The languishing Levy pot: Accessing unspent apprenticeship funds

Almost two years after the apprenticeship levy was implemented, apprenticeship start figures continue to decline in overall terms and questions remain around the ways in which the funds collected by the Government are being spent.

07 March 2019

The apprenticeship levy was introduced to businesses in April 2017, amid fanfare from Government, which made much of the fact that it was creating a truly employer-led system.

However, almost two years after its implementation, apprenticeship start figures continue to decline in overall terms and questions remain around the ways in which the funds collected by the Government are being spent.

Requiring businesses with an annual pay-bill of more than £3m to pay into a central fund, the levy was designed to increase investment in apprenticeship training and assessment. According to guidelines from the Department for Education, an employer paying £10,000 a month into their levy account would receive that £10,000 back to spend on apprenticeships, plus a 10% contribution from the Government.

However, responding to a Freedom of Information request from the City & Guilds Group, the DfE confirmed that in 2017/18, it received an annual apprenticeships budget of £2.01bn from the Treasury. Of this, it appears that only £268m was spent by levy-paying employers on apprentices.

Of the remainder, some £1.065bn was spent on pre-levy training; £189m on apprentices for non-levy paying employers; and £58m on maintaining the apprenticeship programme and service, and on learners still funded under legacy areas of policy such as the Apprenticeship Grant for Employers and the Employer Ownership programme.

This leaves a £400m underspend in the first year of the system alone.

 

apprenticeship levy fund year 2017 and 2018

 

Analysis from Kirstie Donnelly MBE, Managing Director at City & Guilds Group:

“It’s concerning to see in its first year the apprenticeship levy had such a significant underspend and brings to light two major concerns. Firstly, it appears that the apprenticeship budget set by the Treasury fell well below the amount of levy money collected by HMRC, meaning the Government would never have been able to fulfil its promised apprenticeship funding for employers.

“Secondly, we can see that around 90% of the, already less-than-adequate, apprenticeship budget has not been available for employers to spend as they choose, despite that being the key reason behind the levy.

“In light of these findings and the fact that our own research shows 95% of levy-paying employers were not able to spend their full allowance in the first year, we are calling on the Government to increase flexibility and provide clarity around the apprenticeship system. Apprenticeships are key to unlocking the economic and social prosperity of our country and without the full trust and support of Government, we will find it difficult to be able to reap the benefits they offer.”

 

Against this backdrop, City & Guilds Group, together with the Industry Skills Board, is calling on the Government to address the confusion and make some urgent changes to the system and the way funds are allocated.

  • Government must provide regular, proactive and timely reporting on apprenticeship spend

Reporting on levy spend has, to date, varied widely resulting in a high level of confusion and employers choosing not to engage with the system, writing the levy off as a tax. The Government must provide regular, accurate reporting on levy spend ensuring every organisation is clear about the opportunities and ways to engage with apprenticeships.

  • Government must be clear with employers about what their levy is actually covering

Prior to its introduction, it was stated that 100% of levy funds would be available to employers, plus an additional 10% from Government. However, it is clear the apprenticeship budget is largely being spent on legacy frameworks and infrastructure costs. Government must be clear with employers to help them forward-plan and ensure they are clear on where their levy funds are actually being spent.

  • Budget and support for SMEs to access apprenticeships must be ring fenced

Surplus levy was always intended to support SMEs in accessing apprenticeships. However, if levy-paying employers increase apprenticeship spending, it is clear there will not be sufficient funds remaining to support SMEs. The Government has increased the amount of levy funds employers can transfer to businesses in their supply chain to 25%, however there is still work to be done in supporting levy-payers to access those funds and transfer them.

  • Government should consider increasing the levy and broadening its scope

Employers have told us they want greater flexibility in how they can spend their levy, yet the funds coming from the Treasury currently do not cover the core apprenticeship training. If more businesses are to become liable to pay into the levy, Government will need to ensure real employer ownership, enabling employers to control how they spend their levy funds, with sufficient budget to do so. Government urgently needs to listen to the needs of employers, and through its consultation, ensure the voices of companies of all sizes are heard.

  • Government should invest any surplus budget towards recruitment and promotion of apprenticeship opportunities

In 2017/18, there was a £400m underspend in the apprenticeships budget. 31% of levy-paying employers tell us that the biggest barrier to investing more in apprenticeships is a lack of availability of suitable apprentices in the area. More needs to be done to support recruitment of apprentices and help subsidise travel costs.

 

City & Guilds Group outlines further details of its recommendations for Government in its Flex for Success? report.

 

For more information about the City & Guilds Group visit cityandguildsgroup.com

Twitter:
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@Cityandguilds
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@K_DonnellyMD

LinkedIn: City & Guilds Group

 

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