeship levy would like to see it replaced with a ‘training levy’, according to a new survey carried out by the Chartered Institute of Personnel and Development (CIPD).
Of more than 1,000 employers questioned, just 17% of those paying the levy said they supported it, while four in ten claimed it would make ‘little or no difference’ to the training they provide.
The study also revealed that 46% of levy-paying employers will simply ‘rebadge’ their existing training in order to meet the requirements.
Introduced in April 2017, the apprenticeship levy is paid by employers with a pay bill of more than £3 million each year. The levy is 0.5% of the pay bill, although there is an annual allowance of £15,000.
The change was included as part of a package of measures to reform the funding of apprenticeships for all employers.
Commenting on the survey’s findings, Lizzie Crowley, Skills Adviser at the CIPD, said: ‘Our research shows that the straitjacket of the apprenticeship levy is forcing many firms to re-badge a lot of their existing training as apprenticeships, as they seek to claw back the levy they pay. In many instances this is not adding any additional value and is creating a lot of additional bureaucracy and cost.
She continued: ‘The government needs to seriously review the levy to ensure it is flexible enough to respond to employers’ needs and to drive the greater investment in high quality training and workplace skills needed to boost UK productivity.’
The number of individuals starting apprenticeships in England has fallen by 59%, according to figures published by the Department for Education (DfE).
The data showed that, between May and July of this year, only 48,000 people began an apprenticeship – a significant fall when compared to the same period in 2016, when 117,000 individuals entered into an apprenticeship.
Experts believe that the introduction of the Apprenticeship Levy in April 2017 has contributed to the fall in the number of workers beginning an apprenticeship.
The Levy was introduced as part of a government target to encourage the creation of three million apprenticeships in England by 2020, with the stated aim of providing ‘a more sustainable workforce and helping to bridge the UK skills gap’.
It changes the way in which apprenticeships are funded, requiring larger UK employers with pay bills of over £l3 million to invest a percentage of their annual pay bill in apprenticeships.
Commenting on the DfE data, Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said: ‘Getting more people doing apprenticeships is critical, especially if we are to tackle the skills shortage biting many small firms.
‘The Apprenticeship Levy isn’t solely to blame for this drop. The reality is that 98% of firms don’t pay the levy, and these small businesses will be essential to the government reaching its target of three million apprenticeships by 2020.’
As the 2017/18 tax year commences, a range of new tax and business measures have come into effect.
The introduction of the new Apprenticeship Levy is amongst these new measures. This forms part of a government target to create three million new apprenticeships in England by 2020. The Levy requires employers with annual pay bills of over £3 million to invest a percentage of their yearly pay bill in apprenticeships.
Additionally, from 6 April individuals will be able to open up and save into a Lifetime ISA. This type of ISA is available to any adult under the age of 40, and can be used to deposit up to £4,000 per tax year. Consumers will receive a 25% government bonus on any savings put into the account before their 50th birthday.
The tax-free savings and the bonus can be put towards a deposit for a first home in the UK worth up to £450,000 at any time, from 12 months after having first saved into the account.
Meanwhile, from April, the tax and employer advantages of certain salary sacrifice schemes will be removed. This means that employees swapping salary for benefits will pay the same tax as individuals who buy them out of their post-tax income. Some workplace benefits will be exempt from the changes: these include pension contributions and arrangements, childcare vouchers, workplace nurseries and ultra-low emission cars.
However, the British Chambers of Commerce (BCC) has warned that businesses may be ‘hit by upfront costs’ as the new tax year begins. Suren Thiru, Head of Economics at the BCC, commented: ‘We enter a new tax year with a raft of changes adding to the upfront cost of doing business. While corporation tax is decreasing, companies are more concerned about the escalating burden of input costs which hit firms before they even turn over a single pound.
‘Such costs are likely to cause many firms to implement cost reduction measures and weigh down on firms’ ability to invest, recruit and grow their business.’
Small businesses will receive remnants left over from the apprenticeship levy once larger firms have made use of the funds, Skills Minister Nick Boles has confirmed.
The Government had previously published a document putting forward plans to make apprenticeship levy funds ‘more widely available’ if levy-paying employers do not make use of all of their reserves.
From 2017, the new apprenticeship levy will be introduced at a rate of 0.5% of an employer’s pay bill. Each employer will also receive an allowance of £15,000 to offset against their levy payment.
Speaking in front of MPs, Mr Boles said: ‘While it will be possible for any employer who pays the levy to use their contribution on their own apprenticeship across the economy we don’t expect all employers to use all their money.
‘The levy money that is not used by those employers who have paid it will then effectively be recycled to support the apprenticeships of those employers who don’t pay the levy.’
He also revealed that the new Institute for Apprenticeships will play a ‘very important role’ as the ‘guarantor of quality in the apprenticeship system’, adding that the institute’s board would consist of ‘mainly business leaders’.
It is estimated that the new apprenticeship levy will raise a total of £3 billion a year.
Prime Minister David Cameron has outlined details of how the Government intends to fulfil its pledge to create three million apprenticeships by 2020.
Calling on businesses to invest in their workforce, the Prime Minister revealed that companies bidding for government contracts worth more than £10m will now be required to ‘demonstrate a clear commitment to apprenticeships’.
Mr Cameron also invited employers to give their views on plans to introduce a new apprenticeship levy, which would see employers invest in a training fund.
The consultation on the new levy will run until 2 October 2015, and the measure is expected to be in place by April 2017.
The British Chambers of Commerce (BCC) welcomed the plans. ‘Apprenticeship schemes can play a part in meeting important ambitions to boost skills and drive-up productivity,’ said the BCC’s director general, John Longworth.
‘Government policy is currently too focused on major employers, but equal effort ought to be put on encouraging and supporting smaller businesses to offer apprenticeships,’ he added.
However, manufacturers’ organisation the EEF has raised questions over the proposals.
‘With little detail of the level of the levy, who will be required to pay it and how much government will give back in return, manufacturers have a right to remain sceptical that the levy will create the three million additional quality apprenticeships that we all wish to see,’ commented Terry Scuoler, chief executive at EEF.