Businesses may face cap on using apprenticeship levy to fund executive training

£18,000 limit should encourage employers to refocus on apprentice starts, say experts

A potential new cap on the use of apprenticeship levy funds to pay for MBAs and other senior-level training should lead businesses to refocus their attention on bringing in apprentices, experts have suggested.

The cap, initiated by the Institute for Apprenticeships, comes after speculation that many companies would put their funds towards MBAs and other forms of executive education.

According to media reports, the measure would ensure that employers could spend up to £18,000 on masters-level degree courses, which falls significantly short of the £47,000 average fees charged by the top 14 British business schools and the national average for master-level degree courses in the UK.

The apprenticeship levy was introduced by the government in April 2017, seeking to boost low productivity in the UK by setting an ambitious target of three million apprenticeship starts in the public and private sectors by 2020. Organisations with a salary bill of more than £3m must pay an 0.5 per cent tax on their payroll, which is then converted into training vouchers supplied by the government and spent on ‘high quality’ apprenticeships.

The move angered some employers and the scheme has faced a rocky start, with reports of organisations working with training providers to subsidise their costs, protesting the levy’s 20 per cent off-the-job training requirements and writing the levy off as a tax.

Skills minister Anne Milton described herself as ‘flabbergasted’ by the lack of understanding shown by businesses over the levy, which was designed to help them take on and train workers for the benefit of the wider economy.

The latest measure suggests the government could now be taking steps to tackle organisations seeking to rebadge or divert the funds into their existing L&D instead of investing in apprentices.

“We have been concerned by reports of businesses using apprenticeship levy funding for higher-level training,” Elizabeth Crowley, skills adviser at the CIPD, told People Management. “The levy was predominantly introduced to address the decline and shortfall of employer training and technical skills in the UK, as the majority of people who are not being trained in organisations are in low-skilled roles.

“The diversion of funding by ‘rebadging’ – or transferring senior leaders onto MBAs – is a worry, particularly as they are often used to support senior business people in a career transition rather than to address skills shortages in firms and upskilling the broader staff body within an organisation.”

The reports came at the same time as statistics from the 2017 CBI/Pertemps employment trend survey revealed that 63 per cent of businesses planned to reconfigure their existing training into apprenticeships.

The statistics suggested that while almost half of respondents expected to recruit more apprentices in 2018, a broad swathe of businesses could persist in efforts to work around the levy by rebranding their training schemes

“This shines a light on the need to have a broader skills training levy that employers can spend flexibly, rather than locking someone into an apprenticeship where they have to fulfil quotas such as taking one day a week to do off-the-job training,” Crowley said.

“Moves such as capping the spending on MBAs are welcome – but they do highlight the retrofitting of the apprenticeship levy to deal with the unintended, ongoing consequences of wide-scale rebadging being carried out by organisations.”

The Department for Education and the Institute of Apprenticeships did not reply to requests for press comment on the reports.