Why an Overhaul of the Apprenticeship Levy is both Necessary and Urgent

Over 43% of young people in the UK looking for work do not feel that their education has equipped them with the skills needed to get their desired job. Intending to tackle this problem, the government introduced the apprenticeship levy with the aim of creating 3 million new apprentices by 2020, but it has been heavily criticised, most recently by the Labour Party in their election manifesto. 

The levy has been a topic of contention due to a huge discrepancy in what it was expected to achieve, and the disappointing reality of the rollout. Organisations such as John Lewis, Tesco, and Marks and Spencer have recently called the system a ‘complete waste of money’, while on the flip side, the young people for whom it was intended are not benefiting from it. It’s time for us to recognise the flaws in this system, and consider how it can be reworked to ensure young people are getting access to skills, and employers access to skilled labour.  

Poor Social Mobility

If you dig into how the scheme is working now however, the government’s apprenticeship levy is not doing what it intended. In reality, older, experienced managers are receiving upskilling, instead of young people at the beginning of their careers who need the support to get ahead in the workforce. What this means is that those who have already received education and training are benefitting from people who actually need the support, and consequently despite the intention, the scheme is hindering the social mobility of young people and making it more difficult than it already is for them to gain relevant work experience and skills. 

According to the 2020 Youth Voice Census, 35% of those who had looked for an apprenticeship in their local area could not find any appropriate opportunities at the right level. Moreover, the number of young people not in education, employment or training (NEET) from October to December 2023 was estimated at 12.0%, a 0.2 percentage increase from the year before. These are both statistics from after the apprenticeship levy was introduced, demonstrating how the scheme is clearly counterproductive. 

This perpetuates two major issues. Firstly, with organisations such as John Lewis, Tesco and Marks and Spencer demanding an overhaul of the apprenticeship levy, many businesses are not receiving the financial benefits, and even suffering huge losses from the mandated taxation. Secondly, and an even bigger issue, is that it is negatively impacting the very people the scheme was created for – employees, especially those who lack experience and are falling further behind people who are already working in these industries.

Closing the skills gap in the UK

The current levy is widening the skills gap in the UK with its inflexible roll-out; this is highlighted in the decline of up to two fifths of new apprenticeships, and 41% less apprenticeship starts for those under the age of 19 since the scheme’s inception. The opportunity cost of this levy was 12,000 more apprenticeships that could have been offered directly by retailers in the past year. By restricting firms from spending money on their preferred and possibly more effective training methods, there are huge levels of untapped potential going to waste.  

As businesses, it is our responsibility to influence policy and evoke the change required to close the skills gap. By harnessing the power of AI to identify untapped potential regardless of background, providing immersive skill-building experiences, and enabling inclusive hiring practices, we can create a future where every individual has the opportunity to reach their full potential, and every business is helping them do so without the restraints of a government mandated levy. 

Alternatives to the flagship scheme

The main driving factor of the apprenticeship levy was to encourage and increase accessibility to alternative routes to university degrees that would still equip young people with the skills and experience they need to be employable. 

Businesses should be given the autonomy to decide on their preferred training programs while helping young people trying to get into work including more direct approaches and relationships with industry – whether it be in-house or with external companies that offer such services like Academy or the Dyson Institute of Engineering and Technology. 

By either revising or entirely removing the apprenticeship levy and its restrictions and relinquishing these funds back to businesses, employers in the UK are given the opportunity to better support young people in the early stages of their career, and hence create a capable and adaptable future generation, ensuring the UK retains its leading spot as a talent hub.

By Ashley Ramrachia, CEO and Founder of tech upskilling business, Academy.