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Apprenticeship levy “needs urgent reform”

12 August 2019

The apprenticeship levy has failed to deliver more investment in workplace training and should be reformed into a “more flexible” training levy, according to a new report.

The report ‘Addressing employer underinvestment in training’ by the Chartered Institute of Personnel and Development (CIPD)  reveals that 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 July 2017, showing confidence in the levy has dwindled since it came in. 

The report, based on survey data from 2,000 employers, also shows that nearly six in ten (58%) of levy paying employers either 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%).

The key objectives of the levy were to increase apprenticeship numbers and boost investment in workplace training, which was in a 20-year decline when it was introduced in April 2017. 

However, the report finds that the levy has failed on both these counts. 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 research also 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’ve happened regardless

• 15% say they use the scheme to accredit skills which staff already have

• 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

The CIPD recommends that a broader approach to the levy should include other forms of accredited training, as well as apprenticeships, that are aligned to industrial sector priorities.

It should also be widened to include all employers with over 50 staff to raise additional investment.

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.”