Experts have warned that businesses may be writing off the apprenticeship levy as a tax, after Department for Education statistics revealed that scarcely half of eligible employers have signed up to reclaim funds for training.
Just 10,500 apprenticeship service accounts were registered on the system at the end of August, according to the official figures, falling short of the estimated 19,150 levy-paying companies eligible to use the service.
Since April, businesses with a payroll of more than £3m per year have been required to pay 0.5 per cent of their total wage bill. In return, they can access 10p for every £1 spent to train apprentices, provided they have signed up for an apprenticeship service account.
Joe Dromey, senior research fellow at the Institute for Public Policy Research, told People Management that the low uptake suggested employers were not engaging with the levy as hoped. “While these are early days, with the levy introduced just six months ago, these figures will be a cause for concern,” he said. “They seem to validate concerns raised around the lack of awareness of the levy – even among firms paying it – and that many levy-paying employers will simply see it as a tax and write it off.”
Elizabeth Crowley, skills adviser at the CIPD, said the government must do more to make sure employers were actively engaging with the levy: “In our view the government needs to be doing more work to ensure employers are making a choice in not using the levy, instead of being unaware of it. It is equally important that if there is an underspend, the funds are ring-fenced and used for supporting employer training, as there is a danger it could simply go back into the government’s coffer, and not be used to increase skills training and investment in the UK economy.”
Meanwhile, Mark Dawe, chief executive of the Association of Employment and Learning Providers, called on ministers to scrutinise the possible causes of the dwindling uptake in the accounts, as the statistics also show that 910 companies signed up to the system in June, compared with 740 in July and 690 in August. This is despite a total of 26,700 fully confirmed commitments (where both the employer and training provider agree on an apprenticeship start) being registered through the service by the end of August.
“We were hoping for a bigger increase in the 16-18 age group because of the school leaving season,” he said. “The government's social mobility agenda means that the incentives for recruiting these apprentices have to be reviewed by ministers urgently.”
However, as of tomorrow, those businesses that are keen to spend their levy funds will have a new way to do so. The Sunday Times has reported that the Chartered Management Institute has “played a key role in designing” an MBA that complies with the apprenticeship levy requirements. The degree will be offered by more than a dozen business schools, including Manchester Metropolitan, Gloucestershire and De Montfort universities.
Speaking at the Conservative Party Conference last week, skills minister Anne Milton admitted she was ‘flabbergasted’ at the lack of understanding shown over the levy by business leaders.