The Apprenticeship Levy isn’t working

According to the latest government figures, under-19s accounted for a little over a quarter (28%) of apprenticeship starts in 2021/22. The remaining three-quarters were at Advanced or Higher levels.  That can’t be right. 

Let’s be clear, the Apprenticeship Levy is a well-intentioned idea primarily designed to help young people get the start they need for a productive and rewarding working life, and for businesses to fill the yawning skills gaps among their employees.  The truth is, a lot of companies are using it as a means to help their existing staff study for degrees as an aid to retaining valuable people within their organisation.  Now there’s nothing wrong with that per se, but the figures show that the proportions are way out of kilter, to the detriment of young people. 

Businesses do have a clear appetite for recruiting apprentices. A survey conducted in January by Survation for the London First campaign group showed 80% of businesses are planning to hire at least one apprentice in the next year. However, only one in six companies believes the apprenticeship levy system is working well and 48% had to return apprenticeship levy funding to the Treasury because they couldn’t spend it, with the amount returned totalling a staggering £1 billion. 

There are significant barriers to businesses taking on more young apprentices – not least the sheer volume and complexity of paperwork and the time and effort required to fill it in.  The situation has been made considerably worse because of the pandemic.  Businesses coping with simply staying afloat had neither time nor incentive to think about training, and that has taken a significant degree of momentum away from the whole cause of apprenticeships.  The jobs boost we have seen since lockdown ended has primarily been about companies looking for fully-formed members of staff, ready and raring to go in a particular role.  That’s meant wage inflation for many businesses as they went looking to cherry-pick individuals already in employment elsewhere. 

There are sectors where the demand for young people is currently high but finding the numbers to meet that demand is difficult.  Areas like hospitality still have a reputation for harsh and demanding working conditions (Gordon Ramsay and Hell’s Kitchen have a lot to answer for) in spite of significant progress being made by many employers.  That means bumper demand for commis chefs but a lack of enthusiasm among those who’ve been put off by that reputation.  Engineering and construction similarly are in great need.  The problem is not in the demand from employers for apprentices nor in the appetite of young people to have a career, it’s the pipeline joining them which is not functioning properly. 

What is needed is for at least a proportion of the Levy to be ringfenced for under-19s, among whom the need is greatest, and for the simplification of the process to make it easier for businesses to get started.  If, for example, 50% of Levy monies were hypothecated in this fashion, the incentives to look for ways to provide a career start for young people would be greatly increased.    

It must seem strange to anyone not working directly with the Levy system to think that employers can’t find a use for those funds, but again, this is because of the complexity of the system.  In theory, businesses can gift their unspent Levy monies to other companies, but in reality this happens far too infrequently because of the mind-bending form-filling required.  Would it not make more sense for unused Levy cash to go into a local pot for access by any business with a demonstrable need for an apprentice?  Certainly, this would increase the appeal to those SMEs that find it all too complicated or costly to get involved.    

The concept of the levy in funding work-based training opportunities has always been a good one, but the system is in desperate need of reform if it is to serve young people in the way it was initially intended.

Anna Clarke, Group Director: Employer Engagement and Partnerships at MK College Group