Drop in apprenticeships sparks calls for reform of levy-based system

Alexandra Rogers
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Young Apprentices Begin Working At Cammell Laird Shipyard
The levy was intended to fund three million apprenticeships (Source: Getty)

The 25 per cent drop in the number of apprenticeships in the space of a year has sparked criticism that the introduction of a levy-based system has adversely affected the scheme.

Data released by the Department for Education (DfE) reveals that the number of apprenticeships dropped from 309,000 in the six months to February last year to 232, 700 over the same period this year.

On a month-on-month basis, there was a 40 per cent decline in apprenticeship starts from 36,400 in February last year to 21,800 this year.

The announcement almost marks one year since the introduction of the apprenticeship levy, which forces organisations with payrolls in excess of £3m a year to bankroll some of their own training on schemes that fit certain criteria. The funds are then taxed by HM Revenue and Customs (HMRC) if not used within two years.

Originally unveiled by former chancellor George Osborne in 2015, the levy was intended to fund three million apprenticeships. It has been criticised by business groups who say it will not have the desired effect.

Read more: Apprenticeship starts drop as levy criticised as "unfit for purpose"

Seamus Nevin, head of policy research at the Institute of Directors, said: “Today's figures yet again show that the system is not working as intended. How much more evidence does the government need before it takes action? While the motivation behind the policy is laudable, the execution is flawed."

He said that as well as a decline in apprenticeship starts, around 40 per cent of schemes had fallen below the standard internationally recognised as the minimum quality to be an apprenticeship.

“If we want to boost skills, productivity and wages in our economy then the system must be reformed," he said. "Businesses should be afforded the flexibility to invest in more tailored courses. Firms need longer to spend the money so they can use it on the apprenticeships of greatest value. Larger companies could also be allowed to transmit more of the funds down their supply chain to where it is most needed.”

Corporate director at The Open University David Willett said the levy had made it difficult for employers. He said only eight per cent of levy funds had been withdrawn so far by employers to fund training, with £1.28bn sitting unused in levy accounts.

“We're now into the second year of the levy and time will soon run out for employers who are wanting to invest in their workforce through their levy funding, as funds will begin to be absorbed by the government from April 2019, " he said. "Employers should make the most of their levy funding, and with the fourth industrial revolution picking up pace and Brexit on the horizon, investing in the skills and agility of employees is more important than ever for organisations. Those that embrace work-based learning will survive and thrive in this challenging time."

Read more: Levy under fire as apprenticeship numbers sink again

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