Time is running out to spend apprenticeship levy funds

There's an estimated £1.3bn of unspent contributions, which will begin to expire from this month.

by Lauren Brown
Last Updated: 03 Apr 2019

When in 2017 the government introduced rules requiring businesses with an annual wage bill of £3m or more to pay 0.5 per cent of it into a fund to be spent on apprenticeships or other forms of training, not everyone was happy.

A survey by Alliance Manchester Business School found one in three firms actually considered the levy a needlessly bureuacratic and confusing tax rather than the skills reboot it was intended to be.

Research by the British Chambers of Commerce found 56 per cent of levy-paying organisations did not expect to recover their payments in full and were treating the fees as an "extra cost", while 23 per cent did not understand how the levy worked. Only a third said they were expecting to recover all, or most, of their payments – all of which can be reclaimed through digital vouchers.

In late 2017, as the scheme was getting off the ground, skills minister Anne Milton said she was "quite flabbergasted" that many businesses were unaware of the apprenticeship levy, despite having already paid into it. While the principle of improving UK training was widely agreed upon, the government’s chosen course of action was not.

Now time is running out. The generated funds last 24 months after being credited to an employer’s account, so money from April 2017 is due to expire this month. Employers are faced with a ‘use it or lose it’ situation. Currently, an estimated £1.3bn remains unspent in the digital accounts from which employers can recoup their deposits through the National Apprenticeship Service.

Ofsted has warned that the time-squeeze has led to a "dilution of quality", mismanagement and insufficient off-the-job training. In fact the government had to dismiss an apprenticeships provider, Premier People Solutions Limited, in 2018 when it transpired government departments such as HMRC were failing to release apprentices for off-the-job training.

At the start of this year the Confederation of British Industry called for reform and regulation of the current system by ensuring the Institute for Apprenticeships (IfA) was given more independence and the time limit extended.

Regardless of the cash totted up by April, only time will tell whether the government heeds mounting calls for reform in the long term. Recently, Philip Hammond announced that from April SMEs will make reduced contributions towards training apprentices, estimated to bring a £695m saving for businesses. 

Image credit: Skitterphoto/Pexels 

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