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More questions than answers for apprenticeship levy

07 October 2015

In July, the Chancellor of the Exchequer, George Osborne, announced plans for a national training levy to be paid by large employers which will be used to support apprenticeships. The first consultation has ended and has generally raised more questions than it has answered. As with most changes that involve money, feelings appear to be running high. The arguments and concerns seem to generally be around the idea of whether there should be a levy at all. This isn’t surprising as we can’t argue about who is and isn’t in scope to pay, what the income generated can be spent on and other more operational issues, because we don’t know what these will look like as yet. Here at the Association of Colleges, we firmly believe that the levy will need a robust set of rules to ensure that it contributes to genuine training. Experience in recent years shows that this needs to guarantee transferable skills provided by reputable training organisations which are quality assured. Trying to take a neutral look at the introduction of a levy is quite hard to achieve, but perhaps easier if the potential alternatives are considered. The Government currently injects around £1.5 billion each year into apprenticeships. This has been sufficient to fund up to 60% of the targeted 3 million. Currently some employers do pay towards the cost of their apprenticeships, but we would probably need to assume that when paying a levy, such contributions would cease. In very broad terms, another £1 billion needs to be raised to fund the 3 million target. This of course assumes that the new apprenticeship standards being developed in the trailblazer process are no more expensive to deliver than the current frameworks and no further investment is made in capacity and driving up demand. Professor Alison Wolf suggests that the average spend per apprenticeship is currently £2,000. With the inclusion of apprenticeships up to Level 7 (a Masters degree) in the new approach, it seems unlikely that this average will be maintained. Given the Government’s clear commitment to 3 million, the dilemma is where do you raise £1 billion from if not from a levy? It seems unlikely that there is much swilling around within the Treasury, so savings would have to be made elsewhere…. But savings do have to be made elsewhere anyway to bring the deficit down. If the Government will not foot the bill, who should? The individual apprentice? This would mirror our current higher education system. Indeed there was an attempt to loan-fund apprenticeships for older people, but it failed due to lack of take up. It would certainly be interesting to see what would happen if individual 16 to 18-year-olds had to pay for an apprenticeship, against ‘free’ alternative educational paths. So we are back to the levy on the assumption that the other ‘gainer’ from apprentices – employers – are unlikely to have a change of heart voluntarily around the level of investment they are prepared to make. I don’t think the levy will go away. I don’t see what the alternative would be whilst that 3 million target looms and the Government's ambitions and plans have been clearly nailed to the mast. Teresa Frith is the Senior Skills Policy Manager at the Association of Colleges. Our submission to the Government on apprenticeship levies is available on our website.