Government goes into listening mode on the apprenticeship levy

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I hold my hands up. When the Government said that the final apprenticeship levy guidance would be announced before the end of October I thought, "pfft, no way, October....more like December!" So imagine my delight when this morning, after a number of "hit refresh" repetitions, out came the final apprenticeship levy funding guidance. Today's blog takes you through everything you need to know about the final funding guidance and those all important wins for manufacturers....

As regular readers will be aware a levy has never been manufacturers’ preferred option for driving up apprenticeship numbers. Since its announcement, we’ve been pretty wary of the levy and called on government to be a halt to proceedings until it was fit-for-purpose.

 

When the Government published it’s consultation on the apprenticeship levy funding proposals in the summer we were pleased that finally quality had been recognised, with a greater focus on funding for STEM apprenticeships. However, there were still a number of key concerns that were outstanding and our submission reflected that.

 

The big wins for manufacturers from today’s announcement

 

 

STEM funding gets a boost

STEM 

Credit where credit is due. The Government has taken some big steps to ensure that high quality apprenticeships in sectors such as engineering are protected. This includes:

  • Confirming the uplift for STEM apprenticeship frameworks. All STEM apprenticeship frameworks at Level 2 will see funding increase by 40% and Level 3 by 80% before being allocated into the relevant funding band
  • Increasing funding for a number of engineering frameworks that we had on our hit list as still not quite covering the cost of training including: Manufacturing Engineering (Space Engineering) which has increased from £6,000 to £9,000 and Engineering Manufacture (Aerospace, Electrical and Electronic Engineering, Automotive and Engineering Leadership) all increasing from £9,000 to £12,000
  • Increasing funding for a number of manufacturing and engineering frameworks including Machinist (Advanced Manufacturing Engineering) which is now in Band 14 at £24,000 (up from £21,000) and Food and Drink Maintenance Engineer which is now in band 15 at £27,000 (up from £18,000)

What does this mean for manufacturers?

 

These are significant steps forward. What it means in practice is that levy paying companies that wish to recruit manufacturing and engineering apprentices can now use more of their funds towards the training and assessment of these apprentices, with many manufacturing and engineering apprenticeships now in the highest funding bands. The Government has acknowledged that delivering high quality apprenticeship training in our sector costs more. It also benefits non-levy payers. Many of our members say they pay over and above the current public funding for engineering apprenticeships. Having more funding available means that manufacturers should not have to pay an added premium to get the training their businesses need.

    

Expiring dates of vouchers get extended

 expired

From the very start, EEF has called on government to increase the lifetime of the digital vouchers employers will have to spend on training, after all the average apprenticeship amongst our members is up to 4 years long. So we are pleased to see that the government has begun to take this on board by:

  • Increasing the vouchers expiry date from 18 months to 24 months

 

What does this mean for manufacturers?

 

Manufacturers will now have a longer period of time to spend their vouchers before they expire (and are essentially recycling back into the apprenticeship funding system). Levy-paying employers will make their first payment to HMRC in May, based on their April paybill, they will then see digital vouchers in their new Digital Apprenticeship Service (DAS) account. When the funds enter the accounts, employers now have 24 months (not 18) to spend them. This gives them a bit more time to adapt and better align their spend to annual business planning.

 

Ability to transfer vouchers will be led by employers

AP2 

With competition for skills fierce in our industry, it is essential that companies work together to train the next generation of workers. Having the ability to transfer unspent levy vouchers to supply chains and the wider industry is vital to keep up much of the good work that currently occurs in this space. Today the government announced plans to:

  • Allow employers to transfer up to 10% of their annual digital vouchers to another employers’ digital account from 2018.
  • Launch a new Strategic Steering Group with a selected number of employer representatives (including EEF), the third sector and representation from an Apprentice Training Agency – to work out the detail of how we can make this work and increase the 10% in the near future

 

What does this mean for manufacturers?

 

The ability to transfer unused vouchers is particularly important for OEMs who may wish to support training in their supply chains. While this feature won't be available in year one of the levy, the Government has shown willing. Having a Strategic Steering Group to go through the detail of how this functionality could, and should, ensure that this functionality happens as soon as possible in 2018 and explore ways in which we could potentially increase the 10% cap in the future. EEF is delighted to be one of the few employer representatives that will sit on this group to ensure that transferability works for our industry.

More flexibility on choosing multiple providers

maintenance training 

One of the key aims this policy needed to achieve was to create a genuine market in training. However, previously the government had expressed a view that employers would need to pick a “Lead provider” who would need to deliver a minimum of 50% of the training. (This would also apply to any employers who had themselves been considering whether to become an employer provider). This would have meant that an employer couldn’t choose multiple providers to deliver their apprenticeship (well they could but one would need to be the lead and deliver at least 50%). So we were happy to see:

  • The Government has pulled back on proposals for employers to have a lead provider which must then deliver a minimum of 50% of the apprenticeship training. There will however be some restrictions put in place to prevent swarms of intermediaries entering the market.

What does this mean for manufacturers?

 

Removing the restriction for employers to have a "lead provider" who then must deliver 50% of the training gives employers greater flexibility to shop around for provision and to use various providers to deliver their apprenticeship training. This is increasingly important for manufacturers considering (or currently) delivering Degree Apprenticeships. An employer might, for example, wish to use a college, an independent provider and a university to deliver the various elements of the apprenticeship and not have one lead provider that is required to deliver the majority.

If Government could just consider a couple more things….

There is no doubt we are pleased with what we’ve heard today and that Government is in listening mode on the levy. It’s not entirely job done and if we could tick off a couple more things off our wish list it would be:

  

  • Reconsider the proposal to have vouchers leave employers’ accounts on a monthly basis – instead leaving it between the employer and their provider to decide their own payment schedules.
  • Extent the expiration date of vouchers just a little bit more….36 months…go on!
  • Review the current drafting of the HMRC regulations….way too technical to go into here, but some of the drafting puts an unnecessary burden on connected companies to make various declarations to the HMRC.

And finally… the clock is ticking so we need to get a move on….

Timing is now all important. With a shrinking window of opportunity to prepare for the levy, government must pull a final implementation plan out of the bag quickly, and remember that employers as well as government need time to prepare for the sea change in apprenticeship funding next year.

 

Author

Head of Education & Skills Policy

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