Employers’ training spend has stagnated under apprenticeship levy, says CIPD survey

Report suggests levy was ‘never going to close the gap’ left by declining investment in workplace learning

Businesses’ spending on workplace training has largely stagnated since the apprenticeship levy came into force, a report from the CIPD has found, reinvigorating calls for the system to be replaced with a more flexible scheme.

Nearly half (49 per cent) of levy-paying employers surveyed by the CIPD said the introduction of the levy had no impact on the overall amount of money they spent on training, while 9 per cent said it had led to a reduction in spend.

This compared to just 31 per cent who said the levy had led them to increase the amount they spent.

The Addressing employer underinvestment in training report surveyed 2,182 employers, including both levy and non-levy paying organisations.

The CIPD called on the government to replace the apprenticeship levy with a broader training levy that would enable organisations to fund both apprenticeships and other forms of learning and development that might be better suited to their needs and reach a broader section of the workforce.

Lizzie Crowley, skills adviser at the CIPD, said a broader training levy would give employers more flexibility and help prevent some from ‘gaming’ the system – rebadging existing training schemes as apprenticeships, a move seen by some as running contrary to the intentions of the levy. 

“With only 2 per cent of employers required to pay the apprenticeship levy, the money raised from it was never going to be enough to close the gap left by the long-term decline in training investment,” Crowley said.

“If it had more employers contributing, we could make up the shortfall and also help boost regional investment in skills.”

The CIPD suggested a scheme where businesses with 50 or more employees contribute 0.5 per cent of their payroll – which it estimated would raise £5bn – to plug the shortfall caused by the declining investment in apprenticeships over the past two decades.

Under the CIPD’s proposal, larger businesses with more than 250 employees would contribute 1 per cent of payroll. 

The levy was introduced in 2017, with one of its key objectives to increase apprenticeship numbers and boost investment in workplace training. UK employers in the public and private sector with an annual pay bill of more than £3m are required to contribute to the levy, which was expected to raise a total of £2.6bn in 2017/18, rising to £2.8bn in 2019/20.

However, new apprenticeship starts dropped by 36 per cent in the first year the scheme was launched – from 509,400 in 2015/16 to 375,800 in 2017/18 – and have not yet recovered.

Kirstie Donnelly, managing director at City & Guilds Group, said the CIPD’s report provided “further reinforcement” for the need for more flexibility in the system.

“The answer is for the government to apply more carrot and less stick and give greater flexibility to employers in the apprenticeship system, allowing them to exercise choice – within a clear set of parameters – in how they spend the levy,” said Donnelly. 

Mark Dawe, chief executive of the Association of Employment and Learning Providers (AELP), also welcomed the call for an increase in the amount of funding available for apprenticeships: “The extra funding is needed to fund apprenticeships at all levels and to meet demand for the programme from non-levy paying SMEs – something that the levy in its present form can’t achieve, as AELP predicted well before the levy’s introduction in 2017.”