23 May 2023

A question was debated in parliament last month, regarding the Apprenticeship Levy. The discussion outlined a number of valid points around the restrictions of the scheme, such as inflexibility, making it easier for small businesses to host apprentices, levy transfer schemes and enabling larger employers to transfer unused levy to businesses in supply chains.

Lord McNicol of West Kilbride, Labour MP, put a question to the government:

‘‘What assessment they have made of the sectoral disbursement of the take-up of the Apprenticeship Levy.’’

In response, Baroness Barran, member of the House of Lords answered:

‘‘My Lords, employers are at the heart of our apprenticeship system. They have developed more than 660 standards across a range of occupations, and they choose which apprenticeships they offer and when.

The apprenticeship levy will enable us to increase funding to £2.7 billion by 2024 to support employers in all sectors to invest in apprenticeships.

Lord McNicol of West Kilbride, Labour MP, further added:

‘‘The apprenticeship levy is seen by many employers, especially those unable to recoup their contributions, as a training tax. This is due to the current scheme’s inflexible, rigid and bureaucratic nature. Does the Minister recognise the need to redress these problems?’’

Lord Aberdare, also added to the debate and said:

‘‘What assessment have the Government made of the results of initiatives to increase and broaden the take-up of apprenticeships, such as flexible apprenticeships, making it easier for small businesses to host apprentices, and levy transfer schemes, enabling larger employers to transfer unused levy to businesses in their supply chains? Given the seemingly limited impact of these schemes to date, what plans does the Minister have to increase the flexibility of the levy so that more businesses in more sectors, and especially SMEs, are able to make use of it?’’

Lord Clarke of Nottingham, stated:

‘‘Can the Minister confirm that the Government will not waver in their application of the apprenticeship levy, which is making an important difference in stimulating firms to start training their own staff in the way that they used to?

Will the Government also take steps to stop the abuse of the levy when it sometimes gets employed for management training for long-serving senior managers, who would be trained by the company anyway in the ordinary course of events?’’

In response, Baroness Barran answered:

‘‘I think the noble Lord would agree that this country needs to invest more in the skills of the workforce, both those entering the workforce and those currently in it. The last thing we need to do is cut back on the amount of funding going into apprenticeships. We do offer employers flexibility; we are spending £550 million on skills boot camps for the kind of short courses to which the noble Lord alludes, as well as working in particular with the creative industries to offer flexible apprenticeships.

41% of all apprenticeship starts were in SMEs in 2020-21, up from 38% in 2019-20. We have a lot of initiatives. For example, we have lifted the cap on the number of apprentices a small business can take on. In the area of the creative industries, which I alluded to, we are expecting 1,500 apprenticeship starts through the flexible apprenticeship scheme.

The apprenticeship scheme has two important objectives. One, as the noble Lord touched on, is to give young people a choice of opportunities as they enter their career—training, work experience and so forth. The other is to give our employers the skills they need in their workforce. The scheme is currently balancing those two things.

I am happy to reassure my noble friend that we have no plans to do away with the levy. Indeed, as I said, based on the OBR forecast we expect it to increase to £2.7 billion in 2024-25. The levy is part of a wider strategy to offer more flexible opportunities, such as modular learning and the lifelong loan entitlement, to potential employees and address the skills gaps of employers more effectively.

Again, if we look at the trend in the use of the levy, we have seen an increase in adoption and use of the levy by employers, both levy-paying employers and much smaller enterprises. We are committed to offering all sorts of flexible and shorter courses, and to funding those to meet key skills gaps. We think this is a critical part of our strategy.’’

View the full question here.

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