Extra £90M in funding and 25% of Apprenticeship Levy able to be transferred to supply chain

The government has announced a package of reforms to ensure the Apprenticeship Levy provides people with the skills they need to succeed. 

In his speech at the Conservative Party Conference on 1st Oct, Philip Hammond announced a package of measures to support business to boost skills, growth and prosperity in the new economy.

James Reed, Chairman of REED, feels passionately about the importance of apprenticeships for current and future generations of workers. In light of the Chancellor’s latest changes, James says:

“I had high hopes for the apprenticeship levy. It promised a solution to the skills shortage and a way to improve training options for young people. However, the results since it was introduced last April suggest it is not having the desired impact.

“On its first-year anniversary, the levy figures showed a 24 per cent decline in the number of people starting in-work training and there hasn’t been much sign of improvement since.

“Philip Hammond’s pledge to reform the levy will come as welcome news to businesses using it. However, financial incentives alone are not enough. A change in mindset among businesses and students is also needed to promote apprenticeships as a valuable and viable alternative to university.  These schemes are often overlooked in favour of more traditional career paths, yet many degrees do not equip young people with the practical life experience that employers are looking for.

“A society that embraces apprenticeships and holds them in the same esteem as a university degree will revolutionise work for young people and employers. I hope it doesn’t take the best part of another 40 years for us all to realise that.”

James Eiloart SVP EMEA at software company Tableau, commented:

“Philip Hammond’s decision to consult business leaders on how to expand the number of apprenticeships available through the Apprenticeship Levy speaks to both the greatest opportunity, and one of the greatest challenges facing UK PLC. 

“Technologies like Artificial Intelligence and machine learning are opening up opportunities to transform the productivity and prosperity of organisations in every sector. But our ability to harness this potential will be dependent on a concerted effort by government and business to upskill the workforce.

“The scale of the challenge ahead is significant. A report by PriceWaterhouse Coopers found that 69 percent of employers will demand data science and analytics skills from job candidates by the year 2021. Yet according to a separate study only 17 per cent of UK workers can be classed as “data literate”, with a further 40 per cent feeling overwhelmed by data in the workplace.

“Changes to the Apprenticeship Levy that make relevant skills more accessible across a more diverse talent pool represent a step in the right direction. We believe it’s important to have apprentice programmes that are delivering the skills businesses require – whether that be cross training or supporting those starting their careers.

“We recently joined forces with training specialist AVADO to create a data analyst apprenticeship programme, with the aim of training 3,000 data analysts by 2020.  Capitalising on the opportunity presented to UK PLC by new and emerging technologies will need others across business and government to follow suit through a combination of bold action and tangible investment.”

Stephen Evans, Chief Executive, Learning and Work Institute, commented:

“It was good to see learning and skills so central to the Chancellor’s speech. Increasing the amount of Apprenticeship Levy funds large employers can transfer to their supply chain is welcome, as are plans to review the operation of the Levy.

“The Levy is a good idea, but must evolve to succeed. The Chancellor was also right to reference the Government’s work developing the National Retraining Scheme. Ultimately, though, we need a much higher ambition to reverse declines in the number of adults learning.

“The Chancellor’s Spending Review decisions next year will need to match up to his words today if we are to meet this challenge.”

Ann Francke, CEO of the Chartered Management Institute, said:

“The Chancellor’s move towards making the levy more flexible and less bureaucratic for business strikes a much needed-note. Let’s hope this is the first of many policies which will make it easier for all employers to invest in the people skills we so urgently need to boost British productivity.

“We welcome the increased investment in STEM subjects alongside greater access for SMEs and supply chains. Support for degree apprenticeships to boost social mobility, an emphasis on quality over quantity, and a more employer-friendly approach to how the levy is run will also help make the policy more impactful and effective.” 

“CMI welcomes the Chancellor’s plans for investment in a package of measures to tackle the UK productivity crisis. Poor management and leadership is the number one cause of the productivity gap, costing the UK £84 billion every year in lost productivity. Investing in management is vital to turning the 2.4m ‘accidental managers’ into conscious leaders equipped to lead post-Brexit Britain.

“The government’s new interventions focusing on training SME leaders in management skills and supporting business to business mentoring compliment the focus on management apprenticeships. This investment is a welcome step in the right direction to make the UK more competitive as we approach an uncertain future.”

Mark Dawe, CEO, AELP commented:

“It’s great to see the Chancellor speaking about apprenticeships and the need to look at the levy.

