From education to employment

The languishing Levy pot: £2.01bn Apprenticeship budget, but with £400m underspend

City & Guilds Group have released a White Paper called The languishing Levy pot: Accessing unspent apprenticeship funds, which was produced after a  submitted to the Department for Education around apprenticeship levy funds and spending. 

The Freedom of Information request highlighted that in the first year of the levy (2017/18):
  • The Department for Education received an apprenticeship budget of only £2.01bn from the Treasury
  • The bulk of the apprenticeship budget has been spent on pre-levy training 
  • Only £268m has been spent on apprenticeships for levy-paying employers
  • There remains a £400m underspend

After the Freedom of Information request from the City & Guilds Group, the DfE confirmed that in 2017/18, it received an annual apprenticeships budget of £2.01bn from the Treasury. Of this, it appears that only £268m was spent by levy-paying employers on apprentices. Of the remainder, some £1.065bn was spent on pre-levy training; £189m on apprentices for non-levy paying employers; and £58m on maintaining the apprenticeship programme and service, and on learners still funded under legacy areas of policy such as the Apprenticeship Grant for Employers and the Employer Ownership programme. This leaves a £400m underspend in the first year of the system alone.

Since the introduction of the apprenticeship levy almost two years ago, apprenticeship start figures in the UK have fallen significantly. According to the latest figures reported by the DfE, these numbers are now starting to slowly increase. However, level two apprenticeships for young people are still seeing a worrying shortfall.

City & Guilds Group is calling on the Government to both be more transparent in its use and expenditure of the levy funding, as well as removing some of the barriers which are preventing employers from accessing the necessary funds. Details of City & Guilds Group’s call on the Government can be found in their Flex for Success report here

kirstie donnelly 100x100Kirstie Donnelly, Managing Director at City & Guilds Group comments on the findings:

“It’s concerning to see in its first year the apprenticeship levy had such a significant underspend and brings to light two major concerns. Firstly, it appears that the apprenticeship budget set by the Treasury fell well below the amount of levy money collected by HMRC, meaning the Government would never have been able to fulfil its promised apprenticeship funding for employers.

“Secondly, we can see that around 90% of the, already less-than-adequate, apprenticeship budget has not been available for employers to spend as they choose, despite that being the key reason behind the levy. “In light of these findings and the fact that our own research shows 95% of levy-paying employers were not able to spend their full allowance in the first year, we are calling on the Government to increase flexibility and provide clarity around the apprenticeship system. Apprenticeships are key to unlocking the economic and social prosperity of our country and without the full trust and support of Government, we will find it difficult to be able to reap the benefits they offer.”

City & Guilds Recommendations

Against this backdrop, City & Guilds Group, together with the Industry Skills Board, is calling on the Government to address the confusion and make some urgent changes to the system and the way funds are allocated. 

Government must provide regular, proactive and timely reporting on apprenticeship spend

Reporting on levy spend has, to date, varied widely resulting in a high level of confusion and employers choosing not to engage with the system, writing the levy off as a tax. The Government must provide regular, accurate reporting on levy spend ensuring every organisation is clear about the opportunities and ways to engage with apprenticeships.

Government must be clear with employers about what their levy is actually covering

Prior to its introduction, it was stated that 100% of levy funds would be available to employers, plus an additional 10% from Government. However, it is clear the apprenticeship budget is largely being spent on legacy frameworks and infrastructure costs. Government must be clear with employers to help them forward-plan and ensure they are clear on where their levy funds are actually being spent.

Budget and support for SMEs to access apprenticeships must be ring fenced

Surplus levy was always intended to support SMEs in accessing apprenticeships. However, if levy-paying employers increase apprenticeship spending, it is clear there will not be sufficient funds remaining to support SMEs. The Government has increased the amount of levy funds employers can transfer to businesses in their supply chain to 25%, however there is still work to be done in supporting levy-payers to access those funds and transfer them.

Government should consider increasing the levy and broadening its scope

Employers have told us they want greater flexibility in how they can spend their levy, yet the funds coming from the Treasury currently do not cover the core apprenticeship training. If more businesses are to become liable to pay into the levy, Government will need to ensure real employer ownership, enabling employers to control how they spend their levy funds, with sufficient budget to do so. Government urgently needs to listen to the needs of employers, and through its consultation, ensure the voices of companies of all sizes are heard.

Government should invest any surplus budget towards recruitment and promotion of apprenticeship opportunities

In 2017/18, there was a £400m underspend in the apprenticeships budget. 31% of levy-paying employers tell us that the biggest barrier to investing more in apprenticeships is a lack of availability of suitable apprentices in the area. More needs to be done to support recruitment of apprentices and help subsidise travel costs.

What do you think, what recommedations do you have to increase the amount of Apprenticeships? 

Mark Shrimpton, UK Director of People & Organisational Development, Civica said:

“The recent figures released by City & Guilds which suggests that the Apprenticeship Levy has not got off to a flying start due to its apparent rigidity is perhaps unsurprising to those working directly on apprenticeship schemes within organisations across the country. It was billed as a positive reform – and whilst it predominantly still can be – communication around the Levy and what it entails and allows has not been as clear as it could have been.

“Despite the teething problems with the Apprenticeship Levy, we cannot ignore the benefits that bringing young, new talent into a business can make. With the UK skills gap widening, the onus is ultimately on employers such as Civica to take a creative and proactive stance in actively supporting apprenticeship schemes and accept that they may have to adapt and flex current ways of working to integrate apprentices and apprenticeships in a way that benefits both the apprentice and the business itself. As employers, we must share the responsibility to upskill the next generation and prepare them for the future world of work.”  

Related Articles