According to analysis by a business group, UK employers have lost £2bn over the past two years in apprenticeship levy funds that they have been unable to spend.
Since 2017, apprenticeships in England have been funded through a levy equivalent to 0.05 percent of salary costs for companies with an annual wage bill more than £3m. The money that isn’t used within two years will be paid into the Treasury.
Business groups say the policy has failed as the number of people starting apprenticeships has plunged in four years since its introduction. The proportion of apprenticeships going to young people has fallen sharply and employer’s overall investment in training has also declined. The pandemic has also added to these existing problems, with many employers either not willing to make a long-term financial commitment or unable to train apprentices remotely.
The Chartered Institute of Personnel and Development (CIPD) said that while many employers wrote off their levy funds as a tax, others found ways to spend the money on training that didn’t match the policy’s intention. For example, between May 2019 and March 2021, funds totalling £1.999bn had expired unspent, according to the department for Education figures obtained through freedom of information requests.
Within those same two years, companies had doubled their spending on generic management apprenticeships, which are generally offered to existing staff who could have been trained in far more cost-effective ways.
Ministers have so far proposed relatively minor changes to the way the apprenticeship levy works. Changes announced in the March budget, including some new flexibility for employers to pass unused funds on to smaller companies in their supply chain, were simply ‘refining around the edges of a failed policy’ said Ben Willmott, the CIPD’s head of public policy.
Both the CIPD and other business groups argue for more of a fundamental shift to a broader training levy, which employers could also use to find other forms of accredited training for all employees.