Apprenticeship levy has ‘failed on all key measures’, says CIPD

Scheme will act as a ‘handbrake’ for employer investment in skills without reform, warns CEO, calling for changes as part of this week’s budget

The apprenticeship levy has failed on “every key measure”, the CIPD has said, and has called for the system to be reformed ahead of this week’s budget statement.

Research from the HR body, which marks four years since the scheme was introduced, has found that the number of apprenticeship starts fell by 35 per cent from 494,000 in 2016-17 to 322,500 in 2019-20.

This includes a 38 per cent drop in new starts among those aged under 19 (122,000 to 76,300) and a 33 per cent drop among those aged 19 to 24 (142,200 to 95,300)

Off-the-job training funded by employers also dropped by £2.3bn over the same period, while the number of small businesses with apprentices fell 2 percentage points to just 9 per cent from 2016 to 2019.

Without reform to make the levy more flexible, Peter Cheese, chief executive of the CIPD, warned that apprenticeship opportunities for young people would be restricted and employers would be less able to invest in skills.

“On all key measures the apprenticeship levy has failed and is even acting to constrain firms’ investment in apprenticeships and skills more broadly,” said Cheese. "Without reform it will act as a handbrake on employer investment in skills, damaging firms’ ability to recover from the pandemic.”

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Cheese added that a more flexible levy would allow businesses to develop existing staff through other forms of accredited training that were less expensive and more suitable for employees aged over 25. This would leave more money to invest in apprenticeships for young people or to fund training through further education colleges, which would “provide a big boost to meeting the ambition of the government Skills for Jobs white paper and boost employer engagement with their local colleges”, said Cheese.

Chancellor Rishi Sunak is expected to announce a £126m boost for traineeships in England in this week’s budget, which will include a new flexible apprenticeship that allows apprentices to work with numerous employers in one sector, and an increase in the cash incentive given to employers that take on an apprentice.

Lynette Ryals, pro-vice chancellor of Cranfield University, said the UK’s economic recovery depended on improving skills and productivity. “We are experiencing a lot of demand from employers for higher-level technical and business apprenticeships to upskill their workforce,” she said. “Making the levy more flexible so that it could be used in smaller chunks might help companies adapt to a post-Covid world by reskilling more people, more quickly.”

However, Jane Hickie, chief executive of the Association of Employment and Learning Providers (AELP), warned against reform, noting that, before the coronavirus pandemic, the levy was set for a massive overspend. “The demand for apprenticeships from employers was very evident and AELP agrees with ministers that there is no case for using the levy for other forms of training, which attract separate government funding anyway,” Hickie said.  

“As the economy recovers, the levy will come under pressure again and we are urging the government to address the rebalancing need and ensuring that there is apprenticeship funding available for non-levy paying SMEs.”

A Department for Education spokesperson said the levy was “an important part of our reforms to apprenticeships, which are vital for driving our economic recovery”. 

“We are also making it easier for levy payers to transfer unspent funds and making training more flexible to meet the needs of different sectors. In addition, we have already committed to improving the working of the levy and will be making improvements in response to employers' feedback,” they added.