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Apprenticeship levy a bold decision with lots of questions

21 August 2015

Today's consultation on the large company employer levy comes less than seven weeks since George Osborne's surprising announcement in the summer Budget that the Government will introduce a nationwide scheme by 2017. The consultation asks for views about the mechanics of the scheme and does not give many clues about which companies will pay it or how much they'll pay. These plans won't be confirmed until the spending review in November and will depend on how Government ends up defining a "large employer". Data on this is patchy because many companies operate internationally and some high street retailers have thousands of people on zero-hour contracts. On the widest definition of large employers, there may be as many as 16 million people working for organisations with more than 250 employees. A 0.5% levy charged on these numbers could raise as much as £2 billion a year. The precise amount could well be less but no-one should be in any doubt that this is a big project. Incidentally most of the five million public service workers are in organisations with more than 250 staff so the levy is a factor in the Government's own public spending negotiations. The levy plan is a genuinely bold decision and today's consultation addresses some important technicalities. The Government plans to collect the levy via the PAYE system and pay the funds into Individual Employer Voucher Accounts (IEVAs). These are being created as part of a new employer-routed funding system which is being designed right now. Employers will be able to use the money in their IEVA to pay for training for their own apprentices. If they don't use the money within a certain period the Government will remove the funds and use them to top-up the accounts of other employers who spend more on training than they pay. The consultation asks lots of questions about the use of levy funds in IEVAs. Should money collected in Scotland, Wales and Northern Ireland be separately identified? What's the time limit for spending the money before its transferred for use as a top-up? Should there be a limit on the size of the top-up? Should employers be allowed to spend their IEVA on small companies within their supply chain? There are 32 questions in all and important points of principle at stake. A big issue of wide general interest is whether the scheme ensures that apprentices gain transferrable skills. The existing system relies on Government controls on training providers but does not always prevent abuse. The new scheme will encourage some employers to think more about training which is good but it will be a step back if the levy money gets lost in profit maximising training wheezes. The secret to stop this will be the registration and quality assurance arrangements. Ofsted and the Skills Funding Agency in their current form may not be the right vehicle for this work but 20 years of experience regulating apprenticeships shouldn't be junked without a backward glance. In the end, though, the levy is just a tool to encourage training, investment in people and a stronger focus on skills. The levy will be important but the bigger issue is how, collectively, we do better on skills and productivity. Colleges have been in this game for more than 100 years and train one in three apprentices even after the recent expansion. Colleges have much to contribute in making apprenticeships better but the task ultimately sits with business leaders. Julian Gravatt is the Assistant Chief Executive of the Association of Colleges.