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Review of apprenticeship levy rules announced by Chancellor

Review of apprenticeship levy rules announced by Chancellor


A controversial apprenticeship levy that was introduced in April 2017 has been in the news again with plans to change the divisive levy system. The hope is that a new review of the system will lead to it becoming more flexible.


The Chancellor of the Exchequer, Philip Hammond pledged to “engage with business on our plans for the long-term operation of the levy, working hand-in-hand with employers to ensure that every young person can fulfil their potential and achieve their dreams”. Following the announcement, numerous reports have stated that this would include making it an option for employers to share 25% or less of their funds with other businesses in their supply chain.


Additionally, Mr Hammond announced that £5m extra funding for the Institute for Apprenticeships would be used to introduce new apprenticeships standards and update older ones in order to create more courses.


One change to the levy which would benefit a wider range of employees would be to increase the number of access courses in STEM subjects which could potentially make levy funding available to more. Increasing the access to these types of courses would generate more skilled employees and start to fill the void of UK skilled workers, however Lizzie Crowley, skills advisor at CIPD, stated that “apprenticeships were only part of the answer to filling the UK’s skills gaps”.


Additionally, Crowley stated that “we would really be keen on a much more flexible tool to be deployed to support increasing investment in equally valuable forms of training, 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”. It is thought that part of the apprenticeship levy funding could be invested into increasing skill development for gaps in each sector.


The director general of the British Chambers of Commerce, Dr Adam Marshall, made a statement regarding the changes to the levy, in which he said 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”.


Following on from the levy changes announcement Stephen Martin, the director general of the Institute of Directors (IoD) stated that “it is no secret that at times business leaders have felt neglected over the past few months and we hope these announcements will mark a change in direction, the introduction of greater flexibility over the use of funds will be celebrated, as will the promise of further engagement”.


Currently the levy system means that organisations that have an annual payroll of at least £3m are required to pay 0.5% of that into an online digital account. After this has been deposited into an account, the money can then be reclaimed in the form of vouchers to be spent on apprenticeship training within two years. This sector of the levy scheme has come under much scrutiny, with Labour peer Lord Alistair Darling describing the first year of the levy as a “strikingly hit-and-miss affair”.


Furthermore, the requirement of having 20% of the job training has particularly caused issues as employers have declared it as “frankly impossible” and also MPs described it as a “burden” on employers. This has led to employers failing to engage with the levy, according to research.


In April, the Open University published research which showed that only 8% of levy funds had been spent in the first 10 months of its operation, with £1.28bn sitting in unused digital accounts. The official report published last month revealed that the number of new apprenticeships within the UK had fallen by 28% between August 2017 and June 2018. The report revealed there were 341,700 new apprenticeships in the year leading up to June, compared with 472,500 in the previous 12 months.


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