Experts call for re-think of apprenticeship levy as apprentice numbers fall

Out-Law News | 26 Jan 2018 | 5:07 pm | 1 min. read

The government may be forced to revisit the operation of the apprenticeship levy after figures showed apprenticeship starts have actually fallen since its introduction, an expert has said.

There were 114,000 new apprenticeships which began in the first quarter of the 2017/18 academic year, compared to 155,600 in the same period one year previously, according to provisional figures published by the Department for Education (DfE).

The apprenticeship levy, which is payable by large businesses with a payroll of more than £3 million, was introduced in April 2017. The same data showed a 59.3% drop in the number of new apprenticeships which began in the previous three months, immediately after the introduction of the levy, when compared to the same period one year previously.

A total of 67,200 apprenticeships have been supported by the levy, of which 46,100 were reported in the first quarter of the 2017/18 academic year, the DfE said.

Employment law expert Matt McDonald of Pinsent Masons, the law firm behind, said that the "stark statistics" made it seem "likely that the government will have to re-visit the operation of the levy at some point soon".

"The whole purpose of the apprenticeship levy was to increase the number of apprenticeships being offered by employers across the UK," he said. "A stagnation in numbers would have been viewed as a failure, so the fact that they have actually dropped - and significantly so - is a rather embarrassing indictment of the levy and suggests that it is having the reverse effect."

"Dropping the scheme altogether seems unlikely as this was something of a flagship policy for the government, although doubtless many employers would welcome such a move. A simplification of the scheme, and perhaps fewer restrictions on how the funds can be spent, is probably the more likely outcome," he said.

The apprenticeship levy is charged at a rate of 0.5% of payroll on employers with an annual wage bill of £3m or higher. The levy is used to fund 'digital accounts' from which employers are able to pay for apprenticeship training, and is part of government plans to deliver three million new apprenticeships by 2020. Smaller businesses, and additional apprentices for those that wish to spend more than what it is in their account, get 90% of the costs of training paid for by the government, while levy funding is also topped up by the government.

Commenting on the DfE Twitter account, apprenticeships minister Anne Milton said that it would "take time for employers to adjust" to the new system.

"We must not lose sight of why we introduced our reforms in the first place – to put quality at the heart of this programme, and putting control in the hands of employers," she said.

Milton added that employers had two years to spend the funding they had contributed through the levy.