The controversial apprenticeship levy is facing a growing backlash from businesses, with companies finding a well-meaning policy is being strangled with red tape.
Many are complaining the funds raised do not cover training costs and the levy has, in effect, become just another business tax. Launched in April last year, the levy aims to raise £3bn a year to fund better training.
Some companies say the maximum allowance of £27,000 per apprentice does not cover the cost of complex or high-level apprenticeships, while others say they will never get out as much as they pay in.
Other problems listed by businesses – especially smaller ones – are that it is too difficult to navigate, and that training programmes have not been certified so apprentices cannot be sent on the required courses.
“The levy is nothing but a tax,” said Sir John Timpson, chairman of high street cobbler chain Timpson. “The only way to get money back is a tortuous process of changing your training programme to fit government guidelines.”
The claims come as the education select committee prepares to wade through industry’s views on the levy, which requires all employers with an annual wage bill of £3m or more to pay 0.5% of their staff costs into an apprenticeship fund topped up by government.
In November, the committee launched an inquiry into apprenticeships and training, with the levy widely blamed for a collapse in the number of people becoming apprentices.
Government data showed that in the May to June quarter, covering the period when the levy came into effect, apprenticeship starts plunged 59.3% to 69,800. The drop raised questions over the Government’s target of three million people starting apprenticeships by 2020.
Leo Quinn, chief executive of Balfour Beatty, described the situation as “like something out of Yes, Minister”. He said: “In many cases the regulator hasn’t yet approved the courses people are already being trained on, meaning that firms are paying twice – once for the training and once for the levy.”
EEF described the situation as “at breaking point”. Verity Davidge, head of education and skills at the manufacturing trade body, added: “Some employers have stopped training because they can’t buy in the courses they want, and others have stopped recruiting. If a collapse in the number of people starting apprenticeships isn’t enough to make the Government realise the levy is not working, I don’t know what is.”
Paul Everitt, head of aerospace trade body ADS, said: “The pitch for the levy was that those already providing high quality training would be no worse off. However, we’re seeing many large businesses, which already spend significant sums on training, handing over far more than they get back.”
The British Retail Consortium – whose members include the ‘Big Four’ supermarkets and huge workforces mean they are likely to be among the largest contributors to the levy – also hit out at the current system.
Recent figures put BRC members’ levy contributions at £160m a year and Fionnuala Horrocks-Burns, the group’s employment and skills adviser, said some retailers are “writing the levy off as a tax”.
“If nothing is done to improve the situation then anger will rise,” she said. “We want the levy to work but in reality the biggest payers are not going to get their money back.”
A spokesman for the Department for Education said: “Feedback we have had from levy payers shows they are planning to increase their demand for apprenticeships to ensure they have the right skills in their workforce to grow their business and boost their productivity.
“Government will continue to work with employers on how the apprenticeship levy can be spent so that it works effectively and flexibly for industry, and supports productivity across the country.”
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