The Budget and the Apprenticeship Levy

EN:Able Futures respond

It has recently been reported the Apprenticeship Levy is responsible for the reduction in programme starts since its introduction. As the Autumn Budget was announced this month, we waited with bated breath to see whether the Levy would be mentioned.

So, what was said?

There was the recognition the minimum wage for apprenticeships is considered to be low, and thus an increase (above the rate of inflation) has been announced from April 2018 to £3.70 per hour. We are supportive of this as we know our apprentices work hard towards their qualifications and career aspirations, whilst supporting the objectives of their ‘host’ companies. However, we will need to continue to monitor the impact this could have on apprenticeship numbers, particularly within small companies and throughout supply chains.

Keeping with apprenticeship numbers, we know since the introduction of the Apprenticeship Levy there has been a 61% drop in apprenticeship starts, which is a massive concern. Provisional statistics presented by the Department for Education shows for Quarter 4 of the 2016/17 academic year, apprenticeship starts had gone down to 43,600 in comparison to the 113,000 starts in the same period for the last academic year. The lack of clarity and understanding for many on how the levy works together with the limited flexibility on how the money is spent remains, all we know what has been promised in the budget is the levy will be reviewed in terms of its flexibility. Along with many employers, we had hoped for a more concrete promise. Instead, we have seen extra funding awarded to go towards, for example T-Levels.The figure of 3 million apprenticeship starts remains for 2020, and the country continues to face a chronic skills shortage.

What additional flexibility could be requires more clarity. We do know from 1st April 2018, 10% of levy funds can be transferred from a levy paying employer to an Apprenticeship Training Agency (ATA) and/or the employers supply chain. Currently levy paying employers cannot transfer levy funds to any other organisation and can only use levy funds to pay for their apprenticeship training and assessment (with an approved provider and assessment organisation, up to its funding band maximum). It is not possible to use the levy funds for wages travel or subsidiary costs, managerial costs, work placements, traineeships, or set up costs for an apprenticeship programme. We think it would be interesting to see whether the review could consider making changes to this, something we know levy paying and non-levy paying employers would like to see reviewed. Action needs to be taken to help boost apprenticeship starts and make the 3 million ‘real’ apprenticeship starts by 2020 realistic whilst at the same time tackling the skills crisis in construction and housing.

In addition to apprenticeships, we want to draw attention to the reiterated pledge to build 300,000 homes a year. With this comes the announcement of extra money to support building, including £34m to develop construction skills and provide new workers for the building sector. Overall the Chancellor committed £44 billion for housing through capital funding, loans and guarantees, and said the funds will include an extra £2.7bn to more than double the Housing Infrastructure Fund. As much as this is promising for the industry, there is the strong side of caution especially with the uncertainty of Brexit looming and workforce shortages likely to be a top concern raised by many to date, with an estimated 8% of the sector workforce potentially at risk and lost when Brexit happens and access to the European single market is not retained.

Extra investment in the industry is fantastic to hear and we celebrate it but we will continue to challenge and seek assurances that some of those funds go towards ensuring we have the workforce and the skills to enable new developments to happen and create work programmes which attract young people into positions across the industry.

The Author

Written by Efficiency North

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