Labour announces plan for Skills: Growth and Skills Levy replacing the Apprenticeship Levy and Skills England

Keir Starmer has announced that in government Labour will give businesses the flexibility they need to train their workforce and deliver growth, by turning the Tories’ failed apprenticeships levy into a ‘Growth and Skills Levy’.

As part of a wider package, Labour has also announced that it will devolve adult education skills spending to combined authorities, and establish a new expert body – Skills England – to oversee the national skills effort.

As part of a crucial step to delivering the skills needed to drive growth, transition to net zero, and capture the benefits of new technologies, these reforms will give adults across the country the skills they need to gain good jobs and boost local and regional economies.

The Tories’ failure to deliver a skills system that works has left the country ill-prepared for the challenges we face over the next decade, including the transition to net zero, and reaping the benefits of technological change.

Labour’s plan for skills would:

·Turn the Apprenticeships Levy into a ‘Growth and Skills Levy‘ enabling firms to spend up to 50% of their levy contributions, including current underspend, on non-apprenticeship training – including modular courses and functional skills courses to tackle key skills gaps. By reserving 50% of the Growth and Skills Levy for apprenticeships, we will protect existing apprenticeship provision

·Better align skills policy with regional economic policy and local labour markets by devolving combining and various adult education skills funding streams to current and future combined authorities

·Establish a new expert body, Skills England, to oversee the national effort to meet the skills needs of the coming decade across all regions, and ensure we can deliver our Climate Investment Pledge.

Keir Starmer, Leader of the Labour Party, said:

“Labour will give employers new flexibility to invest in the world class training they need. Businesses want high skills, workers want skills training when they need it. We will see the biggest partnership between government, business and communities this country has ever seen.”

Sector Reaction to the Labour Party’s plan for Skills and a Green Skills revolution

Tom Bewick, Chief Executive of the Federation of Awarding Bodies said:

“The Federation welcomes the Labour leader’s speech setting out a green skills revolution. We were one of the few sector bodies to call for a review of the Levy, to ensure it is both flexible for business; as well as to ensure that more young people under the age of 25 secure the opportunity to earn and learn. It’s good to see Labour is listening to our concerns. We await further details when the party launches the outcome of the report being put together by Labour’s counsel of skills advisers.

“However, I would urge them to be radical, by removing unnecessary bureaucracy in the skills system, devolving the post-18 public spend on education fully to the individual – via universal skills accounts; and placing the learner at the heart of a more responsive skills delivery system. Crucially, it’s time to trust  the FE sector more, as well as end the era of top-down schemes and Whitehall knows best.”

Jane Hickie, Chief Executive of AELP said:

“From attending the 2022 Labour Party Conference, it is clear that skills is high on the agenda for the party as it develops its policies ahead of the next General Election. This is positive, but proposed skills reforms must mitigate against any unintended consequences.

“The Apprenticeship Levy has nearly doubled investment into apprenticeships, and AELP firmly believe it should remain ringfenced for apprenticeship training and assessment only. The current levy underspend supports small and medium-sized enterprises (SMEs) to engage with apprenticeships. As well as making up around 98% of businesses in England, SMEs predominantly hire entry level and younger apprentices. Reserving just 50% of the levy for apprenticeships would in reality cut apprenticeship funding in half. Furthermore, there are already ways for businesses to access modular courses and functional skills funding through skills bootcamps and the Adult Education Budget.

“We understand from early conversations with the Labour Party that there will be measures to ensure that SMEs do not see a reduction in the apprenticeship funding made available to them. AELP have long advocated for a standalone SME apprenticeship budget and believe would be a positive step forward to unlock SME growth. I look forward to discussing these policies in more detail with the Labour Party over the coming weeks, but AELP feel strongly that employers should be encouraged to invest more in skills, without seeing the levy diluted.”

Stephen Evans, Chief Executive of the Learning and Work Institute said:

“I welcome Labour’s commitment to green growth. Delivering this will require clear action to ensure the employment and skills system can support this. Our research shows this can engage people and employers, but we need better information and advice on what green skills are.

“We have previously called for reform of the apprenticeship levy to tackle the 28% fall in employer investment in training since 2005. So flexibility to invest in accredited qualifications is welcome, but we also need a wider plan to either widen the levy or increase government spending to ensure there is still sufficient funding is still available for SMEs.

“I hope these announcements are downpayments on wider reforms to increase overall investment in skills, raise attainment of young people, and empower people and communities. Learning and skills are central to tackling the current crisis and building a more prosperous future.”

Kate Shoesmith, Deputy CEO, Recruitment & Employment Confederation (REC) said:

“The Apprenticeship Levy is a failed experiment. Business voices, including the REC, have been saying this for a long time now. In recruitment, we have never understood why it would not be possible to take the funds generated by the levy and put them towards training the individuals who choose or need to work flexibly and could really benefit from shorter courses that would allow them to progress in work. Our proposal was to create a broader training and skills levy. This has a benefit to the employer too as they invest in their staff and reap the rewards of improved productivity. 

“Businesses have a huge role to play in reskilling and upskilling – this was a focus of our recent ‘Overcoming Shortages’ research. So as part of Labour’s future proposals, we would like to see a strategy for engaging the local experts in the labour market as skills programmes are developed – working in a true partnership with FE. The labour market is not static, so we need quick, responsive and local solutions based on up-to-the-minute jobs data that recruiters have, and programmes that are tailored to help people at different stages in life and work. REC members are ready to support the development of such a strategy.”

