Employers only use 9% of apprenticeship levy funds

In 2017-18 apprenticeship levy-paying employers only accessed £191m of an available £2.2bn in levy funds and government top-ups, despite these funds expiring after two years, reports Amy Austin

According to the National Audit Office’s (NAO) report on the apprenticeship programme, £2bn in apprenticeship levy payments were collected in 2017-18 but employers are failing to access these funds.

The number of apprenticeships starts dropped 26% between 2015/16 and 2017/18, with 375,800 new apprentices in 2017/18.

The NAO states that government is ‘very unlikely to meet its target of three million apprenticeship starts by 2020’. This is due to the number of starts falling after April 2017, when employers and training providers could use the previous payment arrangements. Since then numbers have not recovered.

To meet the March 2020 target, the rate of starts would need to double for the remainder of the period.

Since 2017, there has been a significant rise in the proportion of apprenticeships started under a standard. When the apprenticeship levy was introduced in April 2017, 2% of starts were on a standard, but by July 2018 this had risen to 53%.

The introduction of standards has also increased the number of higher-level apprenticeship starts. In 2017/18, 12.8% of starts were at level 4 or above (equivalent to a higher education qualification), compared with 5.3% in 2015/16.

The average cost of training an apprentice on a standard is around double what was expected, making it more likely that the apprenticeship programme will overspend in the future. The Department of education has calculated that the average cost of training an apprentice on a standard at the end of 2017-18 was £9,000, which is double the cost allowed for when budgets were first set.

Public spending on the apprenticeships programme increased from £1.2bn in 2010-11 to £1.6bn in 2017-18. The programme’s budget for 2018-19 is £2.2bn.

Amyas Morse, the head of the NAO, said:’Despite making changes to the apprenticeships programme, the Department has not enticed employers to use available funds or encouraged enough potential recruits to start an apprenticeship. It has much more to do to meet its ambitions. If the Department of Education is serious about boosting the country’s productivity, it needs to set out clearly whether its efforts are on track to meet that aim.’

Matthew Fell, CBI chief UK policy director, said: ‘Today’s report confirms what employers already know – that the Apprenticeship Levy is not yet working as intended and is holding back the government’s welcome efforts to modernise the skills system.

‘Companies are committed to apprenticeships, so what’s needed now is a second wave of reform. The Government must use its review of the apprenticeship levy to work with business and the sector to build a system that supports, rather than frustrates, employers offering a first step to people in their career.’

In April 2017, the government introduced the apprenticeship levy scheme whereby larger employers pay 0.5% of their annual pay bill, which they can reclaim along with a 10% government top-up.

NAO report: The apprenticeships programme is here. 

Report by Amy Austin

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