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Devolve apprenticeship levy and exempt councils from 2.3% target, LGA says

Meeting an apprenticeship target of 2.3% of the workforce and paying 0.5% of wage bills towards an apprenticeship levy will cost councils at least £600m per year, the LGA said, making a case for devolving these reforms.

All large public sector bodies, including local government, will be forced to ensure apprentices make up at least 2.3% of their workforce in a bid to employ 200,000 more apprentices by the end of the decade. On top of that, the government will enforce a new levy from April 2017 to fund the creation of three million apprenticeships by the end of the decade.

The LGA estimated that less than 10% of councils will be exempted from paying this levy, which will take a 0.5% share from all public and private firms with wage bills of more than £3m. The levy itself will cost councils over £200m a year, with the new apprenticeship target incurring £400m in extra wage costs.

Exempting councils from the 2.3% target would ensure councils don’t have to create new positions when they have already reduced staff pools by 40% since 2010, the LGA said.

And while accepting the levy, councils said it should be devolved and pooled locally, allowing authorities to spend the money on skilled apprentices that target specific skills gaps and meets local employers’ needs.

This comes some months after a paper presented to the LGA’s People and Places Board last year said local authority leaders should oppose plans to set apprenticeships targets.

Cllr Nick Forbes, the LGA’s vice chair, said councils stand behind the government’s ambition to create three million apprenticeships, but argued too many of them are low-skilled and too few are school leavers trying to get their first job.

“It is clear that our centralised employment and skills system is struggling to create the right apprenticeships that local residents and business need. It is critical that the money raised from the Levy is used in the most effective way. This can only be achieved by giving councils the powers to play a leading role in spending it on delivering apprenticeships, driving economic growth and raising productivity,” he said.

“Pooling Apprenticeship Levy money locally would allow councils to ensure every penny is spent properly. This should be combined with funding and control over nationally-run education, skills and employment schemes as well as existing national apprenticeship funding also being handed over to local areas and exempting councils from national apprenticeship targets.”

Along with schools, colleges and employers, councils could then work to “drastically increase” the amount of good apprenticeships, Forbes said, adding: “A locally co-ordinated system would take the burden away from business and let them get on with the vital job of increasing productivity and driving economic growth.”

The LGA’s calls were backed by a study published by the IPPR last year, which showed demand for apprenticeships is rising above the number of vacancies on offer. Two-thirds of intermediate or advanced apprentices were also already employed by their company rather than newcomers.

Councils also defended their fundamental role in creating apprenticeships through several case studies, including Bright and Hove City Council’s apprenticeship programme focusing on those affected by benefits reforms; Darlington’s Foundation for Jobs; Birmingham City Council’s apprenticeship requirement in all procurement protocols over £1m; and Southampton City Council’s ‘action plan’ to improve the quality of apprenticeship careers.

A BIS spokesman told PSE: “The public sector needs to play its part in apprenticeship expansion. To ensure that it does, the government will be setting apprenticeship targets for public sector bodies, who will be able to draw down levy funding like any other employer.

“We are talking to LGA and other public sector bodies about the impact of the levy and how local authorities can work together to share resources.”