Ben Willmott, head of public policy at the CIPD

Plans in the Queen's Speech as part of the Government's 'Levelling up' agenda will be undermined unless the Apprenticeship Levy is made more flexible to allow firms to invest in other forms of accredited training and development, say CIPD

Government plans to create an adult education and training system that is fit for the future will be fatally flawed unless the Apprenticeship Levy is reformed, as new data shows employers have been forced to write-off £2bn of levy funds over the last two years. 

This is the view of the CIPD, who have obtained data using FOI requests which show that £1.999 billion of employers’ levy funds expired and returned to the Treasury between May 2019 and March 2021, as they were unable to use them on apprenticeships.  

The analysis from the professional body for HR and people development also shows that employers are spending increasing amounts on generic management apprenticeships. Overall, employers spent £378 million spent on just 4 generic management apprenticeship standards between 2017/18 and 2081/19, as employers seek ways of spending their levy funds.  

While employers have doubled their expenditure on management apprenticeships, in the same two years the number of apprenticeships going to young people under the age of 19 fell by 8%.  

At the same time, as CIPD revealed in March, overall employer investment in apprenticeships, including for young people, and in skills more widely has fallen since the levy was introduced. 

Ben Willmott, head of public policy at the CIPD, the professional body for HR and people development, said:  

“The Government’s ambition to revamp the further education system by boosting employer engagement with local colleges and investment in adult skills is exactly right but will be fatally undermined unless the Apprenticeship Levy is reformed.  

“Turning the Apprenticeship Levy into a more flexible training levy would enable firms to invest in other forms of accredited training and development, which would maximise their ability to work with further education colleges and universities. 

“Apprenticeships are ideal to help young people develop the skills they need for a career in an occupation but other forms of training and development are usually more suitable for existing and typically older employees and learners as they are more flexible – and provide better value. 

“Developing the skills of managers to manage people is an absolute priority for all organisations but there are much more cost effective and flexible forms of training to achieve this than through management apprenticeships.” 

Apprenticeship Levy has failed on every measure and will undermine investment in skills and economic recovery without significant reform, says CIPD 

2nd Mar 2021: Reforming the levy to a broader, more flexible training levy would boost employer skills investment and business performance, while supporting the Government’s further education reforms, according to the @CIPD 

As the Apprenticeship Levy nears its fourth anniversary, an assessment of its performance by the CIPD on key measures over the period is damning. Analysis by the professional body for HR and people development has shown that since its inception employer investment in training has declined, overall apprenticeship starts have fallen and far fewer apprenticeships have gone to young people. 

The CIPD is urging the Government to announce it is reforming the Apprenticeship Levy into a more flexible training levy in the Budget this week to boost employer investment in workforce skills and help the economy recover. 

Key data used for the CIPD’s four-year performance assessment of the levy shows that:  

  • Total apprenticeship starts have fallen from 494,900 in 2016/17 to just 322,500 in 2019/20 
  • The number of apprenticeships going to under 19s has fallen from 122,800 in 2016/17 year to just 76,300 in 2019/20 
  • The number of apprenticeships going to 19-24 year-olds has declined from 142,200 per year to 95,300 per annum over the same period 
  • Overall employer investment in training which the levy was supposed to boost, has also declined, with employer funded off-the-job training in England falling by £2.3bn between 2017 and 2019 
  • The current funding arrangements are also failing smaller organisations. In 2016 11% of small businesses (less than 50 employees) had apprentices in their organisations, but by 2019 this had fallen to just 9%. 

Looking ahead, the CIPD believes that without reform, the levy will have further damaging effects on investment in skills by:   

  • Further restricting apprenticeship opportunities for young people at a time they are most needed 
  • Undermining the Government’s Skills for Jobs further education reforms and the plan to boost employer engagement with colleges 
  • Reducing employers’ ability to invest in the skills their business needs for the recovery. 

This last point is reinforced by a new large-scale CIPD survey of 2,000 organisations by YouGov on behalf of the CIPD which shows nearly half of large employers say that reforming the levy to a more flexible training levy would help them improve workplace productivity and business performance to either a great (23%) or a moderate extent (23%). Just 13% of large firms employing 250 or more staff said reforming the levy in this way would have no impact on productivity or performance.  

CIPD Chief Executive, Peter Cheese, said:  

“On all key measures the Apprenticeship Levy has failed and is even acting to constrain firms’ investment in apprenticeships and skills more broadly. It appears to have achieved the opposite of its policy objectives. Without reform it will act as handbrake on employer investment in skills, damaging firms’ ability to recover from the pandemic. 

“A more flexible skills levy would mean employers could use it to develop existing staff through other forms of accredited training and skills development which are cheaper and usually much more suitable for employees aged 25 and over, leaving more money to invest in apprenticeships for young people who most need them.  

“Levy flexibility would also help employers fund their employees through training in further education colleges as many technical and vocational courses are not apprenticeships. This key change would provide a big boost to meeting the ambition of the Government Skills for Jobs white paper and boost employer engagement with their local colleges.” 

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