Most levy funds are not being spent on new apprentices, figures suggest

5 Mar 2019 By Francis Churchill

Half of money collected from employers goes towards existing training or apprenticeship schemes, says City & Guilds

Employers have spent only a small fraction of the first year’s apprenticeship levy funding on accredited apprenticeships, according to a new analysis which suggests significant amounts of money intended for new apprenticeships continue to be put towards “rebadged” training. 

Figures from the Department for Education (DfE) suggest just £268 million of the £2.01 billion collected from employers during 2017/18 was spent by levy-paying businesses on apprentices.

By contrast, half the inaugural year’s budget – £1.065 billion – went towards pre-levy training, defined as training that was established before the current levy system came into force and which may include management training or “rebadged” schemes, as well as existing apprenticeships.

The revelation, obtained in a freedom of information (FOI) request by City & Guilds Group, will fuel concerns that although the number of new, accredited apprenticeships will increase over time, current spending on apprenticeships remains well below the government’s aspirations. 

Around £400 million – a fifth of the overall budget – remained unspent at the time of the FOI request in December 2018, while another £189 million was spent on apprentices for non-levy paying employers and £58 million was spent on maintaining the apprentices programme itself.

The figures, which were released to coincide with National Apprenticeship Week this week, appear to validate concerns raised by employer groups that levy funding is largely not being spent as it was intended. “It’s evident that employers are still struggling to get to grips with the current apprenticeship system,” said Kirstie Donnelly, managing director of City & Guilds Group.

“With access to international talent threatened, it’s never been more pertinent for employers to focus on bringing fresh talent into the workplace.

“Apprenticeships provide one key solution to the skills deficit problem, and while DfE figures show that apprenticeship starts at higher and advanced levels are starting to increase, those at intermediate level are still declining: a worrying fact for the UK’s talent pipeline.”

The overall amount of levy funds contributed by employers also fell short of expectations. While it was forecast £2.7 billion would be collected during 2017/18, City & Guilds said just £2.3 billion made its way to the Treasury, which Donnelly described as “concerning”.

“It appears that the apprenticeship budget set by the Treasury fell well below the amount of levy money collected by HMRC, meaning the government would never have been able to fulfil its promised apprenticeship funding for employers,” Donnelly said.

She added that previous research by City & Guilds Group found 92 per cent of levy-paying businesses want to see greater flexibility in how they spend their funds, a sentiment echoed by other employer groups.

In January, the Confederation of British Industry called for a shake-up of the UK’s skills system to ensure apprenticeships lead to high-skilled, high-paid jobs, a YouGov survey showed more than a third of businesses wrote off the levy as another tax, and a recent poll of People Management readers found nearly half were expecting to write off some or all of their first round of levy funding.

Separately, the head of the UK’s human rights watchdog has called on businesses to use apprenticeships to help close gender, ethnicity and disability pay gaps.

Rebecca Hilsenrath, chief executive of the Equality and Human Rights Commission, said employers needed to create a “level playing field” at the entry point to the labour market, and that apprenticeships offered a key opportunity to do this.

She encouraged employers not to be scared of using positive action when recruiting, despite a recent tribunal ruling in which a UK police force was found to have broken discrimination rules when it incorrectly attempted to do just that.

“Apprenticeships offer a great opportunity to create opportunities for individuals by offering paid employment, on-the-job training and qualifications,” said Hilsenrath. “[But] employers need to take a confident and proactive approach if they are really going to make a difference here. Too often they are hesitant about using positive action because they’re worried about inadvertently discriminating against others.

“Unfortunately, employers such as Cheshire Police falling foul of the law due to a lack of understanding add to this fear. In reality, when used correctly, positive action is a powerful way for employers to address skills shortages and foster inclusive and diverse working environments that allow everyone to reach their full potential.”

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