CIPD: Apprenticeship levy has failed

apprenticeship target missed
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England’s apprenticeship levy has failed on every measure, the CIPD has said in a strongly worded statement stemming from an analysis of the policy’s performance.

Without significant reform, said the HR body, it will undermine investment in skills and economic recovery.

The institute stated that “reforming the levy to a broader, more flexible training levy would boost employer skills investment and business performance,” and would support the government’s further education reforms.

On all key measures the apprenticeship levy has failed and is even acting to constrain firms’ investment in apprenticeships and skills more broadly” – Peter Cheese, CIPD

The CIPD’s assessment, which it said was “damning” that since the levy’s inception employer investment in training has declined, overall apprenticeship starts have fallen and far fewer apprenticeships have gone to young people.

Its report comes as the government has announced some reforms to apprenticeships: This weekend (27 February), chancellor Rishi Sunak said the government would use this week’s budget to announce a new ‘flexi’ apprenticeship scheme where trainees can gain experience with multiple employers in the same sector.

The levy, introduced by then chancellor George Osborne in 2015, is a pool of funds that companies pay into that is used to train apprentices. Businesses with a payroll of £3 million or more are obliged to make monthly deposits of 0.5% of their annual pay bill into the apprenticeship levy pot. As a devolved policy, apprenticeships in Scotland, Wales and Northern Ireland are organised on a different basis.

In its first full year of operation, 2017-18, only £268m was spent by levy-paying employers on apprentices in the programme’s first year of operation and nearly 5,000 larger businesses failed to spend all the money allocated to them for staff training through the levy scheme. About £400m in funds expired and were returned to the government between May and December 2019. Many businesses regard it as inflexible and too open to abuse.

The CIPD is urging the government to convert the levy into a more flexible training levy in the budget on 3 March to increase employer investment in workforce skills and help the economy recover.

Included in the CIPD’s four-year performance assessment of the levy were findings showing that total apprenticeship starts had fallen from 494,900 in 2016-17 to just 322,500 in 2019-20. Employer-funded off-the-job training fell by £2.3bn in 2017-19 and smaller businesses were being failed with a two percentage point decline in the number of apprentices in organisations from 11% in 2016 to 9% in 2019.

Perhaps the most disappointing figure was the decline in apprenticeships going to young people: a fall from 265,000 in 2016-17 to just 171,600 in 2019-20 among people aged between 16 and 24.

The CIPD believes that without substantial change the levy will restrict young people’s training just as they need it most as the pandemic recedes. It would also undermine the government’s Skills for Jobs further education reforms and reduce employers’ ability to invest in skills.

Citing a YouGov/CIPD survey, the analysis found that nearly half of large employers believe the creation of a more flexible training levy would help them improve workplace productivity and business performance. Only 13% of large firms employing 250 or more staff said reforming the levy in this way would have no impact on productivity or performance.

CIPD chief executive Peter Cheese said: “On all key measures the apprenticeship levy has failed and is even acting to constrain firms’ investment in apprenticeships and skills more broadly. It appears to have achieved the opposite of its policy objectives. Without reform it will act as handbrake on employer investment in skills, damaging firms’ ability to recover from the pandemic.

“A more flexible skills levy would mean employers could use it to develop existing staff through other forms of accredited training and skills development which are cheaper and usually much more suitable for employees aged 25 and over, leaving more money to invest in apprenticeships for young people who most need them.

“Levy flexibility would also help employers fund their employees through training in further education colleges as many technical and vocational courses are not apprenticeships. This key change would provide a big boost to meeting the ambition of the government Skills for Jobs white paper and boost employer engagement with their local colleges.”

At a Westminster Employment Forum conference last week CBI president Karan Bilimoria also suggested that the government should reform the levy. He said the system had been “put in place with the right intentions by government but have not been as effective as it could be.”

He said the CBI recommended a far more flexible scheme going forward, adding that CBI research had shown 42% of businesses were taking additional steps to support young people, 26% were maintaining or increasing the number of apprenticeships, 15% were creating more traineeships and one in 10 intended to use the new Kickstart scheme, which had been made a “welcome and positive initiative”.

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