Levying Up the Chancellor’s Budget

Kirstie Donnelly, CEO of City & Guilds outlines what she would like to see from the Chancellor in his Budget Statement next week.

The article discusses how businesses are struggling to use their apprenticeship levy and provides solutions-based recommendations for it to become a broader skills levy.

In a week’s time the Chancellor will deliver his Budget statement to Parliament.

With a shrinking economy, 1.3million unfilled vacancies and growth as the only way forward, the time to act on skills is now – not as a ‘spend’ but as an investment.  It’s vital that we collectively push for the Chancellor’s announcement to commit to lifelong learning from early talent and apprenticeships that can kickstart careers, to modular learning that allow people to retrain and regain skills at key life and career transitions to deliver the skills we need. Investing in the long-term success of skills and apprenticeships will return dividends for employers and help drive much needed economic growth.

Businesses are struggling to find the skilled talent they need. Apprenticeships are a brilliant way to help people learn on the job, and grow organisations, whilst filling job roles in day-to-day posts. Training workers is one solution for closing these skills gaps, but with business costs increasing rapidly, organisations are less able to afford training, creating even more barriers to skills development and workforce entry. Engagement with the apprenticeship levy, which subsidises the training costs, could be a key solution to this problem.

Our recent Levying Up report found that more than five years on from the introduction of the apprenticeship levy, the current system is not working for all businesses – or those hoping to learn new skills and progress their careers. 96% of levy paying businesses told us that they would like to see changes made to the apprenticeship levy, with only 4% telling us that they have been able to use the levy in full. And this call to Government is not a new one. Five years ago we released Flex for Success which showed that 92% of employers wanted more flexibility in how they spent their levy – a similar rallying call today, yet it has so far been an unrealised solution for change. With apprenticeship starts down year on year and millions of unspent levy going back to the Treasury, it’s clear that urgent change is needed so that businesses are able to fully utilise and benefit from apprenticeships.

That is why we believe that the apprenticeship levy should become a broader skills levy, which ringfences funding for apprenticeships. By doing so, business leaders will be able to make choices about what skills their organisation needs, and the best qualifications to develop them. Ringfencing funding for apprenticeships within the broader skills levy means there are still opportunities for employees to earn while they learn, whilst offering businesses the flexibility they crave and making way for more modular learning to sit alongside longer apprenticeship programmes.

We are also calling for:

• the Department for Education and HM Treasury work together to ensure that unspent apprenticeship levy funding is spent on programmes designed to reduce skills shortages
• the system to be simplified for SMEs
• the government to cancel plans to reduce level 2 apprenticeships
• the Government to consider introducing standardised, levy funded bitesize learning.

Our calls to action are always based on employer insight, and serving employers and learners and we were pleased to see recommendations from our Flex for Success research implemented by Government. SMEs are now able to pool their levy funding to increase buying power and access more high-quality apprenticeships and a UCAS-style application programme for apprenticeships has been introduced to help raise their profile.

However, more needs to be done to make the apprenticeship system fit for purpose. With a week to go before the Budget, this is our ‘act now’ moment to make changes to create a long-term skills system, fit for the future, and I do hope the Chancellor takes this advice on board.