Blog published by CIOB People June 2024

Written by Dr Mandy Crawford-Lee, Chief Executive, UVAC

The Apprenticeship Levy has come under considerable scrutiny of late from political figures through to large construction firms. With there now potential for a change of government this summer, some of that scrutiny has often turned to criticism and demands for reform. 

 

But are these demands justified and how will they affect the funding and delivery of higher and degree apprenticeships to those aiming to reach senior level roles within the construction sector? What impact could Labour’s proposed Growth and Skills Levy have as an alternative solution? And are the original core principles and benefits of the current levy being overlooked in the quest for change? 

 

Introduced in 2017, the levy was designed to boost apprenticeship numbers, incentivise increased training and invest in future workforces. Investment in apprenticeships via the levy have since been proven to improve training quality, social mobility, tackle the construction skills gap and ultimately drive economic growth.

 

The compulsory contribution of 0.5% to fund the levy – by building firms with payroll costs of over £3m – was met with some understandable resistance. It has often been regarded as another form of business taxation, especially by firms which pay the levy but don’t take on apprentices. 

 

So, what is the alternative? Labour’s proposed Growth and Skills Levy would see 50% of payments ring fenced for apprenticeships while employers could spend up to 50% of payments on other approved training programmes.  This Labour claim would help deliver the flexibility employers have been demanding but what could the impact be on construction-led higher and degree apprenticeships delivered by universities? 

 

As it stands, less funding in principle will go to finance apprenticeships under Labour’s scheme, especially at level 6 and 7. If employers are allowed to spend 50% of their levy payments on other non-apprenticeship approved training, this leaves circa £1,6bn for apprenticeship funding annually across the devolved nations versus the £2.5bn spent by the government on apprenticeships in the last financial year.  

 

If Labour aren’t elected, what reforms are needed to the current Apprenticeship Levy?

A major stumbling block in need of reform, is that any unused levy funds expire after 24 months and return to the Treasury. Since its introduction, almost £2.7b of funds raised by the levy has been retained by or returned to the Treasury and not spent on apprenticeships. We believe excess funds should first and foremost be spent on apprenticeships at all levels and for all ages and not put back into the government’s coffers. 

 

We also believe that the annual apprenticeship budget should not stifle the outstanding recent growth of degree apprenticeships. The budget, largely funded by levy payments, currently dedicates around a fifth of spend to degree apprenticeships. We feel that should be doubled to nearer 40% of the total budget, given the integral role level 6 and 7 apprenticeships play in addressing the skills gap and enabling apprentices to reach senior level roles within the construction industry. 

 

Some of the suggested reforms go too far. There have been calls to restrict employers’ use of levy funds on degree apprenticeships for older workers, for individuals earning above a certain salary, for employees with a degree, or for apprenticeships at higher levels. Such measures would be a backwards step and severely restrict construction firms’ ability to mould apprenticeships to fit their business needs.

 

It’s clear to see that some reform is needed but not at the expense of diluting the levy’s original purpose. We’re working hard to ensure that the levy remains free from restrictions and continues to help apprentices across all ages and skills levels. We hope the construction industry is aligned on this issue and will continually defend the vital role apprenticeships play in the UK economy as an all age, all skills level programme. 

 

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