One year on: How to make the levy work

With reports of the apprenticeship levy failing to deliver, Chris Wood sets out how the government might tackle the problem.

The first anniversary of the Apprenticeship Levy has focused attention on this controversial scheme.

Since the introduction of the Apprenticeship Levy by the UK Government, which requires larger employers to invest in apprenticeships or lose their payments contribution to the scheme, there has been a slump in the number of new apprentices.

I believe the government now needs to review the current levy arrangements, but it should avoid some of the changes being mooted.

Typical of the criticism surrounding the levy one year after its introduction is a scathing report by the think tank Reform, calling for a wide-ranging overhaul to make it fit for purpose. While this identifies some of the issues it is wide of the mark on three counts.

First, it suggests standards are falling across the board because training providers have compromised quality in potential exchange for higher apprenticeship volumes. This is a disservice to employers and training providers who have invested to deliver successful schemes within the scope of the levy.

Effective apprenticeship schemes that attract able new recruits to industry are going to be crucial to ensure our national infrastructure is maintained and developed.

Rather than being a waste of taxpayers’ money, as the report suggests, such programmes can be hugely valuable.

Second, the report states that the levy is too complex for employers to understand and highlights the inexperience of some approved training providers. I agree that simplifying the scheme would be welcome but still there are many experienced training providers who can help employers navigate the complexities of the scheme.

This will continue to be the case even as the levy evolves.

Third, it is suggested that by widening the definition of apprenticeships, we may risk losing sight of their underlying value. My recent discussions with senior HR executives leave me in no doubt that the scheme could and should be made more flexible.

More importantly is a vital need to update the continuing perception of the meaning of an apprenticeship and to persuade students, and their parents, that vocational education can be at least as valuable as going to university.


So what exactly should the government do? First, it must accept there is a problem! In March 2018, its own figures showed a 25% slump in new apprentices in the first two quarters of 2017/18 over the previous year.

This has attracted widespread criticism from employer organisations, including the Engineering Employers Federation (EEF) and the Confederation of British Industry (CBI), and renewed calls for change.

Here are some proposed adaptations to the scheme.

  • Make the levy more flexible by extending the time allowed to use levy funds beyond the current two year limit
  • Widen apprenticeship choice
  • Unshackle the de facto value cap on apprenticeships, a move which would help training firms to deliver more schemes
  • Bring appropriate non-apprenticeship schemes into scope
  • Enhance government contributions (co-investments) to non-levy paying firms
  • Centralise end-point assessments and do away with the need for commercial independent assessor structures

A cut in the rate of the levy, which some have called for, seems unlikely as it could be politically suicidal and would, in any case, fail to address underlying skills shortages.

Conversely, raising the rate, in an attempt to put more pressure on employers may negatively impact the important work performed by other levy-funded bodies such as the Construction Industry Training Board (CITB) and Engineering & Construction Industry Training Board (ECITB).

But how much does all this matter? Given the depth of the UK skills crisis, the answer is that it matters a great deal. Effective apprenticeship schemes that attract able new recruits to industry are going to be crucial, not just for the economy in general but at a fundamental level to ensure our national infrastructure is maintained and developed.

A year on, employers are still wrestling with the implications of the levy. While the idea may be applauded in principle, it’s clear for many that it isn’t a straight choice between training people and paying tax.

The levy money received for training an apprentice does not cover the full cost of recruitment and employment. Some have said it would be foolish to take on apprentices to recoup the levy payments without capacity to manage recruitment and training programmes.

Clearly, there is a yawning gap between the principle and the practicality of the apprenticeship levy. If it is to work as intended, the government must address its structural inadequacies as a matter of urgency.


About the author 

Chris Wood is CEO of Develop Training


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