Apprenticeship levy comes into effect today: Two-thirds of British firms clueless about new levy

Mark Sands
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The government says the apprenticeship levy will fund 3m new roles by 2020

A controversial new levy on businesses comes into effect from today, despite warnings that as many as two-thirds of British firms report little or no knowledge of the charge.

The government says the apprenticeship levy will fund 3m new roles by 2020, but business groups say the programme is rushed and poorly designed. Economists have described the levy as a stealth tax.

Only one in two large companies surveyed by recruitment specialist Manpower expect to pay the levy, while 63 per cent of UK employers say they have little or no knowledge of the new system.

A separate survey by the Chartered Institute of Personnel and Development (CIPD) shows that less than a third of businesses who expect to pay the levy have calculated how much it will cost them each year.

Business groups say confusion is rife among their members, while concerns remain that the levy could distort training schemes and end up doing more harm than good.

Read more: We need to change perceptions of apprenticeships – especially for professional jobs

The CBI has complained this morning about “the speed and scale of the introduction”, and said “significant concerns still exist”.

The UK’s biggest business group added: “Some firms face paying for the levy but are unable to access new or updated training standards, or have no approved providers available locally.”

A spokesperson for manufacturing body the EEF told City A.M.: “Employers are asking us questions on a daily, if not hourly, basis where they are struggling to get to grips not just with payment, but asking how to spend the money, because there are so many restrictions. Seventy-five per cent of our members don't think they will be able to spend all their levy money.”

Some businesses and researchers fear the rush to created 3m apprenticeships risks eroding the quality of training schemes throughout the economy.

“Many firms remain in the dark about how the apprenticeship funding reforms will operate or impact on their training plans,” said British Chambers of Commerce director of research Mike Spicer. “The focus on apprenticeships should be on quality rather than quantity – this isn’t a numbers game”.

While the levy will be paid by businesses with a payroll above £3m per annum, Sam Bowman of the market-liberal Adam Smith Institute said workers will pay the price through lower wages.

“Forty-four per cent of new apprentices are over 25. Nearly one-third of people do not complete their apprenticeship. And most are low-quality, with just 30,000 positions being at a higher level than a school GCSE as of the end of 2015,” Bowman said.

“In light of that, the target to create 3m apprenticeships by 2020 looks both unattainable and a wilful waste of time and money. We do not need 3m bogus apprenticeships, funded by a new payroll tax, just so the government can get a few good headlines.”

Read more: British businesses are hiring 25 per cent more apprentices

Nearly one third (29 per cent) of firms admit they will offset the cost of the levy by adapting existing training programmes so they can be officially accredited as apprenticeships, the CIPD survey shows.

The CIPD also said 36 per cent of employers that have calculated the cost of the levy say "it will force them to reduce investment in other areas of workforce development".

A Department for Education spokesperson said: "We want to build a world-class education and skills system that will give everyone a chance to climb the ladder of opportunity to rewarding careers."

"Quality is at the heart of our reforms. That is why we have given employers more freedom than ever before to design training that works for them and ensure it delivers the skills and knowledge that our economy needs."

"We have been working closely with employer bodies, including the CBI, to help them and their members prepare to make the most of the opportunities available."

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