“The review should focus on increasing starts for young people, starts among smaller businesses and starts at lower levels.”

Brian Berry, Chief Executive of the FMB, said:

“The Chancellor has, in part, listened to the concerns of business by making the Apprenticeship Levy more flexible. However, he needs to go much further. Currently ten per cent of Levy vouchers can be passed down through the supply chain from large firms to smaller firms and today, he increased this to 25 per cent.

“This is important as in construction, it’s the small firms that do the bulk of the training while the large firms don’t tend to directly employ or train tradespeople. Since the Apprenticeship Levy was introduced last year, apprenticeship starts have fallen in the construction trades by more than ten per cent. Given that the construction industry is already suffering from an acute skills shortage, this is very worrying indeed.

“If the Chancellor is serious about ensuring the Levy has the desired effect, and increases meaningful training across all sectors, it should go further and make 100 percent of the vouchers transferable from large to small companies.”

Teresa Frith, Senior Policy Manager at the Association of Colleges, said:

“More than a year on since the introduction of the apprenticeship levy, there have been some successes and some areas that need improvement. It is unclear in this announcement whether this funding is in addition to the apprenticeship levy or if it is just allowing employers to transfer more levy funds to their supply chain, so whilst the announcement appears to be helpful, we will need to consider the detail that sits behind it. We remain keen to see the levy funding spent solely on apprenticeships at the moment.

“AoC supports the continuation of the levy but recommends the government drops the target to secure three million apprenticeships to ensure that a larger amount of funding is spent on guaranteeing high-quality training. It is vital that apprenticeships bring benefits to both the employer and the apprentice, providing them with the skills needed to have a successful career.”

Ben Rowland, Co-Founder of the UK’s leader in digital, IT and HR apprenticeships,  Arch Apprentices said:

“Here at Arch Apprentices we welcome the Chancellor’s announcement this morning for two reasons: the first is the change proposed should make a positive difference, secondly, it doesn’t alter the fundamental principles of the apprenticeship reforms. Given how important stability is to enable the changes to bed in and flourish, this stability is really welcome.

“Our  experience at Arch is that as employers get used to the apprenticeship reforms, and are comfortable with them, they embrace them. That’s why three times as many people are doing apprenticeships with Arch now, as they were a year ago.”

Rob Alder, Head of Business Development, AAT (Association of Accounting Technicians) said:

“Chancellor Philip Hammond is determined to ensure that a Conservative Government delivers for British businesses and fights for our children’s future – and plans to improve the Apprenticeship Levy in order to enable more people to benefit from high-quality training could just be the boost that the scheme requires.

“It’s been well documented that apprenticeship starts have fallen off a cliff since the Levy was introduced. While there have been small success stories, such as a 9% rise of apprenticeships in the accountancy sector across levels 2-4 between August 2017 and April 2018, there was a 39% fall at these levels across all industries. The Government has all but conceded defeat in its original target of three million apprenticeship starts by 2020 – but today’s package of reforms might at least provide a kick-start to the Levy’s original aims of increasing the quality and quantity of available apprenticeships.

“But the UK’s skills needs extend well beyond the scope of apprenticeships. Workers need fresh training and upskilling opportunities throughout their careers; especially given new figures showing that the average Briton retains for an entirely new role twice within their working life. That is why the Chancellor’s announcement of £100m to deliver a world-class National Retraining Scheme might prove to be the most critical in terms of helping social mobility. Upskilling Britain’s workers will directly contribute to greater productivity and thus drive the economy as a whole in the right direction.”

Charlie Mullins OBE, Founder of Pimlico Plumbers, said:

“Since the Levy was introduced in April last year, there’s been tangible evidence of the policy failing. Large businesses and SMEs alike, all spoke out about the complicated, restrictive, and senseless policy which only served to disincentives businesses to put young apprentices on their books.

“Figures released last month showed the number of new apprenticeships in the UK fell 28 per cent to 341,700 in the year to June which is nothing short of a disgrace. Aside from the Brexit bandage, Hammond has also announced the opportunity for big businesses to hand over 25% of their levy funds to smaller businesses within their supply chains.

“But this all just sounds like adding more layers of bureaucracy to a policy which should be easy and streamlined with one main objective; getting more young people into work.”

“Pride and confidence in British business has for too long been missing in Westminster. It made a comeback in the Chancellor’s speech today.

