The apprenticeship levy - a new tax or just taxing for employers?

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Yesterday, the Chancellor, in his autumn statement, produced a little more detail on the expected apprenticeship levy. You can read EEF’s full briefing on the levy here Today we ask is it a new tax or taxing employers?

 

 

The big questions on the rate and reach

The new levy will replace current funding from Government for apprentices and will be payable by “larger” employers, for whom all public funding which they current receive for apprenticeships will dry up.

The Treasury have come up with an ingenious model – payroll based, and including all employers – which is at least simple. But, all employers are to get £15,000 off their levy payment, which given the rate has been set at 0.5% of payroll means employers with a payroll bill of less than £3 million will pay nothing. Officially, Government says that only 2% of employers will pay the levy, but within the 2% will be many who won’t think of themselves as “large”.

Apprenticeship funding is going digital

The levy, payable from April 2017, will give employers spending power with approved providers via a digital voucher. To incentivise employers to spend the vouchers, there will be an as yet undefined “top-up”. The whole system will be controlled and administered via a new digital apprenticeship service.

Have all our questions been answered?

No. There are a long list of unknowns. How much will employers be allowed to spend on each apprentice, and what will be the shelf-life of the new digital vouchers? Quality training providers will need robust transitional provisions to support them until they have a steady and reliable income stream from the new vouchers.

We don't support levies, but it probably could have been worse

For all the questions, the new levy seems better than it might have been. We don’t support the principle of levies – they are blunt tools, and their ability to incentivise high quality apprenticeship provision by employers is, at best, doubtful. But, for all this, there is some form of taper in the model, which avoids a cliff edge for employers at the margins of the levy.

Will employers have control?

The government announced it will establish an employer-led Institute for Apprenticeships, to safeguard standards and advise on how much employers should be able to spend on different apprenticeships and how much the top-up should be. Whilst short of direct employer control of the levy pot, and it does represent a strong employer voice in deciding how the levy money is directed and spent. For manufacturers, this is promising. They are likely to be a sector which benefits more than others.

The verdict following the announcement?

No, we don’t support levies, but we will work to ensure that this one creates what it is intended to support – high quality apprenticeships – and that it genuinely supports manufacturers who already invest far more of their own money in training that they ever received from government.

 

You can read our response to the Government's consultation on the apprenticeship levy here.

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Director of Employment and Skills Policy

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