Apprenticeship funding overhaul to quell small firm training cost fears

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Written by Emilio Casalicchio on 12 August 2016 in News

Almost every employer will contribute only 10 per cent to the cost of an apprenticeship from next year, under new plans unveiled today by the Department for Education.


The Government has issued proposals to further help with the funding of apprentices. Credit: Fotolia

In his last Spending Review George Osborne announced a levy to help fund employer apprenticeship schemes which will be set at 0.5 per cent of the payrolls of companies.

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He said all employers will receive a £15,000 allowance to offset the levy, and businesses with wage bills of less than £3m will not have to pay.

Today the Government has announced extra help to those firms exempt from levy payments in the face of fears they might not sign up to the scheme.

Under plans to be put out to consultation it has offered to pay 90 per cent of the costs of training for around 98 per cent of those with wage bills smaller than £3m.

It has also offered £2,000 of extra support per trainee if they are 16 to 18-years old or young care leavers, and full support for such trainees in firms with fewer than 50 employees.

Employers with a pay bill of £3m or more will also be funded for 90 per cent of the costs of additional training that takes them above their allowance.

Apprenticeships and Skills Minister Robert Halfon said the levy was “absolutely crucial” to offer young people “a ladder of opportunity”.

“Our businesses can only grow and compete on the world stage if they have the right people, with the right skills,” he said.

“The apprenticeship levy will help create millions of opportunities for individuals and employers. This will give our young people the chance they deserve in life and to build a highly skilled future workforce that the UK needs.”

The consultation will be open until 5 September with final plans confirmed the following month and the levy coming in from next year.

Thinktank IPPR said today's proposals were "a step in the right direction" but did "not go far enough".

Associate director for public services Jonathan Clifton said: "The proposed apprenticeship levy will still only cover 2 per cent of employers.

"In the long term, the Government should expand the levy to cover all employers – because every firm has a role to play in training up the next generation."

When the original plans were announced last November, business group the Institute of Directors branded it a “big new cost” for companies.

The Confederation of British Industry said the levy was a “significant extra payroll tax” and warned that “by widening the net it will now catch more smaller firms”.

And the Federation of Master Builders warned that the levy “could be devastating” for training in the construction sector.

Announcing the measure, Mr Osborne said it would raise £3bn a year.

“It will fund 3 million apprenticeships with those paying it able to get out more than they put in,” the Chancellor said.


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