And the Levy was dry

5 mins read

A year on from the launch of the much-vaunted Apprenticeship Levy, its impact has left a lot to be desired, according to a scathing new report

Apprenticeships have a long and distinguished history in the UK, dating back as far as the 16th century. Manufacturering, particularly, has long recognised the benefit of good apprentices. However, the past 30 years have seen a significant decline in apprentice numbers – something that has concerned governments of all colours since.

To combat this, March 2015 saw the announcement of an ‘Apprenticeship Levy’, with the intention of raising £3 billion per year by 2020; the 2015 Conservative Party manifesto also promised three million apprenticeship starts in the same period. The Levy, which came into force in April 2017, is effectively a tack of 0.5% on the pay bill of organisations with annual wages of over £3 million. These organisations pay levy contributions into a digital account run by HMRC, and can access their funds to spend on apprenticeship training delivered by registered providers.

On paper, it seemed simple yet effective. In reality, though, figures suggest that it has proved to be anything but. In the six months after the Levy was introduced (April-October 2017), the number of people starting an apprenticeship was down by over 40% compared to the year before.

A scathing report, The Great Training Robbery, was published by independent think-tank Reform in April this year, to investigate the impact of the Levy’s first 12 months. The report looked at both the quality and quantity of apprenticeships, and found some stark issues with both.

A worrying lack of quality
In the early days of the Levy, the government allowed companies to come up with their own interpretation of Downing Street’s wider definition of an apprenticeship. “There’s nothing wrong with that, per se,” explains Tom Richmond, senior research fellow at Reform and author of the report. “If you think about the sheer number of industries we have in the UK, you can afford to be a bit flexible. Our concern is that it was too loose – it suggests that as long as there is an element of training on a job that lasts at least a year, it will constitute as an apprenticeship and be eligible for Levy money.

“We estimate that around 40% of apprenticeship schemes designed as part of the Levy wouldn’t stand up to scrutiny abroad. They just don’t have the breadth, depth or rigour to be considered as an apprenticeship. Ultimately, the Levy system is very simple: employers pay their money to government and the only way to get it back is to run courses that are labelled as apprenticeships. However, that guarantees nothing about the quality of the apprenticeships on offer. It’s not appropriate to give employers the chance to develop apprenticeships based on what they think one should be, when that money could be used to deliver high-quality training to someone else instead.”

This has the potential to damage the apprenticeship ‘brand’ going forward, warns Richmond. “Young people see the word ‘apprenticeship’ and have every right to expect structured, long-term training, involving on- and off-the-job learning with the ultimate aim of entering a skilled profession. After all, that’s what it always used to mean.”

Another factor that is limiting quality, according to the report, is that employers have to use their Levy funds within two years. This means they will “look for the quickest wins,” says Richmond. Often, this will be more of a focus on ‘up-skilling’ existing staff, rather than looking to encourage the next generation. Indeed, the report highlights that employers are often classifying management training courses – which are often very expensive to run – as Levy-worthy apprenticeships.

“Becoming a manager is being subsidised to the same degree as a high-quality manufacturing apprenticeship,” says Richmond. Added to that, the report has highlighted that some employers are cutting their internal training budgets and instead subsidising it for Levy money – meaning no additional training is actually happening.

“We think apprenticeships are extremely important within our education system and should be protected,” continues Richmond. “The government shouldn’t allow any courses that may jeopardise that, either via low-quality apprenticeships or re-badged management training. We are concerned that both of those could have a serious impact on the long-term credibility of apprenticeships.”

An image problem
Hits to the public reputation of apprenticeships are particularly unhelpful, especially considering the tendency of politicians – of all colours – since Tony Blair to push the importance of going to university instead of a vocational career. “The value of apprenticeships, even good ones, has been downplayed,” laments Richmond. “That makes it even more vital that all apprenticeships are of a high quality. If someone decides that university isn’t suitable for them, and they find that the apprentice route is full of poor options, it will cause a serious issue for both that individual and apprenticeships as a whole.”

However, according to Stephen Crawley, director of skills at Skills Training UK, any training that can be attributed to the Levy has to be a good thing. “The Levy is giving people the opportunity to develop, which they might not otherwise have,” he says. “It’s providing the chance to improve their skills or develop new ones. As part of a programme of development that uses apprentices – of all ages – they can make sure that the right skills get passed down and won’t be lost as people retire.”

Has the horse bolted?
Is it, then, too late to fix the Levy system? In short, says Richmond, no. “There’s nothing wrong with the idea of a Levy in principle,” he explains. “There are at least 60 other countries worldwide that do something similar, and they tend to work relatively well. In other countries, for instance, once the government collects Levy money from employers, it’s placed into a ‘fund’ that can only be used for apprenticeships and is guaranteed to support the jobs it was intended to. Here, the Treasury just keeps hold of it all.”

By contrast, Crawley is adamant that as manufacturing enters a technology-driven age, the Levy is helping to give companies a competitive advantage. “We’ve seen millions of pounds of improvement that companies have made just by maximising the hidden talents of their employees,” he says. “If people just come to work and clock in and out without having any impact on the wider company, they will get bored and their talent will be wasted. The Levy is really important for what we’re trying to do, both as an industry and as a country, but it’s being seen as a box-ticking chore for a lot of manufacturers.”

The Reform report has outlined six proposals to try and improve the Levy (see box, above), although Richmond admits that his phone “hasn’t been ringing off the hook with government ministers. Clearly, though, some changes need to be made, and we ask government to seek to implement them as soon as possible.”

Reform’s proposed Levy changes:

1 The target for three million apprenticeship starts by 2020 should be abandoned so that the focus can be placed on quality above all else

2 Government should introduce a new internationally benchmarked definition of an apprenticeship – any that don’t meet that should be withdrawn

3 The requirement for 10% employer co-investment towards the cost of training apprentices should be removed to avoid employers disengaging from running apprenticeships

4 Government should replace the existing HMRC digital payment system with a simpler ‘apprenticeship voucher’ model to give employers control of their own funding

5 All apprenticeship standards and assessments should be assigned a fixed cost to remove the need for complicated negotiations between employers and training providers

6 Exam regulator Ofqual should be made the only option for quality-assuring the end-point assessments for apprenticeships to ensure standards are maintained

EEF: A 'win-win' has turned into a 'lose-lose'

EEF has also called on government to act over the Levy. The organisation says that there is scope to turn it into a wider ‘training levy’ after its own research showed 95% of manufacturers want to see the Levy change in some form and only 7% of companies have had no issues with it (

“While the Levy had laudable aims, its impact has been highly damaging for employers and apprentices, and what should have been a win-win situation has turned into a lose-lose,” says EEF's director of employment and skills policy, Verity Davidge. “We have to address the alarming drop in starts initially, and then look at the positive solutions that are on the table to make the Levy work in the long-term. Government must now sit down with business and find a way to rescue the Levy so that it meets the original pledges made to companies when it was introduced.”