Chancellor George Osborne has announced an apprenticeship levy for large businesses to increase help fund growth and give back direct control to employers.

In the first wholly Conservative Budget in almost two decades, Osborne said a “drastic and frankly long overdue approach” was vital to train up the next generation to address Britain’s “weak productivity.”

He said: “It is to our national shame that we are almost the only advanced country in the world where the skills of our 16-24 year olds are no better than our 55-64 year olds. The education reforms we started in the last parliament have begun to address this problem.”

“We’re going further in this parliament by tackling the coasting schools that simply aren’t good enough. We’ve already doubled the number of apprenticeships to 2 million – now we’re committed to 3 million more. To fund those apprenticeships and make sure they’re of high quality, we have to confront this truth.”

The Chancellor said implementing the levy would put a stop to all the large companies who were ‘taking a free ride on the system” and that “firms that offer apprenticeships can get more back than they put in. Britain’s great businesses training up the next generation. This is exactly the type of bold step we need to make if Britain is going to up its game.”​

Data from the Skills Funding Agency suggesting that apprenticeship starts in the motor retail sector alone have plateaued in the last 12-18 months.

Steve Nash, CEO of the Institute of the Motor Industry (IMI), agreed that giving employers direct control of apprenticeships means that they can “teach in the workplace.”

He said: “If the Government wants to achieve its goal of 3 million apprenticeships in 5 years, 50,000 new apprenticeships need to be created every single month. Making the task even more challenging is the fact that young people will soon have to be in education or training until they are 18, which means that schools will inevitably be reluctant to release all but the least academically able students into vocational training, which is not what business needs. 

“Furthermore, the desperate lack of careers advice in schools will make it extremely difficult for candidates and their families to make reasoned choices.”

Chris Jones, Chief Executive of the City & Guilds Group, who wrote a letter to the Chancellor last week urging him to increase support for vocational education said he “welcomed” today’s Budget statement. 

He said: “Sustainable long-term funding solutions, such as the proposed apprenticeship levy for large firms, will be critical to not only meeting the 3m apprenticeship target, but making sure each and every apprenticeship is high quality. With the annual productivity gains from training an apprentice at £10,280 per year, the investment is well worth it. However, if this new levy is implemented, it must be done in a way that does not impose additional bureaucracy on businesses, and does not discourage employers from supporting on-the-job training in their companies.

“It is also important that support for would-be apprentices does not overshadow the need to help people up the ladder at every stage of their careers, including later in life. Today we are disappointed that the Chancellor was silent on the need to boost provision for over-19s in areas such as vocational qualifications and employability support. We also need alternatives to a purely academic curriculum at 14 or 15 – again, something that wasn’t covered.

“As I wrote to the Chancellor last week, broadening high-quality vocational education provision can make a substantial difference to employment, productivity, and our GDP.”