“The Chancellor has started this process. Reform of the Apprenticeship Levy, currently failing firms and apprentices alike, is vital. Additional funding for the National Retraining Partnership will help people embrace technological change. Recognising and supporting the great work underway between small and large business in supply chains will lift regional prosperity.

“Companies know they are nothing without their people. Apprentices accelerate local growth and have been failed for too long. Businesses will be delighted to hear today’s commitment to change.

“Companies spend £45 billion every year on skills training, more than the entire English secondary school budget. But for two years CBI members of all sizes have been clear that the Levy has blunted provision. The 40% drop in apprenticeship starts alone is evidence that this reform is long overdue.

“To their credit the Government is listening. Improving the range of high-quality courses available and helping supply chains work together to provide what is needed locally is what business has been calling for.

“But more is needed. The Government must act now to deliver a meaningful review of the levy that demonstrates it will continue to collaborate with companies.”

“And with a well-funded National Retraining partnership delivered with the CBI and TUC, plus T levels and a revistalised careers strategy, the UK’s skills system could fire on all cylinders.”

Apprenticeships

The Chancellor announced a package of reforms and £95 million increase to the Apprenticeship Levy to ensure it continues to help business train people with the skills they need for the new economy.

The changes are aimed at providing flexibility for businesses so they can take full advantage of the benefits of employing apprentices, and to help as many people as possible find the right training to equip them for the new economy.

An extra £90 million of government funding will enable employers to invest a quarter of their apprenticeship funds on people working for businesses in their supply chain – boosting the number able to benefit from high-quality apprenticeship training.

A further £5 million was announced for the Institute for Apprenticeships to introduce new standards and updating existing ones so that more courses can be offered – meaning more choice for those considering their training options. The government will discontinue the old frameworks so that all new apprenticeships will be on the same higher-quality standards by the start of the 2020/21 academic year.

The government has worked closely with business groups to ensure the Apprenticeship Levy works for employers who are at the heart of delivering this move to world-leading training.

In the coming weeks, the government will set out a process to seek views on the operation of the levy after 2020 to ensure it supports the development of the skilled workforce businesses need for the new economy.

The apprenticeship levy is making good progress – with 1.41 million apprenticeships started since May 2015. There were 119,500 starts reported in the first three quarters of 2017/18, more than ten-times higher than the same period the previous year

The Chancellor Philip Hammond pledged government support for apprenticeships, adult training, to boost management skills in small businesses, and to ensure the UK’s world-class regulatory system is fit for the future.

Management skills for small firms

The government’s recent productivity review found the UK’s thriving small business community is facing a management skills challenge. To address this, the Chancellor announced £20 million will be invested in networks to enable small businesses to learn from each other and from world-leading firms. Over 100 mentors from companies, such as GSK, Amazon, KPMG and Siemens, have already signed up to offer their management expertise.

A further £11 million will pay for a training programme that will build the necessary management skills lacking in many SMEs. This will help 2,000 businesses in its first year, with an ambition to train 10,000 people per year by 2025.

Adult skills/National retraining scheme

The government is also establishing a National Retraining Scheme – during this Parliament – to support adults across the country and equip the workforce with the skills needed for the new economy. While this scheme is developed, the government is also funding additional projects including £30m to test the use of AI and innovative Edtech, and £34m for construction skills funding.

The government wants to work with employers to give every worker the opportunity to upskill or retrain for the new economy. The Chancellor pledged £100 million for the first phase of the National Retraining Scheme, announced in the last Budget, which will be rolled out next year.

He said this will include a new careers guidance service with expert advice to help people identify work opportunities in their area and what they need to do to get the skills to land the job. This will be backed up with state-of-the-art courses combining online learning with traditional classroom teaching to help people develop the key transferable skills for jobs of the future.

Independent review into utilities regulators

The UK has a world-class regulatory system which protects the interests of consumers. But it needs to be fit to respond to the challenges of the future to remain cutting-edge.

Therefore the Chancellor announced he will commission the National Infrastructure Commission to carry out an independent study of the telecoms, energy and water regulators. This will ensure they have the ability to encourage investment, promote competition and innovation and meet the needs of consumers in the 21st-century.

Midlands Engine

The Chancellor also announced £2 million for the Midlands Engine Partnership to support a study into how best to redevelop the area around Toton in the East Midlands, to ensure it maximises the growth opportunities offered by HS2.