From education to employment

What next for the apprenticeship levy?

National Apprenticeship Week will inevitably share some of the news headlines with the Budget this year especially since the Chancellor is expected to announce more about the new levy system for apprenticeships.

We do not expect to hear much is that is new and it will probably be confirmation of the proposals that have already been announced. The Business select committee in the Commons was recently informed by Sajid Javid not to expect too much because details of the scheme such as the funding rates would not be ready before the summer. The skills minister Nick Boles has said that Mr Osborne might have something significant to say. We shall see.

With April next year as the start date for the levy, there is an increasingly urgent need from employers and providers to understand how the levy will apply to them. This includes answers to some fairly basic questions from both large employers paying the levy and from the smaller non-levy payers. We have to keep the momentum going in terms of growth. Providers have done a great job in driving the number of starts and raising the quality but this has to be supported by government. They have to address the additional growth we need for 16 -19 year olds and they need to stop short term changes to funding rates. We need some key details about the levy to keep this momentum going. We do not want April 2017 and the levy to become a barrier to growth.

For example, we do not even know what the levy will pay for. Will it just be apprenticeships or apprenticeship-related spend? Will it just be for employees or will employers be able to spend their money on apprenticeships for their suppliers?

Ministers have always said that a levy paying employer can get back more government money to fund their apprenticeships than the levy tax they have paid. However we don’t know how this will exactly be implemented although the government is talking about a top-up system for each employer’s digital account. We might also see businesses being able to purchase additional vouchers at a discount. But these features may not be ready for the start of the programme in April 2017.

We will also need to know how the government will value each type of apprenticeship. At present we have nearly 200 different frameworks and eventually we could end up with many hundreds of different standards. The system has traditionally worked on the basis of a fixed funding rate for each framework which is clear to both the employer and the training provider but the government has been piloting a cap on the maximum amount an employer can receive which can then be used to negotiate a price with the provider to cover the cost of the training and assessment. AELP believes that in the interests of both quality and simplicity, we should stick to a set of funding rates, not caps. This is particularly vital as we also need to understand how incentives (for 16-19 year olds for example) might work and how English and maths and Additional Learning Support will be funded.

The skills minister has again offered MPs reassurance that any levy money unused by levy payers to fund their apprenticeships will be ringfenced to help fund the apprenticeships offered by smaller businesses. BIS expects the levy to raise £2.5 billion for England by 2020 and it has concluded that some of the levy proceeds will be available to fund SMEs. The big unanswered question though is whether that sum will be enough to satisfy the demand from levy payers wanting their money back and from SMEs who currently account for about half of the apprenticeship opportunities on offer.

AELP has consistently maintained that the final design of the reforms should keep smaller businesses on board to achieve the 3 million target and this will remain a top priority for Mark Dawe who will take over as the Association’s CEO after Easter. The Trailblazer pilot funding system which requires upfront cash contributions from employers will be a barrier to entry for many non-levy payers. We have recommended that providers manage the system of contributions and incentives so that the SME is not involved in numerous negotiations, contracts and cash transactions. We must have a long-term sustainable solution for the funding of non-levy payers wanting to offer apprenticeships.

The apprenticeship programme and the levy will generate much more investment and interest, and this is a major opportunity for good quality and flexible providers. And let us not forget the additional apprentices who will get a great experience and the employers that will close their skills gaps. While there are significant issues that must be sorted out very quickly, we should remain optimistic about the future and the successes being celebrated in National Apprenticeship Week are a great reminder why the extra investment in this fantastic programme is justified.

Stewart Segal is chief executive of the Association of Employment and Learning Providers

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