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Apprenticeship levy – we need a better way

Prior to the 2015 general election, the Cameron government realised that migration and wages had become a major issue. For too long companies in Britain had relied on being able to import ready-skilled workers. That creates low levels of skill (not to be confused with low levels of potential) said to cost the British economy £2 billion a year.

That government’s hand was forced. It set out plans for the development of apprenticeships across the whole country, with major differences within each devolved administration. The stated aim was to provide for an uplift in skills levels across the economy.

George Osborne, then Chancellor of the Exchequer, declared that apprenticeships were the means to achieve that aim and 3 million would be created by 2020. He established the apprenticeship levy as the way to fund this.

From April 2017 each company with a turnover above £3 million has had to pay the levy, a charge of 0.5 per cent of their payroll. Funding for apprenticeship training was supposed to come from companies claiming back an equivalent amount in training credits. Smaller companies don’t pay the levy but can access digital credits to pay for accredited employee training.

It has not turned out like that. About three-quarters of employers are yet to make use of funding for training. Employers’ organisations claim, with justification, that the levy system and access to the digital accounts is far too complex and ineffective.

This levy scheme is not the answer, even where the apprenticeships created are effective in building skills and of good quality. Since its introduction, the numbers of people starting apprenticeships has crashed from 117,400 in May/June 2016 to 48,000 in the comparable period in 2017. Between 2009/10 and 2011/12 there was a large increase in apprenticeship starts; from then until 2016/17 there have been around 500,000 each year.

Over 40 per cent of companies interviewed said that they did not fully understand how the complicated “standards/level” training system in England operated and reliance on external providers is not seen as workable. Only one in five employers said that they understood how to claim funding from their digital account.

The government is sticking to its line for now but it looks likely its target for training or apprenticeship places won’t be reached. The CBI and other open door migration supporters complain about the levy and the new skills caps on migrant labour introduced after the 2016 referendum. But some businesses have called for reform in funding. It’s up to organised workers to hold employers to account and press that whatever replaces the levy leads to effective skills investment.

• Related article: Skills and education for the future of Britain