Half of businesses will not spend apprenticeship levy funds

People Management research shows sluggish uptake among employers, as official statistics reveal new apprenticeship starts remain low

Half of businesses will not spend apprenticeship levy funds

Half of employers will write off at least some of their first tranche of apprenticeship levy funding, according to research conducted by People Management which suggests many businesses are still struggling to put processes and strategies in place to deal with the levy.

A survey of readers, carried out in December 2018 and January 2019, found 50 per cent did not anticipate spending all the funds in their digital account by the time the first month of levy taxation expires in April 2019. Another 10 per cent said they would not spend any of it at all.

This compared to 40 per cent who said they had either spent all their funds or would have done so by the deadline, which comes two years after the first funds were taken from payrolls under the levy.

The poll coincides with the latest government statistics, which show apprenticeship starts for the first quarter of the 2018/19 academic year were up on the same period last year, but were still lower than before the levy was introduced.

There were 132,000 apprenticeship starts in England in the first quarter of 2018/19, up 15.4 per cent on 2017/18. However, this figure represented a decrease of 13.8 per cent and 15.2 per cent on 2015/16 and 2016/17 respectively.

The People Management survey, which polled more than 250 readers, also found more than a third (35 per cent) had spent some of their levy funds on MBA or other management level training, and 46 per cent had spent the majority of their money on employees who were not, or had not previously been, apprentices.

Lizzie Crowley, skills policy advisor at the CIPD, said the survey appeared to confirm the rapid rise in management and leadership apprenticeships seen in official figures. “These starts have been one of the fastest growing [areas], almost doubling over the last two years,” she said.

“It is a bit of a concern given the fact that apprenticeships really are in most other countries a way in which young people can access the labour market, smooth the transition between education and work and really kick-start young people’s careers.”

Crowley added the figures hinted at a “worrying level” of rebadging, where companies rebrand existing management courses as apprenticeships so they can use levy funds to pay for them – a practice recently highlighted as a concern by Ofsted.

“We know there’s been a decline overall in training in the UK over the last 20 years, and we know it’s the more highly skilled individuals who get trained,” said Crowley. “So it’s a bit worrying to see this shift that implies money is going on more highly skilled, experienced workers potentially at the expense of routes into the labour market for young people.

However, Crowley added that failure to spend the entirety of an organisation’s apprenticeship levy funding was not necessarily a bad thing for apprenticeships as a whole. “If everyone did spend all the levy in their pot, there would actually be no money left for smaller employers to draw down funding to support apprenticeships,” she said.

She added it was important to make sure apprenticeship schemes were only created in areas where there was a real need – so it was perfectly fine for a business to “write off the levy as a tax” without ever drawing down from its pot if apprenticeships were not suitable for its training needs. However many businesses would still benefit from greater flexibility in how they could spend their levy money.

A YouGov poll published earlier this year found nearly a third of employers considered the apprenticeship levy a tax, and a separate City and Guilds survey found nearly all respondents (92 per cent) would like more flexibility in how they spent their levy.

Read more about how People Management readers spent their apprenticeship levy in our in-depth feature, from the February 2019 issue.