Today, EEF, together with Lloyds Bank Commercial Banking, published our new report – Lifting the lid on the Levy: Making the Apprenticeship Levy work for industry.
We will be blogging a series of finding from the report, but today’s blog gives an overview on why we have lifted the lid on the Levy.
The Apprenticeship Levy and joined-up thinking
Apprenticeships have for a long time been ingrained within the manufacturing industry and have been, and continue to be, an effective means of mitigating the skills gap.
The ambitious timeline to implement the Apprenticeship Levy has always been a cause for concern and with just over a month to go until implementation, it is no wonder that 50% of manufacturers are concerned about the time-scale for implementation.
The Apprenticeship Levy, has been subject to much debate, and regular blog readers will know EEF’s position on the Levy well. The policy has been somewhat of a rollercoaster, with ups and downs, and we’ve had an underlying concern that the reform has been taken in isolation.
At EEF we always call for a joined up Government, with joined up policy thinking, and that’s true for the Levy. Yet the permanent focus on funding has distracted the Government’s (and indeed employers’) thinking away from all the wider issues around improving our education system, the need to increase the number of good quality candidates who can fill employers’ vacancies and driving up national training provision to meet the needs of manufacturers who are continuously investing in new technologies, new processes and new innovations.
What did we find when we lifted the lid on the Levy?
1. A lot more companies than expected are in scope of the Levy
Why? Because of the complex rules around connected companies, which allocates just one allowance, when employers are part of a group structure. This means that even SMEs are in scope of the Apprenticeship Levy.
Recommendation: The Government should amend the rules around connected companies so that each individual company receives an allowance.
2. Manufacturers that operate across the UK, and importantly, have employees that live in England, Northern Ireland Scotland are placed at a disadvantage.
Why? Because the Levy is UK wide (tax policy is UK wide) but what employers receive in digital funds to then spend on apprenticeship training is only the English fraction (skills and education policy is devolved).
Recommendation: The devolved administrations must give employers clarity on how they will spend their portion of funds. Manufacturers want to see funds ring-fenced for the industry to spend on skills and training.
3.The perception that the Levy is nothing more than a tax has not been erased.
Over a third (34%) of manufacturers see no benefits to the Apprenticeship Levy. Three-quarters (75%) are concerned they won’t get back what they put into the levy and 61% are concerned about the cost impact on their business.
4. Time and uncertainty are major problems too.
The Levy was first announced in the 2015 summer budget and two years on we’re about to go live. This is actually a short period of time for such a fundamental reform. 50% of manufacturers say time scale for implementation is a concern. In addition, manufacturers are uncertain about the future – this uncertainty comes not just from the mechanics and rules of the Levy itself, but in the wider economic context.
5. Manufacturers are seeking to embrace the Levy where possible.
Our report finds that at the Levy should, in the short to medium term at least, increase the number of engineering apprenticeships (46%), encourage manufacturers to think about apprentices in other areas of their business (35%) and use the Levy as a means to up-skill and re-skill their existing workforce (47%).
Recommendation: The term “materially different” should be defined. The Government should empower the employer panels that form part of the Institute for Apprenticeships and Technical Education, to decide on this.
6. What happens in the future remains the great unknown.
Maintaining the uptick in apprenticeship numbers may be challenging, especially when employers have utilised their Levy on existing employees and may face strict headcount restrictions that prevents they from taking on new recruits. Therefore the Levy must be a policy that is revised and evolved overtime. In addition, Government must ensure that the Levy is sustainable and fit-for-purpose.
Recommendation: The Government should commission an independent, employer-led review of the implementation and roll-out of the Apprenticeship Levy by the end of 2018.
If the Levy is to have a chance of success, changes need to be made, not just to the Levy, but the wider skills system. Our report keeps the debate going and we’ll be blogging on some of the detailed findings of the report in the coming weeks.
Read our full report here.