Apprenticeship Levy needs careful reform

Mandy Crawford-Lee is chief executive for the University Vocational Awards Council

Scarcely a month goes by without businesses or political figures across Scotland demanding significant changes and reforms to the Apprenticeship Levy. But are these demands justified and are the original core principles and benefits of the levy being overlooked in the quest for change?

Introduced in 2017, the levy was designed to boost apprenticeship numbers in Scotland and the UK, incentivise increased training and invest in future workforces across an increasingly diverse array of sectors. In principle, increased investment in apprenticeships via the levy can only be a good thing, given they are proven to improve training quality, social mobility, tackle the skills gap felt across many industries and ultimately drive economic growth.

Unfortunately for many businesses across Scotland, the compulsory contribution of 0.5% to fund the levy - by employers with payroll costs of over £3m - was met with some understandable resistance. Since its introduction, it has been regarded as another form of business taxation and viewed even less favourably by those firms which pay the levy but don’t take on apprentices.

Apprenticeships need to be properly financed

So, what benefits could reforms bring? There have been calls for the scope of the levy to be extended beyond apprenticeships. We’d always argue that it should first and foremost be used to fund them.

Another major stumbling block, widely viewed as in need of reform, is that any unused levy funds expire after 24 months and return to the Treasury, creating further employer dissatisfaction. Since its introduction, almost £2.7b of funds raised across the UK by the levy has been retained by or returned to the Treasury and not spent on apprenticeships.

If more levy funds are collected than are used to pay for apprenticeships, then excess funds should not be put back into the government’s coffers. Those excess funds could provide greater support and incentives for SMEs to engage with apprenticeships.

There is a danger that some of the suggested reforms go too far. For example, there have been numerous calls to restrict spending on certain types of apprenticeship and types of learner. This includes reducing employers’ use of levy funds on apprenticeships for older workers, for individuals earning above a certain salary, for employees with a degree, or for apprenticeships at higher levels. Such measures, if introduced, would cause havoc with the apprenticeship system, undermine its focus on productivity and social mobility, as well as severely restrict employers’ ability to develop the apprentices their organisations needed. Imagine the NHS not being able to use its levy payments to train a nurse simply because the individual had a history degree or was aged over 24.

There has even been calls for a graduate ban which would prevent levy funding being spent on young people pursuing a degree apprenticeship via Scottish universities and other higher education providers. This would be unthinkable and conflicts with our view that apprenticeships should always be available through an academic route.

It's clear to see that some degree of reform is needed but also clear that it should not be at the expense of diluting the levy’s original purpose and reducing apprenticeship support. We hope employers across Scotland are aligned on this issue and will continually defend the vital role apprenticeships play in the wider economy as an all age, all skills level programme.