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DfE blasted for ‘irresponsible’ apprenticeship levy as further details revealed

It is “irresponsible” for the government to press ahead with the problematic apprenticeship levy, especially in the midst of post-referendum economic uncertainty, the Chartered Institute of Personnel and Development (CIPD) has said as the DfE revealed further details of the tax.

The CIPD’s head of public policy, Ben Willmott, added that it was disappointing that the DfE didn’t take the opportunity afforded by a new ministerial team to look again at the levy, which has been severely criticised by a range of businesses and public bodies.

“The very valid concerns regarding the levy in its current form are wide scale across organisations from the private, public and voluntary sectors and it is irresponsible for the government, particularly in a time of economic uncertainty in the aftermath of the referendum, to simply press ahead with a policy that is not fit for purpose,” he said.

“Our research suggests the levy, in its present form, will undermine efforts to improve the quality of apprenticeships. This is a time where we need to be raising the status of apprenticeships, not pursuing a policy which will have the effect of devaluing the ‘apprenticeship brand’.

“In addition, there is the damaging unintended consequences of forcing employers to reduce investment in other areas of equally valuable workforce training and development, and to essentially ‘re-badge' existing training as apprenticeships in many instances. This ‘one-size-fits-all’ approach will damage attempts to improve the UK’s workplace productivity and will not address the downward trend in employer investment in training in recent years.”

After months of silence around how the levy would be calculated and implemented, the DfE today published its proposals for a new funding model for apprenticeships and further details on the levy itself.

It confirmed that firms with a wage bill of less than £3m – around 98% of all businesses, according to the ONS – will only pay 10% of the cost of training an apprenticeship, below the 33% previously set in pilot areas. Employers with less than 50 staff will not pay anything.

Larger employers will receive a proposed annual 10% allowance to offset levy costs. If their digital accounts are still insufficient to pay for the necessary apprenticeship training, 90% of the extra training costs will be subsidised. An online calculator, launched today, helps calculate how much apprenticeships will cost employers.

The level of subsidy available to employers of different sizes is also “effectively the same”, according to CIPD analysis, but larger businesses will be mandated to put some cash aside to fund apprenticeships, which the government hopes will help improve apprenticeship numbers to hit its 2020 target.

The CIPD is just one of many employers critical of the scheme. The LGA previously asked for the levy to be devolved and for councils to be exempt from the 2.3% apprenticeship target, while the Strategic Development Network warned the levy is a “step in the dark” for local authorities.

Today, the CIPD argued that “radical reform” is needed throughout the entire apprenticeship system before they can be regarded as genuine alternative to university education, which is how the government often depicts them.

Peter Cheese, the CIPD’s chief executive, added: “The focus on hitting the three million target threatens to further undermine quality. If we are to have an apprenticeship levy at all then we will need to make it far more flexible, otherwise we risk undermining the quality of apprenticeships further.

“The CIPD has already called for a delay in the introduction of the levy because we are concerned that rushing it through will have damaging, unintended consequences.”

The Federation of Small Businesses and the Confederation of British Industry were also highly critical of the scheme, with the latter’s director general, Carolyn Fairbairn, saying the levy in its current form “risks turning the clock back on recent progress through poor design and rushed timescales”.

But apprenticeships and skills minister Robert Halfon argued the levy will ensure people “of all ages and backgrounds have a chance to get on in life”.

“The apprenticeship levy will help create millions of opportunities for individuals and employers. This will give our young people the chance they deserve in life and to build a highly-skilled future workforce that the UK needs,” he said.

The government is now inviting employers and training providers to have their say on the initial funding proposals, which can be accessed here.

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