UK employers welcome proposed changes to apprenticeship levy UK employers welcome proposed changes to apprenticeship levy

UK employers welcome proposed changes to apprenticeship levy
11 Oct 2018

UK employers have welcomed government plans for changes to the controversial apprenticeship levy, hoping a further review will lead to a more flexible system.

Chancellor Philip Hammond, in his speech to the Conservative party conference in Birmingham, pledged to “engage with business on our plans for the long-term operation of the levy”.

Such action would include making it possible for employers to share up to 25% of their funds with businesses in their supply chain, and increasing access to courses in science, technology, engineering and maths subjects, potentially making levy funding available to benefit a wider range of employees. 

Lizzie Crowley, skills advisor at the Chartered Institute of Personnel and Development, welcomed the Chancellor’s announcement but cautioned that apprenticeships only offered part of the answer to filling the UK’s skills gaps.

“We would really be keen on a much more flexible tool to be deployed to support increasing investment in equally valuable forms of training,” she told People Management. “Within individual sectors, there are particular skills gaps and challenges, and we would like to see the government working with sectoral bodies to understand what the real pinch points are in those sectors.”

Crowley suggested that part of the apprenticeship levy funding could be used to boost skills development to fill gaps in each sector.

Meanwhile, Dr Adam Marshall, director general of the British Chambers of Commerce, said: “We have spent months pushing ministers to make practical changes to the way the apprenticeship levy works, and the measures announced today are an important step in the right direction. However, the review announced by the Chancellor must introduce greater flexibility to the apprenticeship system, to ensure that businesses of all sizes can find and train the workforce they need.”

The levy, which was introduced in April 2017, requires organisations with an annual payroll of at least £3 million (US$3.9 million) to pay 0.5% of that into a digital account. This payment can then be reclaimed as vouchers within two years to spend on apprenticeships training.

When it was first launched, employers were the only ones authorised to spend their own funding pots. But earlier this year, the scheme was tweaked to allow them to offer up to 10% of their funds to other organisations.

The system has been the subject of much criticism though. In February, Labour peer Lord Alistair Darling described the first year of the levy as a “strikingly hit-and-miss affair”. The 20% off-the-job training requirement in particular has sparked a great deal of anger.

Other research has suggested employers are failing to engage with the levy. A response to a Freedom of Information request, submitted by the Open University and published this April, revealed just 8% of levy funds had been spent in its first 10 months of operation, with £1.28 billion (US$1.68 billion) sitting unused in digital accounts.

According to an official report published last month, the number of new apprenticeships in the UK for the 2017/18 academic year fell 28% between August 2017 and June 2018 to 341,700.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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UK employers have welcomed government plans for changes to the controversial apprenticeship levy, hoping a further review will lead to a more flexible system.

Chancellor Philip Hammond, in his speech to the Conservative party conference in Birmingham, pledged to “engage with business on our plans for the long-term operation of the levy”.

Such action would include making it possible for employers to share up to 25% of their funds with businesses in their supply chain, and increasing access to courses in science, technology, engineering and maths subjects, potentially making levy funding available to benefit a wider range of employees. 

Lizzie Crowley, skills advisor at the Chartered Institute of Personnel and Development, welcomed the Chancellor’s announcement but cautioned that apprenticeships only offered part of the answer to filling the UK’s skills gaps.

“We would really be keen on a much more flexible tool to be deployed to support increasing investment in equally valuable forms of training,” she told People Management. “Within individual sectors, there are particular skills gaps and challenges, and we would like to see the government working with sectoral bodies to understand what the real pinch points are in those sectors.”

Crowley suggested that part of the apprenticeship levy funding could be used to boost skills development to fill gaps in each sector.

Meanwhile, Dr Adam Marshall, director general of the British Chambers of Commerce, said: “We have spent months pushing ministers to make practical changes to the way the apprenticeship levy works, and the measures announced today are an important step in the right direction. However, the review announced by the Chancellor must introduce greater flexibility to the apprenticeship system, to ensure that businesses of all sizes can find and train the workforce they need.”

The levy, which was introduced in April 2017, requires organisations with an annual payroll of at least £3 million (US$3.9 million) to pay 0.5% of that into a digital account. This payment can then be reclaimed as vouchers within two years to spend on apprenticeships training.

When it was first launched, employers were the only ones authorised to spend their own funding pots. But earlier this year, the scheme was tweaked to allow them to offer up to 10% of their funds to other organisations.

The system has been the subject of much criticism though. In February, Labour peer Lord Alistair Darling described the first year of the levy as a “strikingly hit-and-miss affair”. The 20% off-the-job training requirement in particular has sparked a great deal of anger.

Other research has suggested employers are failing to engage with the levy. A response to a Freedom of Information request, submitted by the Open University and published this April, revealed just 8% of levy funds had been spent in its first 10 months of operation, with £1.28 billion (US$1.68 billion) sitting unused in digital accounts.

According to an official report published last month, the number of new apprenticeships in the UK for the 2017/18 academic year fell 28% between August 2017 and June 2018 to 341,700.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

UK apprenticeship levy: Five myths busted

Continued fall in UK apprenticeship numbers blamed on levy

Ask the Expert: How do I find a UK payroll apprenticeship provider?

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