Apprenticeship Levy 'not fit for purpose'

A levy that has put a dent in many umbrella and limited company contractors’ take-home pay since it took effect a year ago is finally receiving short shrift from business lobbyists.

The CBI, the IoD and the EEF are each taking issue about the effectiveness of the Apprenticeship Levy, payable since April 2017 by all whose annual wage bill exceeds £3m.

As the levy applies to many umbrella and staffing firms, who must pay its 0.5% charge on their non-permanent (as well as permanent) staff -- like contractors, it has critics in the contractor sector too.

But the business lobbyists are all outraged after official data showed that of the £1.39billion paid into the levy by English firms, only £108million has been drawn down.

Education department data released under freedom of information rules also shows that the volume of new apprentices in the first quarter after the levy’s launch plunged by 60 per cent.

The hope was that, by paying in a small contribution of their payroll costs into a scheme which they can claim back for training, employers could start tangibly closing the skills gap.

“This worrying data should be the final wake-up call for the government that the… [levy] is not working as intended,” the CBI said of the official data, obtained by the Open University.

“[In] its current form [the Apprenticeship Levy] does not encourage more investment in high-quality training… [so] this needs action now.”

Manufacturing body the EEF agrees that levy funding fails to cover the high cost of training in technical fields.

But there is less agreement between the lobbyists on what ought to be done, and unfortunately for contractors with take-home pay affected by the levy, axing it outright isn’t popular.

“The levy could be a vital part of the skills system,” says the CBI’s Neil Carberry, sounding hopeful of reform at Budget 2018. “There is still time to get the levy right.”

However, Philip Hammond only just used his freshly delivered Spring Statement to announce a £80m fund to help small and mid-sized businesses navigate the system and access the levy.

While the Chartered Management Institute (CMI) is among those waiting on the finer details, it says the government ‘has a lot of work to do to get employers on board.’

But it wants the levy left completely alone.

“Managers and employers need certainty to aid the planning of their apprenticeship programmes,” it said. “We urge the government to remain firm in its commitment to the levy in its current format”.

On behalf of 190,000 businesses, the CBI appears completely at odds with the CMI, saying an urgent review of the levy must be carried out, because it is “not fit for purpose.”

Similar language is coming out of the Institute of Directors. “Only 14% of business leaders who pay it [the levy] think it is fit for purpose,” said the IoD, following a survey of its members.

“It is not helping firms to invest in skills and train in a way that best suits the needs of our economy. Many employers are unable to make the complex and restrictive rules fit their specific training requirements.”

The institute’s head of policy research Seamus Nevin appealed: “While the intention behind the policy is right, employers need to see a change in how it is implemented urgently. We strongly advise that the levy and co-funding system are reviewed”.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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