The Levy was introduced one year ago but in that time the number of Apprenticeship starts has fallen compared to previous years, putting the government’s target of three million Apprenticeships by April 2020 under threat.
However, in a report published last week, EEF – a body representing UK manufacturers – said that many of its members have struggled with the Levy. It is calling for a number of reforms, including more flexibility in how employers can spend the Levy funding.
The EEF is not the first business group to call for reform. In January, the Confederation of British Industry (CBI) called for the current Levy to be “evolved” into a “flexible skills levy”.
Since being introduced a year ago, employers have had to pay 0.5 per cent of their overall pay bill into the Levy, although an allowance of £15,000 a year means that only those with pay bills of £3 million or more pay the tax.
The Levy is aimed at encouraging employers to take on apprentices. Any Apprenticeship that started on or after May 1, 2017, has been funded by the Levy. Employers can spend from £1,500 to £27,000 on an Apprenticeship, with 20 per cent of funds held back until the Apprenticeship has been completed.
The figures make difficult reading for ministers. They show that the number of people starting Apprenticeships dropped to 114,000 between August and October 2017, down from 156,000 in the same period in 2016 – a drop of around 27 per cent. The previous three-month period saw a 59 per cent drop in uptake. Overall, as of October 2017, 608,900 participants on an Apprenticeship had been reported for the academic year, compared with 638,700 at the same time in 2016/17 – a decrease of 4.7 per cent.
The EEF analysis says that around 1.7 million Apprenticeship starts are needed between February 2018 and April 2020 if the government is to hit its three million target – this is around 56,000 starts each month against the current average of 40,000.
A survey of 100 EEF members for the report found that only seven had had no challenges with the Levy. Problems included:
- Registering for the Digital Account Service, which manages Levy payments.
- Knowing whether they were eligible to pay the Levy.
- Finding an appropriate Apprenticeship funded by the Levy.
- Negotiating price and delivery with providers.
Among the survey respondents, two in five said that colleges and training providers were “unable or unwilling to provide Apprenticeships that manufacturers want” while half said that the Apprenticeship standards were “not ready for delivery”.
Half of the companies in the survey want to keep the Levy but with improvements made, while a quarter backed the CBI’s call to turn the Levy into a training levy.
Among the EEF demands are to increase the lifetime of Levy funds to 48 months. They say manufacturers are being penalised for not recruiting on an annual basis when many companies only recruit every two or three years.
They also say the maximum Levy funding of £27,000 “does not scratch the surface” in terms of the true costs of an engineering apprentice.
They are calling for no upper funding limit. The report states: “It is not uncommon for manufacturers to report spending £4-5 from their own pocket for every £1 of Levy funds spent.”
The EEF also wants to see more flexibility on payment schedules in order to support higher cost Apprenticeships, incentive payments for STEM Apprenticeships, and more flexibility to allow employers to transfer Levy funds between themselves, which it says would create more Apprenticeships in the system.
The EEF’s head of education and skills policy, Verity Davidge, said: “While the Apprentice Levy had laudable aims its impact has been highly damaging for employers and apprentices, and what should have been a win-win situation has turned into a lose-lose. We have to address the alarming drop in starts initially and then look at positive solutions which are on the table to make the Levy work for employers and learners in the long term.
- Levy Price to Pay? The Apprenticeship Levy one year on, EEF, April 2018: http://bit.ly/2Kmjuv8