THE BLOG

Apprenticeship Levy: Friend or Foe?

23/03/2016 11:07 GMT | Updated 23/03/2017 09:12 GMT

Last week's National Apprenticeship Week was full of discussion. We heard about the productivity gains of hiring apprentices, and concerns around the gender divide. We celebrated the amazing things apprentices have achieved, and heard from business leaders who are pledging to create more apprenticeships.

But the one thing that's front of mind for businesses is the levy, which will help to fund the Government's ambitions of three million apprenticeships by 2020.

When it comes into force in a year's time, all employers with a pay bill over £3m will have to contribute 0.5% of that bill towards the levy - which the Government says will raise £3bn for apprenticeships.

But what do businesses think about the levy?

At the start of the month, City & Guilds ran a conference on its recent Making Apprenticeships Work report. It brought together 150 top British employers to discuss exactly what they think about the Government's apprenticeship plans.

Unsurprisingly the levy and Government targets were a hot topic. When we polled the attendees, nine in 10 employers said the target of three million apprenticeships was arbitrary and had no relevance to their businesses. A similar number of employers wanted it to be linked to sectors hit by the biggest skills shortages. And over half (53%) said the levy would not encourage them to take on more apprenticeships.

Businesses want apprenticeships to work for them. It's as simple as that. But naturally they're concerned about the cost and impact of the levy. As an employer of apprentices myself, I understand their worries. So what does the Government need to do to put our minds at rest?

Firstly, the Government must put quality at the heart of its apprenticeship policies. The good news is, the Government has already made progress. Last year it announced an employer-led governing body to oversee apprenticeship standards and guarantee quality.

Secondly, it needs to communicate information about the levy effectively and clearly to businesses. Plus, the levy needs to be easy to engage with, as too much bureaucracy can put businesses off hiring apprentices in the first place. Since the near-silence on the levy in last week's Budget, the Government has released more information on how it'll work in practice, yet questions still remain about how SMEs will fare in the new system. We can expect more details to come later in the year.

Finally, the Government has to continue showcasing the business and economic benefits of hiring apprentices. Our research showed that the net annual business benefits of training an apprentice in the UK in 2013/14 was £1500 per annum. And research from the Cebr showed that for every £1 spent on apprenticeships, the economy gains £21. If we want to motivate businesses to take on apprentices - and not be put off by changes to the system - they have to understand why they're so valuable.

The bottom line is, apprenticeships need a more sustainable funding model if we want to increase the number of apprentices and maintain a high quality learning experience. The levy is a real opportunity - but it will only work if employers support it. Government must now listen to businesses' concerns and address them so we can capitalise on this opportunity.