As the news breaks that apprenticeship starts are down by 26% - following the introduction of the Apprenticeship Levy in April 2017 - its clear that currently, the Government is falling a long way short of its target of 3 million apprenticeship starts by 2020.
On paper, the Levy delivers good value. All businesses with a payroll over £3m per annum have to pay 0.5% of their wage bill towards funding apprenticeships, (employers get a £15,000 fixed annual allowance to offset against the levy payment). Once employers have registered for an apprenticeship service account, they can use that money, plus a 10% government contribution, on apprenticeships within their own organisation.
For those sitting below the £3m payroll clause, the rule was originally that employers paid 10% of training costs, while the Government pitched in 90%. Recent reforms to the Levy now reduce employers training costs to 5% from April 2019, with the Government paying 95%. Those reforms have also allowed employers paying the Levy to invest up to 25% of their funds to support apprentices in their supply chain.
The Levy - which was meant to boost the number of apprenticeships and improve the UK’s productivity record - has been hit with a number of set-backs, which has seen a staggering £2bn sitting unspent. With employers set to see their contributions disappear if they have not accessed them for training within two years of paying in, there’s not only a gaping black hole where it comes to apprenticeship starts, but levy paying businesses will soon see one when it comes to their contributions too.
Kevin Wellman, CEO of the Chartered Institute of Plumbing and Heating Engineering (CIPHE) said, “The Levy was meant to reform the system and in many ways it has – but for the worst. Parts of big business have regarded the Levy as little more than an additional tax on wages, with many failing to claim back the money they have put in. Amongst employers that have utilised the Levy, there has been a trend in furthering the qualifications of existing employees, rather than taking on inexperienced new starters.”