Workforce, Pensions and Training

Making the most of the apprenticeship levy

Cllr Peter John OBE, deputy chair of London Councils and executive member for business, skills and Brexit, says greater flexibility and local control over the apprenticeship levy could be the difference between a policy that fails to deliver and a policy that transforms skills.

London boroughs take pride in fulfilling our role as leaders to create employment and training opportunities within our diverse communities. We have created over 11,000 apprenticeships and doubled the amount offered per year since 2009.

The apprenticeship levy, which was introduced in May 2017, presents a golden opportunity to build on the work already taking place in the capital.

It has the potential to boost apprentice numbers and ensure London contributes to the government’s ambitious target of achieving three million apprenticeship starts by 2020.

It is still too early to tell the extent of the levy’s impact on London businesses and boroughs. To develop our understanding of how it is working, London boroughs are keen to work with central government during the next financial year on a joint evidence-based review of the levy to closely examine its effectiveness.

In the meantime, initial statistics from the Department for Education show that there has been a sharp drop in the number of apprenticeship starts across the UK, which is a cause for concern.

Between May and July 2017 apprentice starts decreased by 59.3% compared to the same period the previous year, from 117,800 starts to 48,000.

An initial drop-off in the 2016-17 financial year was expected as employers get used to the apprenticeship levy. We know that SMEs in London borough supply chains are struggling to adjust and offer the training opportunities required to achieve the government’s bold aims.

Greater flexibility

London Councils’ view is that allowing employers more flexibility around the apprenticeship levy would go a long way in achieving more apprenticeship starts and better outcomes for Londoners.

Currently, the levy leaves councils with few tools to help with the particular demands for skills in the capital or addressing community-specific issues.

Greater flexibility could include allowing the levy to be spent on pre-apprenticeship training, which focuses on the most disengaged and furthest from the job market, getting those most in need ready to start an apprenticeship.

It could also be invested in supporting apprentices with additional needs, which would allow councils and businesses to improve attainment, progression and longer-term outcomes.

The proposed ‘passporting’ cap of 10%, to be introduced in 2018, limits councils’ ability to pass on apprenticeship levy funds to supply chain businesses keen to create apprenticeships. In 2016-17, London boroughs created 60% of their apprenticeships through contracts and suppliers.

Restricting ‘passporting’ to 10% will have real consequences when it comes to improving the supply of apprenticeships. It will also create additional barriers to addressing specific skills shortages in local government.

Devolving the levy

Given the likelihood of a significant amount of apprenticeship levy funding not being spent, London Councils is calling for the government to devolve unspent levy funds to London government as a first step.

This would help the boroughs and the mayor to closely support and work with businesses in the capital to generate more and better apprenticeship opportunities. 

In the longer term, London Councils is calling for full devolution of the apprenticeship levy to the capital, as already happens in Scotland and Wales, and for the government to consider broadening the policy’s remit to make it a wider skills levy.

Devolution will allow us to increase underrepresented group access, build capacity in SMEs, and better address gaps in apprenticeship standards.

The apprenticeship levy has the potential to ensure London remains economically strong yet grows in an inclusive way. However, the stark 59% drop in apprenticeship starts is an early sign that it might be not working for businesses or London boroughs.

We feel that additional flexibility, a broader remit and greater local control over the way levy funds are invested could make the difference between a policy that fails to deliver and a policy that transforms investment in skills in London and across the country.

(Top image © ivanastar)

FOR MORE INFORMATION
W: www.londoncouncils.gov.uk