Apprenticeship levy proves ‘empty promise’ on training

The apprenticeship levy, designed to boost workplace training, has proved an ‘empty promise’ and needs urgent reform, according to the Chartered Institute of Personnel and Development (CIPD)

Introduced in April 2017, the levy applies to firms with annual pay bills in excess of £3m, taking 0.5% of an employer’s paybill to put toward funding for new apprenticeships. Its key objectives were to increase apprenticeship numbers and boost investment in workplace training, which was in a 20-year decline.

However, the CIPD’s survey of 2,000 employers found fewer than a third (31%) of levy-paying employers say the levy will lead them to increase the amount they spend on training. This is down from 45% in 2017, which it says shows confidence in the levy has dwindled since it came in.

The research also shows that over half (58%) of levy payers believe the levy will either have no impact on the amount of money they spend on training (49%), or will actually lead to a reduction in training spend (9%).

CIPD says its analysis shows the levy has failed to address the key reasons for its introduction. As well as not boosting skills investment in most workplaces, the levy has meant employers have invested in fewer apprenticeships with starts falling from 509,400 in 2015/16 to 375,800 in 2017/18.

The institute also warns that the research shows the design of the current levy is incentivising employers to use their funds in counterproductive ways.

A fifth (22%) of the 2,000 employers surveyed said they use their levy money on training which would have happened regardless, while 15% say they use the scheme to accredit skills which staff already have.

In addition, 14% of employers report the apprenticeship levy has had the effect of directing funds away from other forms of training that are more appropriate for their organisation.

In light of the report’s findings, the CIPD is calling for the apprenticeship levy to be replaced with a broader training levy. This would enable organisations to fund both apprenticeships and other forms of accredited training which are better suited to their needs.

The CIPD also wants the levy to cover all employers with a headcount of 50 or more to double the amount raised by the levy to £5bn, which would help to make up the shortfall from the decline in investment over the last two decades.

A portion of the training levy fund could also be used to create a regional skills fund to address skills challenges at a local level, such as helping smaller non-levy paying firms to invest in skills by providing better business support.

Lizzie Crowley, skills adviser at the CIPD, said: ‘Our research clearly shows the apprenticeship levy has failed to deliver what the government said it would: more investment in workplace training.

‘For this to become a reality, we need to have a broader training levy that is much less prescriptive and gives employers more flexibility. This should also help to prevent employers from gaming the system as is currently the case.

‘With only 2% of employers required to pay the apprenticeship levy, the money raised from it was never going to be enough to close the gap that’s been left by the long-term decline in training investment.

‘But if we had more employers contributing, we could make up the shortfall and also help to boost regional investment in skills.’

CIPD report: Addressing employer under-investment in training – the case for a broader training levy

Pat Sweet | 24-07-2019

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