Business groups slam apprenticeship levy as firms fail to withdraw funds one year on
One year on from the introduction of the apprenticeship levy, business groups are calling for urgent reform of the controversial policy as firms leave more than £1bn of funding untouched.
Data published by the Open University today shows that businesses have paid £1.39bn into new National Apprenticeship Service accounts, yet have withdrawn just £108m. Businesses have only one year left to spend that money before it begins to expire.
The figures add fuel to the fire of criticisms that the levy, formulated by former chancellor George Osborne, is little more than a stealth tax.
Read more: Ministers face House of Lords grilling over apprenticeship levy impact
The policy, which was put in place in April 2017, aimed to boost the UK’s skills base by requiring businesses with an annual wage bill of £3m or more to pay 0.5 per cent of their staff costs into a fund that is also topped up with public money.
Business leaders are now calling for reforms to the “complex and restrictive” design of the levy after official figures revealed last week that apprenticeship take-ups have plummeted by a quarter.
Figures from the Department for Education showed 194,100 apprenticeship starts were reported in England for the first two quarters of the 2017-18 academic year, down from 258,800 the previous year.
“The decline in apprenticeship starts since the levy was introduced proves that the levy and co-funding system need to be reviewed,” said Seamus Nevin from the Institute of Directors.
“Many of the new courses are not yet in place but employers already have to pay into the system. Given their contributions expire after a certain date, some employers are paying the levy tax but can’t use their money for the right apprenticeships.”
Neil Carberry, the managing director of people and infrastructure at the Confederation of British Industry (CBI), said businesses have failed to claim funds due to the inflexibility of the system.
According to the Open University’s report, the most significant barrier preventing apprenticeship take-ups is the availability and flexibility of programmes, with one in three business leaders calling for more flexibility in apprenticeship content.
Carberry said the government’s critical failing was not taking criticism by business leaders seriously ahead of the implementation of the levy.
“The levy was not designed in a way in which it incentivises employers to work together to build a quality provision,” he said.
While he said the government is now starting to recognise the policy’s shortcomings, “they are yet to appreciate the urgency of doing something about it now,” Carberry added.
Read more: The apprenticeship levy needs urgent reform, IoD poll suggests