Robert West, CBI Head of Education & Skills, said:

“Business shares Labour’s commitment to give firms greater flexibility over training. The CBI has long called for additional flexibility within the Apprenticeships Levy and a new independent body to address future skills gaps. Doing so, we’ll be able to address skills gaps in our economy, and be ready to harness the digital and green market opportunities of the future.”

David Robinson, Director for Post-16 Education and Skills at the Education Policy Institute, said:

“It is welcome to see that the Labour Party have chosen to make improving the UK’s skills system a policy priority ahead of the next general election. Greater flexibility in how businesses and organisations choose to spend their apprenticeship levy could have the potential to provide a much-needed boost to training across the country, but there are risks that this flexibility would fund training that would have taken place anyway, whilst depressing the number of apprenticeships. Given that around £1 billion a year of levy
payments are going unspent, maximising the effectiveness of this fund should be a priority. Careful design will be important to ensure any changes achieve the desired goals.

“Labour’s ambition for a renewed focus on skills policy through the creation of Skills England should also be welcomed, although we await precise details on how this might operate and impact current structures, such as Local Skills Improvement Plans. A skills system that listens to localities, catering for workforce needs in specific regions, is important due to the diversity of circumstances across the country. As we think of how to best utilise the skills system to combat serious challenges such as climate change, however, an element of centralised oversight could support these efforts, providing policy that’s designed with the bigger picture in mind.”

Geoff Barton, General Secretary of the Association of School and College Leaders, said:

“It is encouraging to see Labour’s focus on a modern childcare system, including fully funded breakfast clubs in all primary schools, and investment in providing lifelong skills training. Providing more wraparound support around the school day is particularly important in helping children from disadvantaged backgrounds whose families often struggle with the basics of food and heating and are likely to be badly affected by the cost-of-living crisis. Skills training is an essential part of improving not only the opportunities for individuals but delivering an economy which is fit for the future and where growth is sustainable. It is also important that this emphasis on skills is reflected in a review of the current curriculum and qualifications which are dominated by the current government’s fixation on a diet of traditional academic subjects.

“However, a Labour government would also urgently need to address the shortages of teachers and funding which are the most pressing issues facing schools and colleges. The current government’s record on both issues has been lamentable, and politicians from all parties have to recognise the fact that every educational aspiration and target relies upon having in place the essential resources of enough teachers and money. It is very unlikely that taxing private schools will work as a way of improving state funding to any significant extent because it will drive up school fees and lead to the closure of small independent schools, displacing many children into the state education system with the associated cost.

“Nevertheless, we are pleased with Labour’s general direction of travel and we look forward to working with the party’s education team over the coming weeks and months.”

Mark Cameron OBE, CEO, The 5% Club, said:

“The 5% Club welcomes the move from the Labour Party to keep skills and the evolution of the tax system so high up on their agenda – this is important in these unprecedented times and especially when so many will need positive skills interventions to realise their full potential.

“We have submitted our own proposals for Levy reform to the current Government and we would be keen to work with those in opposition to ensure the sentiment contained therein can be delivered. Shifting from the current approach to a broader skills levy would need careful consideration and management, especially to avoid unintended consequences or negative impact on those who most need the help. We stand ready to support such a discussion in the run up to the 2024 General Election.”

Matt Robinson, Commercial Director, Lifetime said:

“Any decision to widen the apprenticeship levy will need to take into consideration the impact of skills, knowledge and behaviours on young people. Apprenticeships provide a bigger piece of the puzzle beyond technical skills, some of the benefits are more holistic; around developing life skills and work experience, which a 12 week training course would fail to deliver.  We’ve seen many positive impacts of the levy from bringing more organisations into the apprenticeship market to establishing high-quality apprenticeship programmes. We’d like this engagement with employers to continue to increase, seeing more people take up apprenticeships. Therefore, it will be interesting to hear more about the practical side of this in the report. “

Olly Newton, Exec Director, Edge Foundation said:

“This year we were pleased to see Labour putting a green transition at the heart of economic and social transformation. However we noticed a lack of discussion or fringe events focusing specifically on skills or FE – which we sought to rectify in our own fringe event “Skills for the Future – are we prepared” in partnership with the NFER.

“So, we welcome Labour’s recent announcement on the ‘growth and skills levy’. At Edge, we have long advocated for the levy to be reformed as the term ‘apprenticeship’ cannot be all things to all people. We suggest the levy is reformed to incentivise employers to take on young apprentices aged 18-24 and on high-quality routes into apprenticeships (e.g. traineeships, paid internships, reinstating the young apprenticeships model). Adult learning and retraining should then be properly funded and supported by government outside the apprenticeship programme.

“As part of broader apprenticeship reform, we would encourage Labour to go further by setting high quality measures of success for apprenticeships and other skills programmes  – this should move away from numerical targets towards measurements such as the delivery of equality, diversity and inclusion (EDI strategies); completion rates; progress and destination measures; and percentage of apprentices and employers satisfied with programmes.”

David Phillips Managing Director City & Guilds said:

“We welcome Labour’s commitment yesterday to creating a broader skills levy that better supports the skills needs of employers across the UK. This is something that we have been calling for some time to help stimulate employer investment in skills.

“City & Guilds carried out research with the CBI on the levy way back in 2018. And the message even then was clear, employers wanted to be given wider scope on how to best use levy funds to finance a wider range of workplace training.

”To address the UK’s stubbornly low productivity and give businesses the best opportunity to succeed in challenging times, it’s essential that we develop a skills system that is fit for purpose, with employers placed absolutely at its heart.”