…but the apprenticeship levy was dry

Posted on 16 Apr 2016 by The Manufacturer

The recent National Apprenticeships Week provides an opportunity to celebrate apprentices and champion their success. But the spectre of the apprenticeship levy looms large and is causing real concern among employers, says Pippa Morgan – Head of Education and skills, CBI.

Investing in training and providing apprenticeships to our young people – something many CBI manufacturing members are particularly proud of – is something that business is fully committed to.

Pippa Morgan, head of education and skills, CBI.
Pippa Morgan, head of education and skills, CBI.

Many firms, as well as the CBI, celebrate the success of apprentices through the annual National Apprenticeships Week. But even in sectors like manufacturing, with long-established apprenticeship programmes, it’s still a challenge to attract young people with the right skills into the sector.

The shift that many manufacturing employers are making to invest in new technologies, products and processes is ramping up the demand for higher level skills – and indeed the opportunities for creating apprenticeships and jobs.

There is a real risk however that the apprenticeship levy will damage and limit this provision, unless we can effectively iron out the key elements of the policy ahead of its introduction.

The Budget contained a number of positive measures for business; including reforms to business rates and progress on key infrastructure projects. However, for businesses currently struggling with planning their finances and staffing for 2016, there was little comfort to be drawn from the announcements, as a result of the levy.

There is some clarity on when further details on the operational aspects of the new system will be available, as well as welcome signs that business will have some input into proposed funding rates in the summer. But that will be a mere ten months from the introduction of the levy: the time when business need to go to market with apprenticeship schemes for 2016.

CBI Apprenticeship Levy PQ 1 - April 2016Additionally, the proposals for a 10% top-up for employer funds outlined in the budget documents miss the point that businesses of all sizes and sectors are raising – many firms do not see how they will reclaim their levy obligation, let alone an extra 10%.

Employee concerns

It is worth stepping back for a moment, and recapping why employers are so concerned about the introduction of the levy.

Businesses stand squarely behind the aim of increasing pathways into work and progression within the workplace, but in its current form the levy risks making apprentices more expensive as well as penalising those providing quality schemes.

That is why many companies struggle to see how the policy could actually increase and improve training and provision.

The flaw at the centre of the levy proposal is that it does not reflect the very best of employer behaviour. As currently envisaged, it seems a business can only draw down levy funds for training by an external provider, the ‘off-the-job’ element of an apprenticeship.

While that is an important element of an apprenticeship all employers tell us that it is on the job training is where some of the most valuable learning takes place. Getting that invaluable experience on the shop or factory floor from experienced colleagues is what brings training to life and where some of the most important ‘lessons’ are learnt.

CBI Apprenticeship Levy PQ 2 - April 2016By valuing only external provision, this policy runs a real risk of damaging the quality opportunities that already exist. Why? Because as those with experience in supporting apprenticeships know, the costs of delivering high quality training extend far beyond those related to external provision to include mentoring, on-the-job learning and administration costs to name but a few.

If these are not covered within the remit of how employers are likely to spend their levy funds, it then becomes more expensive and challenging to provide the same number of high-quality opportunities that they do in the current system.

Employee needs

Working on the available information from government at this stage – the headline cost and the ability to only recoup external training costs – some businesses have already had to take the difficult decision to scale back the number of places they are offering as a result of the cost pressures of the levy.

This is why the CBI continues to push for a system with more flexibility for employers to meet the needs of their businesses and sectors.

Crop - Carolyn Fairbairn, Director General, CBI
Carolyn Fairbairn, director general, CBI.

Added to the inherent risk of the policy design is the level of uncertainty that remains. While the levy was not an approach supported by the CBI, in January CBI Director-General, Carolyn Fairbairn, wrote to the Business Secretary, Sajid Javid, to set out business principles to give the levy the best chance of success.

The system needs to be respond to business and economic needs, reward commitment and remain coherent across the four nations of the UK. At this stage huge uncertainty exists for business about what funding levels per apprentice will be, whether the right standards will exist in time, as well as how the policy will work in devolved nations.

Addressing these effectively according to the deadline set by government will be incredibly difficult. While business stands ready to play its part in tackling the issues with the UK’s skills system, it is vital that political commitments do not risk the shared goal of business and government to improve outcomes for apprentices, for businesses and the economy.

Putting control into the hands of employers around skills and training is the right thing to do. Employers can better identify the needs and challenges in their sectors – but if they are to be successful at closing skills gaps and offering routes to progression and good careers the levy must allow them to invest and spend in the ways that are best for their business.

A year from the start of the levy, the policy risks firms cutting back on apprenticeships rather than increasing them: changes are needed while there is still a window of time to get this right.

To find out more about the CBI’s work on skills and manufacturing, visit the website – where you can also register for The Future of UK Manufacturing conference taking place on May 5.