Is the Apprenticeship Levy failing?

The Apprenticeship Levy, which came into force in April 2017, requires employers with pay bills over £3 million to pay 0.5% of their total gross pay bill to the government (through PAYE) which is then used to fund approved apprenticeship programmes. Each employer has an annual Apprenticeship Levy allowance of £15,000 to offset against their levy liability.
The hope was that the levy would create 3 million apprenticeships by 2020, however, Edwin Morgan, director of policy at the Institute of Directors, said last month that this target was “sinking below the horizon”.
Whilst the latest official figures published by the Department for Education show a steady rise in the cumulative number of apprenticeships between 2014 and 2018 to 1.4 million, the introduction of the Apprenticeship Levy has actually had the reverse effect of what was intended.  There was a 31% drop in the number of apprenticeship starts during the 2017/18 academic year compared to the equivalent period in the previous year, from 457,200 to 315,900. As a consequence, by 2020, the number of apprenticeships is likely to be closer to 2 million than the 3 million target.
Critics of the levy have argued that this decrease in apprenticeship starts is not just the result of employers coming to terms with the new system. One issue commonly cited is the continued lack of awareness among parents and students about degree-level apprenticeships, which mix time at university with learning on the job. A survey by the Chartered Management Institute earlier this month of 1,008 parents found that only 32% of parents were aware that the degree-level apprenticeships existed; although this was a 19% increase from a similar poll conducted in 2016. The levy has also been criticized for being more complex than the previous system, especially with regard to payments, to the extent that many larger organisations have had to employ extra staff to simply administer the system.
Flexibility has also been an area of concern. Lizzie Crowley, skills adviser for the Chartered Institute for Professional Development, said that there is a need for a “more flexible training levy that can help organisations fulfil a number of training and development opportunities rather than shoehorning funds and efforts into apprenticeships when that may not be what a business needs, or what an individual wants”.
In response to this criticism, the Government has announced the start of tentative reforms. Since July, employers are now able to make transfers of up to 10% of apprenticeship service funds to multiple businesses as opposed to just one other employer. The Government hopes this move will help employers work together in partnership, supporting employers to take on apprentices who may not have done so otherwise. The Institute for Apprenticeship has also launched the Faster and Better programme, which aims to simplify aspects of the development process for standards and the Institute’s approvals processes.
The next round of apprenticeship and levy statistics are due to be released by the DfE on 13 September 2018.

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Claire McKee

About Claire McKee

Claire is an associate in the People, Reward and Mobility practice. Whilst advising employers and employees on a wide range of employment issues, Claire focuses on advising clients on contentious employment, discrimination and equal pay matters. She appears before the Employment Tribunal in Scotland and England on a regular basis.

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