Government announces apprenticeship levy reform

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In response to industry criticism, the government has revealed several measures it hopes will rescue its failing Apprenticeship Levy scheme

Announcing the reforms at the Conservative party’s annual conference in Birmingham, Chancellor of the Exchequer Philip Hammond said the proposed changes would give companies more flexibility.

An extra £90m of government funding will enable employers who pay the apprenticeship levy – those with an annual wage bill of at least £3m – to spend a quarter of their apprenticeship funds on people working for businesses in their supply chain, while the Institute for Apprenticeships would receive an additional £5m to introduce new standards and update existing ones so that more courses can be offered.

In the coming weeks, the government will set out a process to seek views on the operation of the apprenticeship levy after 2020 to ensure it supports the development of the skilled workforce businesses need for the new economy.

Hammond said: “We have heard the concerns about how the apprenticeship levy is working so today we’ve set out a series of measures to allow firms more flexibility in how the levy is spent.

“But we know that we may need to do more to ensure that the levy supports the development of the skilled workforce our economy needs. So in addition to these new flexibilities, we will engage with business on our plans for the long term operation of the levy.”

The Federation of Master Builders (FMB) has been a prominent critic of the government’s apprenticeship levy.  FMB chief executive Brian Berry said of the news: “The chancellor has, in part, listened to the concerns of business by making the Apprenticeship Levy more flexible. However, he needs to go much further.

“Currently 10% of levy vouchers can be passed down through the supply chain from large firms to smaller firms and today, he increased this to 25%. This is important as in construction, it’s the small firms that do the bulk of the training while the large firms don’t tend to directly employ or train tradespeople. Since the Apprenticeship Levy was introduced last year, apprenticeship starts have fallen in the construction trades by more than 10%.

“Given that the construction industry is already suffering from an acute skills shortage, this is very worrying indeed. If the chancellor is serious about ensuring the levy has the desired effect, and increases meaningful training across all sectors, it should go further and make 100% of the vouchers transferable from large to small companies.”

Mark Farmer, chief executive of Cast consultancy and the author of the ‘Reform Or Die’ report on the future of the construction industry, said Hammond’s proposals were “the latest in a series of piecemeal and reactive modifications to the levy in gradual recognition that only 2% of UK employers pay the levy, but that training must happen in a much more diverse and SME-led supply chain, most of whom are not levy payers”.

Farmer said the new 25% cap of transferrable apprenticeship funds, up from 10%, was still too low and the slow progress around agreeing new standards, assessment methods and the funding allocations of the levy “prevented it being spent in the first place”.

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