Plans to change apprenticeship levy welcomed – but is it too little too late?

In his address at the Conservative Party conference, the chancellor announced ‘plans for changes to the controversial apprenticeship levy system’. His pledge to ‘engage with business on plans for the long-term operation of the levy’, however received mixed reviews (1).

Reports published following the address suggest that planned changes ‘would include making it possible for employers to share up to 25% of their funds with businesses in their supply chain, as well as increasing access to courses in STEM subjects, potentially making levy funding available to benefit a wider range of employees’ (1).

CIPD Skills Advisor, Lizzie Crowley, therefore welcomed the move: ‘We would really be keen on a much more flexible tool to be deployed to support increasing investment in equally valuable forms of training’ (1). She did indicate however that pinch points should be the following focus: ‘within individual sectors, there are particular skills gaps and challenges, and we would like to see the government working with sectoral bodies to understand what the real pinch points are in those sectors’ (1).

But the plans haven’t come about unprovoked. Director General of the British Chambers of Commerce, Dr Adam Marshall reminds People Management readers that: ‘we have spent months pushing ministers to make practical changes to the way the apprenticeship levy works, and the measures announced today are an important step in the right direction’ (1). He continues though that in order for the apprenticeship system to work and be of greater benefit it needs to be flexible – ‘to ensure that businesses of all sizes can find and train the workforce they need’ (1).

Given months of outcry over the apprenticeship levy, it’s unsurprising that the sudden thought of making changes to the system now, may seem to be attempts to mend industry relations ahead of Brexit (believed by The Times to counter the growing threat of Corbyn (2)) has left a bitter taste for many.

Introduced in April 2017, ‘organisations with pay subject to employer’s NI of at least £3m’ were required to pay 0.5% of that ‘pay bill’ figure as the levy, paid back in into a digital apprenticeship account but only based on employees with an address in England as skills training in is a devolved. The monies can then be reclaimed as vouchers to spend on apprenticeships training within two years’ (1).

Discontent began when it was first launched as employers realised they were only able to spend the funds they paid in. So, employers with a skills shortage in Wales or Scotland were unable to use funds in their account and couldn’t launch nationwide apprenticeship training.  A slight tweak to the system earlier this year allowed businesses to offer up to 10% of their funds to those in their supply chain (1), yet the levy still attracts significant criticism. In particular, People Management highlights that the 20% off-the-job training requirement was deemed ‘frankly impossible’ by employers, whilst MPs derided it as a burden on employers (1). Equally employers with development programmes for older workers found they had to switch to concentrate only apprenticeships in order to receive levy funds leading to older workers losing out if apprenticeships were not appropriate to address their development needs.

As the levy has landed companies with greater costs and less flexibility it’s also not surprising that employers are failing to engage with it. The Open University reported in April that just 8% of levy funds ‘had been spent in the first 10 months of its operation, with £1.28bn sitting unused in digital accounts’ (1). Furthermore, significantly fewer new apprenticeships were created over the last academic year. The recent Department for Education report in apprenticeship and levy statistics show the number of new apprenticeships in the UK fell by 28% between August 2017 and June 2018 (3).

So with all that discontent and neglect, isn’t it all just a little too late? Well indeed much more could have been done sooner, but haven’t we been there with most policies? Some critics are holding on to these proposed changes as a glimmer of a silver lining – a chance to shape the levy.

Director General of the Institute of Directors, Stephen Martin (IoD) cites the feelings of neglect but ardently hopes that ‘these announcements will mark a change in direction by recognising the contribution [apprenticeships] make to our economy’ (1). Chief Executive of the BIFM (the professional body for facilities management) Linda Hausmanis’s commentary effectively sums up the discontent, scepticism and demand for change from industry:

‘The chancellor’s announcement will be welcomed by those businesses wanting to support their SME supply chain, but the fact is that the levy is underused while the FM skills gap continues to widen, including at senior levels. Apprenticeships are an essential part of the solution to plug this gap but the real barrier to take up is the way bands are allocated and funded.

Firms in my sector, whose levy contributions have resourced the development of FM apprenticeship standards are baffled that they remain beyond reach because funding bands are too low for providers to deliver quality programmes, leading to the pitiful scenario of a degree apprenticeship with no uptake, despite demand. It’s a double whammy because strict levy rules prevent them from funding alternatives. (4)

So, what about payroll apprenticeships? After the sterling work by Ian Holloway of Cintra to develop and get approval for a standard for our industry, one of the first progammes is being launched this month by East Midland Shared Services (who are close to my heart as they’re local to me) providing payroll services to the public sector. They are working with MBKB training to put their programme together and I hope more employers will be able to use their levy funds to support those wanting to make payroll their career. I’ve been blessed to have spent nearly thirty years working with hugely dedicated and motivated people in this industry. I’d encourage people of any age to see it as an intellectually demanding and business critical role that offers significant accountability (and reward) at the senior levels.