Between the lines: Alter the Apprenticeship levy

The seismic effects of the Brexit vote will reverberate for years to come. It’s understandable politicians are keen to engage with business leaders on the impact of the vote. However, it will take years for the new economic and political settlement to be reached, and in the meantime there are tangible steps both the UK and Scottish governments can take to provide greater certainty over the future operating environment.

An early priority for business is clarity on the Apprenticeship Levy. Announced without prior warning last year, this is a tax on employers with a payroll of over £3 million, coming into force next April. Levy payers who operate UK-wide will receive the “English Fraction” which is calculated on their English workforce, as a “digital voucher”, which can be redeemed against the cost of apprenticeship training.

Retailers welcome the focus on improving skills and driving productivity to grow the economy. However, the levy is a blunt tool, penalising employers of scale who already make substantial investment in training, development and apprenticeships with existing training structures.

And from a Scottish perspective it’s a mess – it’s still not even clear how much of the money the Scottish Government will receive through Barnett Consequentials.

For the UK government, the priority must be to revisit their proposals to allow a more flexible system for businesses operating across the UK. This would involve allowing companies to use a portion of their “English Fraction” funds to support training in the devolved nations; and allowing those funds to be used to pay for training in the devolved skills framework. They should also look at how the implementation of the levy can be simple and consistent.

The Scottish Government has acknowledged they have a role to play, and it’s timely they are launching a consultation later this week. Scottish businesses want a fair system that provides support for their training needs. That should involve some direct funding and reimbursement for Scottish-based levy payers. But there is also an opportunity to look at allowing levy payers to provide support to their Scottish supply chains.

There is also an opportunity to refresh the Scottish skills framework. While much of the system is effective, it’s worth examining how it could become more flexible – for example on age restrictions for apprenticeships.

No matter what the relationship with Europe is, the Scottish economy must become more skilled and productive to compete in a competitive global market. The Apprenticeship Levy isn’t what business would have chosen, but by focusing on reform and the needs of the economy it could be the spark to inspire a more effective skills system.

l Ewan MacDonald-Russell is head of policy for the Scottish Retail Consortium