Apprenticeship Levy Reform – A call for Employer input 

Today, The 5% Club calls on its 700 Members and all those employers who are subject to the English Apprenticeship System to pass them their comments, perspectives, and ideas for Apprenticeship Levy reform, to shape and inform The 5% Club submission to the Chancellor later this summer.

In his Spring Statement speech (delivered in the House of Parliament on 23 March 2022) the Chancellor highlighted how we, in the UK, lag behind our international peers when it comes to Adult Technical Education. He cited that:

Just 18% of 25–64-year olds’ hold vocational qualifications, a third lower than the OECD average.

UK employers spend just half the European average on training their employees.

As such, he committed to “considering” whether the current tax system, including the operation of the Apprenticeship Levy is doing enough to incentivise businesses to invest in the right kinds of training.

Earlier this year, The 5% Club explored the operation of the Levy and the performance of the Department for Education’s Funded Apprenticeship Programme through a series of Freedom of Information requests. The responses to these inquiries highlighted the following:

Apprenticeship Levy – from its inception in FY2017/18, receipts from the Levy have grown from £2.271 Billion to £2.910 Billion in FY2020/21 – an increase of 28% over the first 4 years of operation. 

Department for Education (DfE) allocated Apprenticeship Funding – based on forecast Levy receipts, the HM Treasury allocates a fixed annual “ring-fenced” budget for Apprenticeships (covering Levy and non-Levy employers) which has grown from £2 Billion in FY2017/18 to £2.5 Billion in FY2020/21 – an increase of 25%, slightly below the growth in receipts. This funding is set to grow slightly to £2.7 Billion in the period to 2024/25 as set out in the Budget & Spending Review announced in December last year – an increase of just 8% over 4 years.

DfE Apprenticeship Budget Underspend – spending on Apprenticeships is demand led, and there has been an increasing underspend in the allocated budget rising from £424 Million in FY2017/18 to £604 Million in FY2020/21 – a sustained underspend of in the region of 20-25%. 

Non-Levied Employer expenditure – this aspect of the programme which is focused on those employers with a wage bill of less that £3 Million has grown from £189 Million in FY 2017/18 to £557 Million in FY2020/21 – a near threefold increase, although still only representing about 20% of the available budget. 

Co-funding Expenditure – in this area (which shows the expenditure on Levied Employers who have expended their levy funds) has increased from £10 Million in FY2017/18 to £95M in FY2020/21 – now risen to 4% of the available budget. 

Other considerations include the changing nature of the Apprenticeship landscape, notably by age and apprenticeship level. The 5% Club has drawn on the following statistics published at the end of March 2022:

Apprentice Age – The under-25s continue to be the dominant age group in Apprenticeships, consistently representing 50-55% of all participants. The under 19s are most likely to opt for an Intermediate or Advanced Apprenticeship, and very unlikely to be offered a Higher Apprenticeship. Conversely at age 25+, the majority are completing a Higher Apprenticeship, with a minority (less than 15% completing a course at the Intermediate Level).

Apprenticeship Level – Intermediate Apprenticeships remain in decline and now (as of 31 March 2022) represent only 24% of all apprenticeships, down from 65% in 2013/14. Advanced Apprenticeships are being sustained at about 44% of the total, and Higher Apprenticeships now represent 32%, up from 2% in 2013/14. 

Given this contextual information, and the opportunity to provide constructive comment and feedback on potential reforms to the tax system, the Apprenticeship Levy, and measures to improve the delivery of the Apprenticeship Programme in England, The 5% Club welcomes all observations, ideas and suggestions for improvement from its membership and the wider employer network who would wish to see reform to the Apprenticeship System in England.

Commenting on the “call for input”, Mark Cameron OBE, CEO of The 5% Club said, “since the Chancellor’s Budget Speech there has been much sector commentary of the current system, its evolution – including the lessons to be learned from previous activities dating back to the 1950s – and some great suggestions for improvements. We are keen to harness the obvious passion, energy and desire for reform and provide constructive options back to the Chancellor and the Department for Education. This is important given the enduring underspend of funding, and the changing nature of Apprenticeships – away from those at the Intermediate Level, which remain a key feeder into the Skills eco-system.”

All responses to this call for input should be made to [email protected] – the deadline for input is 17 June 2022.