Introduced in 2017, the apprenticeship levy was widely seen as a positive step towards increasing investment in skills development and training by businesses across the UK.
Not only this, but the government was hailed for creating a truly employer-led system. There was hope among the skills sector that these reforms would help to safeguard the future of apprenticeships, which remain vital to closing the skills gaps that persist in so many UK industries.
However, fast forward two years, and it’s a slightly different picture. Apprenticeship start rates have dwindled, and critics wonder whether, since its inception, the levy has really helped businesses and apprentices alike.
It’s true that we’ve seen a very small increase in higher level and degree apprenticeships, but is the system really helping young people to access rewarding careers and supporting employers to find new talent as well as reskill the existing workforce?
According to guidelines from the Department for Education (DfE), an employer paying £10,000 a month into their levy account would receive that £10,000 back to spend on apprenticeships, plus a 10% contribution from the government.
However, responding to a recent FoI request from the City & Guilds Group, the DfE confirmed that it received an apprenticeship budget of only £2.01billion from the treasury in 2017/18, with only £268 million being spent on apprenticeships for levy-paying employers. The rest was spent on legacy pre-levy training and infrastructure, leaving a £400 million underspend in the first year.
Whilst I acknowledge that an underspend is perhaps unsurprising when the system is in its first year and taking time to bed in, we are just a month away from the end of year two and it will be important to have clarity at this time around the financial facts of the apprenticeship budget.
The detail sitting behind the apprenticeship budget has led to some confusion:
- Firstly, the budget originally set out by the treasury was less than the amount of levy money collected by HMRC, meaning that the government would never have been able to meet the promised apprenticeship funding for employers.
- Secondly, 90% of the levy budget has not been available for employers to freely spend as they like, despite this being one of the key reasons behind the levy in the first place.
Naturally, this has raised some eyebrows. Important questions remain around the ways in which the funds collected by the government are being spent. Reporting on the levy spend has varied widely, leading to confusion and the reluctance of employers to engage with the system.
The government needs to rectify this and start providing regular, proactive and timely reporting on the apprenticeship spend.
This will mean everyone involved in delivering apprenticeships and benefiting from them is able to plan more effectively. To further support this, employers, training providers and the government need to be working more closely together to bring much needed changes to the system that will benefit all parties involved, whether they are SMEs or large businesses.
Our recent Flex for Success report highlighted that 92% of levy paying businesses wanted to see greater flexibility in how they spend their levy funds. In order for this to happen, the apprenticeship levy needs to be a lever that helps support, as promised, a truly employer-led system.
The government must ensure real employer ownership, giving businesses the control in how they spend their funds, and the sufficient budgets to do so.
Kirstie Donnelly MBE, Managing Director at City & Guilds Group
To read our full government recommendations for The languishing Levy pot: £2.01bn Apprenticeship budget, but with £400m underspend the apprenticeship levy, click here