New research into the apprenticeship levy from City & Guilds / the 5% Club has found that just 4% of levy-paying employers have used the full amount of funding available to them
The Apprenticeship Levy: Background
Funding for apprenticeships comes from an apprenticeship levy, which came into force on the 6th April 2017, under which employers with annual wage bills above £3 million set aside the equivalent of 0.5 per of their payroll. However, since the introduction of the levy, it has been subject to considerable criticism.
Critics, for instance, point out that the latest statistics show that the numbers starting an apprenticeship has fallen by 4.8% since 2018/19, and that the numbers completing their apprenticeship have fallen by 31.5%. Consequently, some have called for the apprenticeship levy to be broadened in terms of what types of training it funds.
In research carried out by the Chartered Institute of Personnel and Development (CIPD), for example, they found that 51% of employers wanted to see the monies raised through the apprenticeship levy to be used to fund a broader range of workplace training. Just 17% of employers supported the idea of continuing with the apprenticeship levy in its current form.
Commenting upon this, the senior skills adviser at the CIPD, Lizzie Crowley, contended that: "Reforming the existing levy and turning it into a broader and more flexible training levy would allow employers to develop existing staff through other forms of accredited, and cost-effective training, focused on tackling technical skills shortages in the economy. This would then also free up more funds to offer apprenticeships to young people who would benefit from them most."
In response to this criticism, the Government did make some small changes with effect from the 1st August 2022, including the following:-
- Taking greater account of previous training and experience to remove training that is not required, in order to speed up the apprenticeship
- Specifying the minimum number of hours a full-time apprenticeship must spend on training
- Changing the requirements as regards English and Maths
- Making the payment service more efficient
New Research Finds Problems Remain
Nevertheless, despite the changes made by the Government, new research from City & Guilds / the 5% Club, in which 1000 HR managers were interviewed, has found that problems remain with the apprenticeship levy. It finds that:-
- Just 4% of levy-paying employers (i.e. 1 in 25) make use of the full amount of funding available to them
- On average, only 55.5% of available funds are used by levy-paying employers
- Just 15% of employers have been able to recruit workers with the right skill set
- 94% of respondents to the survey reported barriers to accessing levy funds. Barriers included excessive bureauracy (18%), that the apprenticeships were too long (19%), and that there was a "lack of time to invest" (17%).
- 96% of employers believe that the apprenticeship levy system requires reform
- 43% of respondents believe that the option to use at least 50% of levy funds more flexibly should be available, thereby reinforcing the findings of the aforementioned CIPD research which concluded that the use of apprenticeship levy funds needs to be broadened.
The research also revealed that "An FOI found that £3.5billion funding notionally allocated to levy paying employers has expired between FY 2017-18 and FY 2012-22."
Recommendations
In light of the survey findings, City & Guilds, like the CIPD, recommends that the use of levy funds is broadened and made more flexible. It states: "HR leaders do not want to see the apprenticeship levy scrapped altogether. Our research found that the majority (43%) would prefer to shift towards a 50:50 model, whereby half of the levy is ring fenced for apprenticeships and the other half is more flexible - allowing businesses to identify the best way for them to meet their skills needs."
City & Guilds also recommend that "unspent apprenticeship levy funding [be redirected to] programmes designed to reduce skills shortages in the sectors that are most affected."
Reaction
Commenting upon the findings of the new research into the apprenticeship levy, the CEO of City & Guilds, Kirstie Donnelly, stated: "Apprenticeships are a valuable recruitment and retention tool but the current system is just not working for them, leading to large sums of funding intended for the levy instead going back to the Treasury because they cannot be used, all this at a time of such acute skills gaps and shortages. This research reinforces previous calls we and the wider skills sector have made for more flexibility to the current system."
