BUDGET 2018: HAMMOND REVISES APPRENTICESHIP TARGET – BUT SMEs GAIN FURTHER INCENTIVES

By announcing that through ‘the apprenticeship levy we are delivering three million high quality apprenticeships in this Parliament,’ the Chancellor has bought the Government two further years with which to increase starts to this level. This won’t come as any surprise given how, to date, apprenticeship starts have fallen off a cliff since the levy came in.

Indeed the latest figures for the 2017-18 year show a 28% fall across all apprenticeship starts, compared to 2016-17. There have been small success stories, such as in the accounting industry which saw a 12% rise in the same period, largely because it had an already well-established and employer-recognised apprenticeship linked to recognised qualifications, acting as a vocational pathway into the profession. However, the overall picture suggests that the levy’s original aims of improving the quality and quantity of apprenticeships have not yet been met.

News therefore that non-levy payers comprised of small and medium-sized enterprises (SMEs) will now only pay a 5% contribution towards the cost of training new apprentices is a major step in the right direction. This will save smaller firms around £240 million over the next five years, and could just provide the fillip they require to put apprentices at the heart of their thinking when it comes to recruitment.

If apprenticeship schemes are to work to their full potential, then small businesses have a vital role to play, given that 99% of the UK’s 5.5 million businesses classify as SMEs. It’s important in our opinion that they pay something – history would suggest that had the Government cut the figure to 0%, with SMEs making no contributions to apprenticeship training at all, engagement could actually fall as many small businesses could fail to take advantage of a scheme that requires no investment from their side.

In truth, the levy could work even better if it didn’t just consider apprenticeships. The UK’s skills shortage extends far beyond the scope of apprenticeship schemes, and we would like to see more flexibility in the way the levy can be utilised, to include traineeships and other high-quality training, and boost the nation’s social mobility further.   

Other changes announced in the Budget affecting apprenticeships include:

• £450 million available for levy-paying employers to transfer up to 25% of their funds to pay for apprenticeship training within their supply chains
• £5 million available to identify gaps in the training provider market and increase the number of high-quality apprenticeship standards available to employers, by September 2020
• Work will be undertaken by the Minister for Apprenticeships and Skills and the Exchequer Secretary to the Treasury to ascertain how employers are responding to the levy in England.

Rob Alder is Head of Business Development at AAT (Association of Accounting Technicians)