Does the Apprenticeship Levy need fixing?

Does the Apprenticeship Levy need fixing?

As the levy celebrates its first birthday in April, we take a look at some of the teething problems it has faced and ways in which it can be successfully leveraged

One of the government’s flagship skills policies, the Apprenticeship Levy, celebrates its first birthday in April. But despite the great hopes at the launch, the programme has yet to find much love from businesses – indeed a growing number of corporates are complaining that the structure and administration of the levy are proving counterproductive.

When skills minister Nick Boles launched the levy in April, much was made of the impact it would have on investment levels in skills training across a range of sectors.

Boles recently told FE Week: “I’ve always been quite interested about the idea of hypothecated taxation and whether you can get greater acceptance on the part of people paying the tax if they know what it’s going towards.”

“Politically, it fell on very fertile ground because the chancellor and the PM felt that, in a sense, this was the time to cash in our chips with business.”

“So when I presented the idea of the levy to George [Osborne] first, I could see, immediately, his eyes lit up. He thought, ‘now that’s great’, because it solves how we get the three million and how we pay for it.”

Boles proved a successful midwife of the policy, which essentially marries government subsidy with corporate contributions to give a turbo charge to the UK’s skills pipeline.

Teething problems

Since the April start, however, the levy has attracted some criticism for, among other things, imposing too great an admin burden on business and failing to achieve the intended boost to skills investment that targets 3m people starting apprenticeships by 2020.

Government data showed that in period between May and June 2017, covering the period when the levy came into effect, apprenticeship starts plunged 59.3% to 69,800.

The knives have been out. “The levy is nothing but a tax,” Sir John Timpson, chairman of high street cobbler chain Timpson, recently told the Telegraph. “The only way to get money back is a tortuous process of changing your training programme to fit government guidelines.”

Arch co-founder Ben Rowland defended the levy, explaining that any change of this scale will naturally require a period of adjustment.

He suggested that the drop in numbers could be attributed to small companies now struggling to afford apprenticeships due to changes to the system. He said: “Previously, training providers would receive money from the government to provide apprenticeships, then they would go out and try to engage employers and offer them the spaces on the courses.”

“However with the introduction of the levy, many training providers are receiving much less money than they were before. It’s less viable for them to be trying to engage the smaller, non-levy paying firms.”

Looking at the figures, Rowland explained: “Apprenticeship numbers weren’t supposed to fall, but it’s not a surprise, and not necessarily a bad thing, as it demonstrates that two good things have happened; employers have jettisoned low-value programmes, which they previously didn’t have to pay for, and have spent time thinking carefully about how to best use their levy.”

Furthermore, based on direct experience with dozens of employers, Rowland outlines a typical time-frame of 12 months to take a levy paying company from zero awareness to having a strong programme ready to go. As a result, companies may have to wait a full year before the programme bears fruit.

He added: “Our number of starts has gone up x2.5 since the levy came in, but only because we started working with employers on it back in early 2016.”

The Chartered Institute of Personnel and Development (CIPD) last week issued a report that called on the government to rethink the ways in which the levy is run. It highlighted the growing practice of rebadging – where employers simply rename existing training as an apprenticeship.

The research shows that “46% of all respondents think that their organisation will be encouraged to rebadge current training activity as apprenticeships. The proportion is higher amongst public sector organisations, where over half think that they will be encouraged to rebadge.”

By any other name…

Recent reports have highlighted that some businesses had started using the apprenticeship levy to fund senior executives on MBA courses, and our research suggests that a large proportion will use the levy to support similar activities. Over a third (36%) of respondents reported that their organisations are using or planning to use the apprenticeship levy to fund management and/or leadership training.

Lizzie Crowley is a skills adviser at the CIPD. She said: “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.

“There also needs to be much better support for SMEs, both for those that pay the levy and those that don’t, to help them to design and implement effective apprenticeship schemes.”

A spokesman for the Department for Education said: “Feedback we have had from levy payers shows they are planning to increase their demand for apprenticeships to ensure they have the right skills in their workforce to grow their business and boost their productivity.

“Government will continue to work with employers on how the apprenticeship levy can be spent so that it works effectively and flexibly for industry, and supports productivity across the country.”

Making the levy work for you

Employers may experience a levy headache, but firms can use the scheme to their advantage and maximise the benefits.

Companies like Arch Apprentices can help firms to convert costs to a professional-grade training programme for existing employees as well as new starters, including school leavers, graduates, and business as usual hires.

As a result, firms will see this compulsory investment in training deliver a real return for their business and shareholders.

Arch can help firms throughout the process, including the account and levy management, the recruitment and onboarding, the delivery of training, and the quality management.

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