Where are we with our 6 red lines on the Apprenticeship Levy?

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For our regular readers you will have noticed quite a few Apprenticeship Levy blogs. Why? Well, in the employment and skills world, it seems to be the one big topic on our members’ minds.

A recap on EEF and the Apprenticeship Levy

When the levy was first announced we were highly sceptical, we do not support the principle of levies and saw it as a blunt tool to use, when there were other tools in the toolbox that could have done the job better.

However, our position was always we would try our best to make sure that the levy resulted in high quality apprenticeships. After all, the government didn’t just have a challenge of cutting the BIS budget, they also set themselves the stretching target of delivering 3million apprenticeships.

Since the announcement was made in the 2015 Budget the apprenticeship levy has become a major part of my life (sad but true) and in particular we wanted to push government on delivering our six red lines on the levy.

Today’s blog takes stock of where we are…or should I say aren’t…on these lines.

Progress on the 6 red lines?


1. The apprenticeship levy must allow manufacturers to draw down sufficient funding to cover the true cost of training



One of the (many) big unknowns is how much funding each apprenticeship standard/framework will attract. We know that draft funding rates and caps will be announced in June, but we don’t have much of an idea of what they will look like. Will the government announce each funding rate for every framework or standard or give us some examples? If employers are to be making budget and recruitment decisions they will want the latter, but that seems unlikely. And let’s not forget that these rates and caps will be out for consultation, final rates won’t be out until the Autumn. By then, the new Institute for Apprenticeships should be taking shape and I imagine they will have some thoughts….

2. We need to make voucher transferability work



Many larger companies who are concerned that they won’t be able to spend all their vouchers due to their levy contributions being rather significant want to be able to transfer their vouchers to help train apprentices in their supply chain.

What we do know from the government’s guidance is that this won’t be happening in the first year of the levy system, but that the government is weighing up the pros and cons of allowing this to happen and will make a further announcement in June.

While the idea of transferring vouchers may seem simple enough, unfortunately because the levy is essentially a tax it becomes public money and as soon as it turns into public money it’s subject to complicated state aid rules…which we just don’t have time for on this rainy Tuesday morning.

3. Basic English and maths must be funded by the state



Now I would argue that the government has failed on this. However, I am sure government would argue they have achieved this. Let me try and explain in simple turns.

To date, level 2 (GCSE level) English and maths has always been funded by the state. If you don’t get a level 2 English and maths by Key Stage 4 you can continue to study these subjects and it will be paid for by the state. It’s easy to see why this is the case, basic English and maths is fundamental for anyone wanting to enter into full employment, an apprenticeship or other form of training. It’s a good return on investment for the government.

In the new levy world….those apprentices that don’t achieve level 2 English and/or maths by the time they start their apprenticeship will then need to achieve this during their training. Where is the money coming from? The levy pot.

My argument – the levy pot is employers’ money so they’re now paying for it. Government’s argument – the levy pot is public money so the state is paying. I’ll let you decide who you think has got that right.

4. Maintenance and administration of the levy must not be funded by the levy pot



Very similar argument to above…but with little detail. The employer guidance does not refer to the admin and maintenance of the levy….but we all know that implementing a new tax and digital system isn’t all that easy. After all, many of the functionalities employers had hoped for within the new Digital Apprenticeship System (DAS) won’t be included in the first year.

5. The levy and digital system must be frictionless and easy to use




Only time will tell with this one. I’ve spent many a month now talking one to one with companies about the levy, explaining to a room full of employers about the levy, and sometimes I think “I’ve got this” then I learn something new that changes things altogether.

Now, I’m not saying we should take my lack of clarity and understanding of the levy as a reason to be sceptical, but readers out there that are close to the levy are probably in agreement with me that it’s not going to be all that simple.

6. Manufacturers need certainty and predictability of funding over time



If like me you are living the levy life you will be closely monitoring the increasing number of Parliamentary Questions being posed to the Minister on the levy. Interesting a question relating to whether the 0.5% rate will change gained the response that it would remain under “review” so not a great deal of certainty there. There has also been no indication as to whether the 10% top up will remain for the remainder of the Parliament or whether the funding rates and caps will change.

In conclusion.....

I would argue that the government has failed to deliver on these red lines. That’s why we’ve called for a delay to the implementation. Some of the above we can still get right, but if the government keeps powering through without taking all this into account, there’s a real risk it could go horribly wrong.


Head of Education & Skills Policy

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