Apprenticeship Levy 1 Year On: Where are we now and what needs to happen next?

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Regular blog readers will be aware that we have set out our position on the Apprenticeship Levy very clearly. 

A recap: Manufacturers, the Levy and the need for additionality 

Manufacturers’ frustrations from the Levy don’t just stem from the fact that the Levy is a tax and nothing more (indeed only 8% of manufacturers planned to write it off).

It is fact that manufacturers (the gold standard apprenticeship employers) wanted the Levy to deliver on adittionality.  They wanted the Levy to secure long-term aims of creating more quality apprenticeships and deliver the skills the industry so desperately needs.

But one year on, you only have to glance at the stats to see they don’t look good.

 

In the 6 months after the Levy for example, apprenticeship starts fell 41% compared to the same period last year. Just last month the figures showed a 25% drop. Again, not a good news story and a final signal to Government that now is the time for change

Hidden among the figures are move towards higher level apprenticeships and a shift towards new standards - both signals of quality measures. Government should capitalise on this and implement the changes that manufacturers have been calling for since the start. Only then will be see additionality prevail and make this whole new system worth it, otherwise – what was the point?

One year on: What are the outstanding problems and what are the solutions?

Problem: The amount employers can spend from the Levy is too low and bears little resemblance to the actual cost of training an apprentice.

Manufacturers tell us they spend in the region of £100,000 on apprenticeship training yet the absolute maximum an employer could spend is £27,000. It’s no wonder manufacturers say that whilst they are paying £1 out their Levy pot another £4 is coming out their pockets.

SolutionGovernment should enable employers to spend more of their Levy on quality training. This can be achieved by:

  • Reviewing (and increasing) the funding bands
  • Look to extend incentive payments to skills-shortage areas and apprenticeships that incur more upfront costs.
 

Problem: Employers who don’t spent their Levy funds quick enough are getting penalised.

Levy funds only last 24 months. This is a problem for two reasons. One, the average length of an apprenticeship in engineering is 48 months. Secondly, small companies, especially SMEs only recruit apprentices every 2-3 years so funds could expire before they start the next cohort.

Solution: Government should give employers more time to spend their funds

  • Increase the lifetime of funds to the length of the longest apprenticeship standard
  • (Or ideally remove the sun setting altogether)

 

Problem: The whole apprenticeship reform programme has been rushed meaning that whilst employers were paying the tax, new standards were not ready and a responsive training market has yet to prevail.

Standards haven’t been ready, colleges and providers haven’t been willing or able to deliver new standards or niche provision and as result employers haven’t acquired the “purchasing power they were promised”

Solution: Government must create a genuine employer-led, responsive, training market. This can be achieved by:
  • Allowing employers to agree their own payment schedule with providers
  • Streamlining and speeding up the process for signing off new standards
  • Giving employers the greater flexibility they need to spend their funds (see above solutions!)

 

There is another way and it’s called “Annually Managed Expenditure”

And there is another way that we could enable many of these flexibilities and that’s by moving the Apprenticeship Levy Budget from a Departmental Expenditure Limit (DEL) to Annually Managed Expenditure (AME). This would mean that that funding could be based on demand and the DfE wouldn’t need to be accounting for every penny and pound and therefore needing to put the many restrictions in plan that they have done. It would give Government the flexiblity to spend money where there was demand which would enable manufacturers to just deliver business as usual apprenticeships but even more apprenticeships!

Something for not just our DfE colleagues but also our HMT colleagues to think about?

We dream the same dream, we want the same thing

We are share the same ambition, which is to increase the quality and quantity of apprenticeships and we can get this right. Yes it's a new system but we can't afford to wait around and see if it while eveventually pick up. We know the problems, we know the solutions, so let's set about fixing them.

 


 

Author

Head of Education & Skills Policy

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