The Future of the Apprenticeship Levy – UVAC and CMI Position Paper

The Future of the Apprenticeship Levy – UVAC and CMI Position Paper

We have been anticipating a potential review of the apprenticeship levy and its purpose since it was announced by former chancellor and now PM Rishi Sunak when he said he would examine the levy’s effectiveness although this was later denied by HMT that this would be a formal review. We wrote an earlier article published online with FE News on A review of the apprenticeship levy and how the tax system incentivises employers to invest in training: and a follow-up opinion piece in FE Week commenting on the Learning and Work Institute (LWI) recent report called ‘Raising the Bar’, on the lack of employer investment in skills.

UVAC’s position is clear. There is no need for radical changes to the Apprenticeship Levy system.  While the system is not perfect, apprenticeships are a success story and should not be considered, as the CBI has described previously, a ‘failed experiment’.

Of course, some changes have been necessary. The Apprenticeship Levy has not worked that effectively in some sectors. New flexibilities make eminent sense.  Other flexibilities such as front-loaded training, where more training takes place at the start of the apprenticeship, and accelerated apprenticeship programmes are also welcome developments.

Some of the ‘flexibilities’ proposed by a number of organisations, however, make less sense. Tom Richmond’s EDSK think tank published a report last month called ‘Changing Courses’ which proposes to split the current apprenticeship levy into two separate funds: one for apprenticeships and another for skills training with more businesses including SMEs paying into it. The only agreement we would make to EDSKs report is that the Levy goals from the outset were vague. We don’t agree with EDSK’s reiteration (first made in 2020 and which we strongly rebutted in our response) that more than 50% of apprenticeships are fake with employer effectively rebadging existing training in order to fund it via the Levy.

Our view is that broadening out the apprenticeship levy including proposals for using the levy to pay for wage subsidies for apprentices and for it to become a skills or training levy simply will not float. Put simply, there is not the funding to pay a contribution to wage costs. While there may not be substantial changes to the system of the Apprenticeship Levy what was particularly interesting in the former Chancellor’s statement was the reference to the current tax system and whether it incentivises business to invest in training.

We have produced the following position paper with our corporate supporter CMI, with support from the Federation of Small Businesses. It is clear that the purpose of the Apprenticeship Levy has been confused from day one. In our joint report we set out 3 main recommendations including: 1. clarity and transparency of purpose with a definition of an English model of apprenticeships enshrined in law; 2. widening the scope of the system, levying it at a lower rate to include more employers with auto enrolment on the apprenticeship service for all registered companies and 3. introduction of an apprenticeship opportunity fund ring-fenced and funded by levy transfer, expired levy funds, additional charge on large employers or government grant to improve support for underserved groups and businesses.

UVAC has always argued that when combined the Apprenticeship Levy, Apprenticeship Reforms and introduction of Degree Apprenticeship has arguably made more impact on achieving academic and vocational parity of esteem than any other education policy in the last 50 years. A Degree Apprenticeship represents the best of both worlds, the combination of academic and vocational learning, a degree and apprenticeship. Some Apprenticeships have become such aspirational programmes that some have raised concerns over a perceived middle class grab of Apprenticeship places at level 6 and 7. BUT any ‘review’ of the Apprenticeship Levy needs to be considered in the context of other policies. Interestingly, the Lifelong Loan/Learning Entitlement is focusing on supporting more flexibility in level 4 – 6 and the ability to take shorter programmes, retrain and upskill. In contrast the Apprenticeship Levy is used to fund full programmes, although through accelerated Apprenticeships we have a little more flexibility. A key question remains – what should the state, individual and employer fund?

While we consider what the likely government response might be, we might also need to look ahead to a possible labour government and their announcement of a Growth and Skills Levy enabling firms to spend up to 50% of their levy contributions including underspend on non-apprenticeship training.

CMI Long Apprenticeship Paper A4 V2 (1)