Fixing the Apprenticeship Levy

Posted on 8 May 2018 by The Manufacturer

Everyone agrees there must be a surge in high-quality training to provide the skills manufacturing needs. The Apprenticeship Levy was supposed to be the answer, but it’s fast becoming the problem. Stephen Phipson discusses solutions to the government’s failing programme.

Skills Training Apprentice Apprenticeships Apprenticeship Levy
Essentially, there are three fundamental problems with how the levy currently operates.

Last month was the one-year anniversary of the introduction of the Apprenticeship Levy.

Yet, such is the criticism it has received since its introduction, it is one the government is unlikely to have celebrated.

Rushed in – despite calls for a delay so that problems could be ironed out – the statistics on the number of apprenticeship starts make for grim reading, with a 41% fall in the first six months alone.

Manufacturers’ frustrations around the levy don’t just stem from the fact that they view it as a tax. It’s because they wanted it to deliver more quality apprenticeships and the skills that industry desperately needs.

So, why has it failed to deliver and why is it attracting so much criticism? Essentially, there are three fundamental problems with how the levy currently operates.


Firstly, the amount employers can spend from the Levy is too low and bears little resemblance to the actual cost of training an apprentice.

Manufacturers tell us they spend in the region of £100,000 on apprenticeship training, yet the absolute maximum an employer could spend is £27,000 – they are paying £1 out of their levy pot and as much as another £4 is coming out their pockets.


Secondly, employers who don’t spend their Levy funds quickly enough are getting penalised. Levy funds only last 24 months, which is a problem for two reasons. The average length of an apprenticeship in engineering is 48 months, and small companies only recruit apprentices every two to three years, so funds could expire before they start the next cohort.


Thirdly, the whole apprenticeship reform programme has been rushed, meaning that while employers were paying the tax, all the support mechanisms required to make it work were not in place.

Standards haven’t been finalised and agreed, colleges and providers haven’t been willing or able to deliver new training programmes and, as result, employers haven’t acquired the purchasing power they were promised.

Reforms needed

We are campaigning hard for reforms to the Levy that would address these concerns, and have provided a number of solutions to government.

There is one change that would improve the flexibility of how the levy operates – move the Apprenticeship Levy Budget from a Departmental Expenditure Limit (DEL) to Annually Managed Expenditure (AME).

Stephen Phipson is expected to take up his role at EEF on 1 December, 2017.
Stephen Phipson CBE, chief executive, EEF.

This would mean that that funding could be based on demand, and the Department for Education wouldn’t need to account for every penny and pound, and wouldn’t need to put in place the many restrictions that currently exist.

It would also give government the flexibility to spend money where there was demand, which would enable manufacturers to not just deliver business-as-usual apprenticeships, but even more apprenticeships!

We share the same ambition as government, which is to increase the quality and quantity of apprenticeships, and we can get this right. Yes, it’s a new system, but we can’t afford to wait around and see if it will eventually pick up. We know the problems, we know the solutions, so let’s set about fixing it.

This article first appeared in the May issue of The Manufacturer magazine. To subscribe, please click here.