Industry calls for summit with Government to save Apprenticeship Levy

Britain’s manufacturers are calling for an urgent summit with Government to discuss fundamental reforms to make the Apprenticeship Levy work, and to ensure the creation of additional numbers of high value manufacturing and engineering Apprenticeships.

The call comes on the back of a survey by EEF, ‘A Levy Price to Pay: The Apprenticeship Levy One Year On’, the manufacturers’ organisation showing overwhelming support for sweeping reforms to the operation of the Levy and the latest figures for overall Apprenticeship Starts showing a 31% fall in starts for January 2018 compared to the same period last year.

Making the call, EEF Head of Education & Skills Policy, Verity Davidge, said:

“Everyone shares the ambition of creating high quality Apprenticeships which are essential if industry is going to access the skills it will need in the future, especially in a post Brexit world where fewer skilled workers will come to the UK.

“But, whilst the Apprentice Levy had laudable aims its impact has been highly damaging for Employers and Apprentices, and what should have been a win-win situation has turned into a lose-lose. We have to address the alarming drop in starts initially and then look at positive solutions which are on the table to make the levy work for employers and learners in the long term.

“Government must now sit down with business and find a way to rescue the Levy so that it meets the original pledges made to companies when it was introduced.”

Alan Woods, OBE, CEO of VTCT says:

“Today’s report highlights some concerning issues which have dogged the apprenticeship reforms. It is disappointing that the lack of clarity surrounding the Levy is preventing employers from capitalising on the opportunity to take on high quality apprenticeships. Many businesses big and small depend on apprenticeships and crucially, any reforms that the Government takes to improve and enhance the Levy should work to spend more on producing high quality apprenticeships.

“We should encourage the opportunity for entry into job market to include GCSE-equivalent level apprenticeships as well as higher level apprenticeships depending on the needs of the employers in that sector. The critical point is that the quality of the apprenticeship is paramount and that it has a direct line of sight to a regular, well paid job at the end of it.

“As this report states, the Government could provide greater clarity and simplicity around the Apprenticeship Levy, and specifically, why businesses of all sizes, should capitalise on the fantastic opportunity to recruit, train and hire young workers who start their careers as apprentices.”

According to the survey just 5% of companies want to leave the levy as it is. The majority (52%) want to keep the Levy but see improvements made to current system and a quarter (26%) want the levy to turn into a training levy.

Furthermore, 8% of companies have cancelled or delayed engineering apprenticeships for a new recruit specifically because of the Levy while 11% of companies looking to start an engineering apprenticeship for an existing employee have cancelled or delayed it specifically because of the Levy.

The survey also backs criticism that the Levy was rushed in as over half of companies (54%) said Apprenticeship standards have not been ready for delivery, whilst two fifths of companies say colleges and training providers are either unable or unwilling to deliver the Apprenticeships that manufacturers want.

In response EEF is proposing the following reforms to make the Levy work:

1. Move the Apprenticeship (Levy) Budget from Department Expenditure Limit (DEL) to Annually Managed Expenditure (AME). This would mean that the Budget for apprenticeships is based on demand and would allow the Government to spend more on high quality apprenticeships where there was demand from employers to deliver them.
2. Increase the lifetime of funds that employers have to spend their Levy to at least 48 months, the length of an engineering Apprenticeship. In particular this would help SMEs who tend to recruit every two to three years to meet their skills needs.
3. Review the funding band structure by removing the upper limit of a maximum of £27,000. This would honour one of the key pledges Government made to employers on the introduction of the levy to cover the true cost of training and assessment.
4. Expand incentive payments to employers, providers and learners for STEM apprenticeships, an area of consistently reported skills gaps. This would align with Government ambitions to meet increasing demand for technicians.
5. Increase the amount of unused funds employers can transfer to over 50% and remove restrictions on transferring to a single employer. Increasing the amount to over 50% would persuade more employers to buy into transfers and create more Apprenticeships.
6. Allow employers to agree a payment schedule with their provider. This would support the delivery of Apprenticeships in higher cost subjects such as engineering where there is currently a disincentive for colleges and training providers due to the high up front cost.
7. The process of signing off standards for Apprenticeships must become quicker and more transparent to empower the role of employers further to drive standards for delivery.

EEF has a long-standing reputation as one of the UK’s leading experts in the field of Apprenticeship training. Over 1,000 Apprentices a year are trained for some of the UK’s biggest companies at its state of the art Technology Training Centre in Birmingham.

The survey covered 100 Levy Paying Manufacturers between 5th March and 13th April 2018

About EEF: The manufacturers’ organisation, is the representative voice of UK manufacturing, with offices in London, Brussels, every English region and Wales. This year we celebrate 120 years of backing Britain’s makers. Collectively we represent 20,000 companies of all sizes, from start-ups to multinationals, across engineering, manufacturing, technology and the wider industrial sector.

We directly represent over 5,000 businesses who are members of EEF. Everything we do – from providing essential business support and training to championing manufacturing industry in the UK and the EU – is designed to help British manufacturers compete, innovate and grow. From HR and employment law, health and safety to environmental and productivity improvement, our advice, expertise and influence enables businesses to remain safe, compliant and future-focused.