More than £400m expires from apprenticeship levy pots

Experts call for reform of the system as FOI reveals 5,000 employers lost unspent funds last year

Thousands of large employers in England lost funds set aside as part of the apprenticeship levy in 2019, the BBC has revealed, leading to calls for the system to be reformed.

Nearly 5,000 big businesses failed to spend all the money allocated to them for staff training through the levy scheme, leading to more than £400m in funds expiring and being returned to the government between May and December 2019.

Figures obtained by the BBC through a freedom of information (FOI) request revealed 55 of the largest employers each lost more than £1m from their pot in 2019, while a further 746 lost more than £100,000 each.

Matthew Fell, chief UK policy director at the Confederation of British Industry, said the figures made it “clear that the current system is in need of urgent reform”, and called on the government to announce a comprehensive review of the levy in its upcoming budget.

However, Lizzie Crowley, senior skills policy adviser at the CIPD, said the failure of large employers to make full use of their levy pots was not necessarily surprising or concerning. “It should be recognised that the government always expected some employers not to be able to utilise their full levy pot,” she said.

Under the apprenticeship levy, employers spending more than £3m per year on wages are required to pay funds equivalent to 0.5 per cent of their annual pay bill. This ‘pot’ is set aside to fund the training and development of staff. If unspent after two years, companies lose this money and it becomes available to smaller businesses. As the levy scheme was introduced in April 2017, the first round of funds expired in May 2019.

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While many businesses were underspending, Crowley said the real problem facing the levy was large employers spending much more than expected on high-level apprenticeship standards such as management or leadership training.

Echoing concerns previously raised by the government’s spending watchdog, the National Audit Office, about the long-term sustainability of the levy, Crowley said: “What we've seen in many cases is smaller employers have really struggled to access any funding under the current arrangements. There is a need to find more flexible ways that employers can draw down their levy money, to be able to use on the other, less rigid skills development programmes.”

Gill Cronin, director of operations at The 5% Club, also called for greater flexibility in the system. “Expenses such as travel to training centres or paying for accommodation can make some apprenticeships untenable, so businesses should be allowed to use the levy funds to cover these essential expenses,” she said.

“We’d also like to see it spent on shared apprenticeships, where an apprentice is employed and trains across a number of small businesses, allowing employers that are too small to employ a full-time apprentice to support training.”

A spokesperson for the Department for Education highlighted that unspent levy funds were used to support other apprenticeship training by smaller employers, and noted organisations could also transfer up to 25 per cent of their levy pot to their supply chain.

“The levy means more money is available than ever before for training, and this year we have increased investment,” the spokesperson said. "We have already said we will look at how we can improve the working of the levy to ensure more people and employers can benefit from it.”