The government will back down on its controversial apprenticeship levy today with a raft of reforms and a review into the scheme.
Philip Hammond will announce the reforms to introduce greater flexibility for businesses and expand apprenticeship courses in science and other STEM subjects, in his speech at the Conservative Party Conference in Birmingham today.
The number of people starting apprenticeships has tumbled since the levy, which requires businesses with an annual pay of £3m or more to invest 0.5 per cent of its pay bill in apprenticeship training, was introduced in April last year.
There were 341,700 apprenticeship starts in the period between August 2017 and June 2018, down from 472,500 over the same period the previous year.
The new proposals will allow large employers to transfer up to 25 per cent of their apprenticeship levy funds to businesses in their supply chain from April 2019.
The range of courses will also be expanded to increase the number of people who can access STEM subjects, transport and healthcare.
Hammond will also seek views from businesses on the implementation of the levy beyond 2020, opening the door for further reforms.
Stephen Martin, director general at the Institute of Directors (IoD), which has previously called for reform, said the chancellor's business-friendly tone would be welcomed by firms.
He said: “IoD members have long called for change to the levy system and the introduction of greater flexibility over the use of funds will be celebrated, as will the promise of further engagement.
“The levy must be responsive to the needs of businesses across the country, and the increase in STEM apprenticeships couldn’t come a moment too soon.
“In the longer term we should be thinking about the levy as a wider training fund that bolsters the labour market against the challenges of demographic change and automation.”
The British Chambers of Commerce director general Adam Marshall said Hammond was “setting the right mood music” but called for greater flexibility to the apprenticeship system.
He said the government should go further in the long-term, allowing levy-payers to transfer 50 per cent of their funds along the supply chain.