A director general of the Confederation of British Industry​ (CBI) has called for a “radical rethink” of the government’s flagship apprenticeship levy, warning that fundamental design flaws will drive the “wrong outcomes” and encourage rogue employer behaviour.

Speaking to an audience of business leaders yesterday, Carolyn Fairbairn said employers would be encouraged to “rebadge their existing programmes” and even “abandon much training that’s already working” to meet the costs and required “specs” outlined in the levy guidelines.

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The levy comes into effect in April 2017 at a rate of 0.5 per cent of an employer’s total payroll. It will apply to firms with salary costs above £3 million, but from 2018 other organisations looking to run an apprenticeship programme will be expected to use the government’s Digital Apprenticeship Service.

In the last week, the government has published initial guidelines outlining how the levy will work in practice, with the promise of further clarity in the summer. But Fairbairn said firms still lacked “crucial information about the levy and a realistic lead-in time to prepare” for its implementation in 2017.

She said: “Firms across the UK are emphatic that tackling skills shortages is the only way to succeed and create prosperity. They want to create quality apprenticeships and they’re ready to work with the Government to do this. But as it stands, that’s not what the levy is doing.

“Today, firms are having to treat the levy as a tax, because the headline cost is all they’re certain of. Businesses of all sectors and sizes are still in the dark – cutting corners isn’t in anyone’s interest,” she added.

Among the design flaws identified, Fairbairn said the levy effectively lumped all forms of training together under the apprenticeship banner: “Companies are having to change the ‘spec’ of graduate or management training schemes – programmes that are working perfectly well – just to fit apprenticeship standards,” she said.

The CIPD has previously warned of the risk of ‘gaming’, whereby employers rebrand low-level training as apprenticeships, and Alison Fuller, professor of vocational education and work at University College London, said the definition of apprenticeship was being “overstretched.”

Fairbairn said: “When it comes to training, business knows best. They should have the flexibility to choose the kind of training which is right for them, whether it’s labelled an ‘apprenticeship’ or not.”

At the launch of the Automotive Apprenticeship Matching Service earlier this month, skills minister Nick Boles said the levy and the subsequent formation of an Institute for Apprenticeships meant employers would have “complete control of every aspect of the apprenticeship journey.”

But Fairbairn said the Institute risked being seen as a mere “standard-setter” and would lack the authority and power to shape big decisions on the design of a system that has already been created.

“Government has the opportunity to create a once-in-a-generation revolution in skills, but it is currently only likely to deliver another once-in-an-administration shake-up,” Fairbairn said.

“Government needs to work with business to resolve these issues before the levy launches. This means taking the time to get this right to design a flexible, business-led system – through the Institute – that encourages employers to spend on quality training opportunities.”