Apprenticeship levy proposals deliver more than expected for employers and young people

By Rhiannon Sanders August 18, 2016 1:39 pm

In the midst of summer holidays, the Olympics and the Labour Party’s seemingly never-ending leadership contest, there are still civil servants in the depths of Whitehall churning out policy papers. For many departments these will be focusing on what on earth to do next after the EU referendum; but for those relatively free of European influence business is going on as normal.

This includes the Department for Education’s publication of proposals on funding for the apprenticeships levy, a policy to fund apprenticeships anticipated for introduction next spring. The lengthy documents contained some clarifications and surprises, which provide a degree of comfort for those wondering how the Government intends to meet its target of creating three million apprenticeships by 2020.

Firstly, the clarifications. Despite significant pressure to do otherwise from the sector, the Department still intends to introduce the levy from May 2017. Many businesses had expressed concerns that the relevant frameworks and support would not be in place by then, and that pressing ahead with this deadline would compromise the levy’s implementation. There was some speculation that the reshuffled frontbench, new PM and transfer of skills policy from BIS to DfE (with a newly dedicated Minister for Skills and Apprenticeships, Robert Halfon MP) would be adequate reason to apply the brakes. However, the Government stuck to its plan (albeit with the staggered implementation of the digital apprenticeship service as a means of procuring training and receiving funding for apprentices).

The proposals also included the original intention of applying the levy to businesses with a pay bill more than £3 million per annum, or two percent of English companies. The Chief Executive of the Federation of Master Builders, Brian Berry, recognised that because small businesses are so deeply involved in training apprentices it is crucial that “arrangements work for these firms and do not impose higher costs on them.” Some in the sector – such as Mark Dawe, CEO of the Association of Employment and Learning Providers – still believe that the compulsion to make some financial contribution towards training will be burdensome.

Yet it was surprising that the Government has gone so far in subsidising training. It will contribute the lion’s share of funding to training apprentices: 90%, versus 10% from businesses, under a “co-investment” arrangement, when the expectation had been that a greater share would fall on employers. This attempt to reduce pressure on small employers will not go unnoticed. Employers will also have full control over the providers used to train their apprentices, representing an extensive delegation of control to employers from the Skills Funding Agency, recognising that employers are key to making the system work.

So what does this mean? Perhaps most importantly, employers have been given concrete reassurances around the proposed burdens imposed on them by the apprenticeship levy. How comforting this will be is contingent on how much they suffer from a skills shortage. It is also notable that employers have been put in control of the training their workers receive – although the scale of choice and quality of provision remains to be seen.

But there is a new unanswered question of how the Government will actually manage to fund this system now they have taken much of the cost away from employers. When apprentices could be eligible for between £1,500 and £27,500 in training, the 98% of non-levied businesses being supported by the two percent does not seem to be an economy of scale. How the books balance up may be a question left unanswered until our new Chancellor faces his first financial test in the Autumn Statement.

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