Firms have called for an urgent summit with the Government to discuss fundamental reforms to make the levy work and to ensure the creation of additional numbers of high-value manufacturing and engineering apprenticeships.
A survey conducted by the EEF found that more than half of manufacturers (52%) wanted to keep the levy, but have improvements made to the current system, while a quarter (26%) wanted the levy to turn into a training levy.
A further 8% of companies have cancelled or delayed engineering apprenticeships for a new recruit specifically because of the levy, while 11% of companies looking to start an engineering apprenticeship for an existing employee have cancelled or delayed it specifically because of the levy.
Highly damaging
Verity Davidge, EEF head of education and skills policy, claimed the Apprenticeship Levy’s impact has been highly damaging for employers and apprentices.
“What should have been a win-win situation has turned into a lose-lose,” said Davidge. “We have to address the alarming drop in starts initially and then look at positive solutions which are on the table to make the levy work for employers and learners in the long term.
“Government must now sit down with businesses and find a way to rescue the levy so that it meets the original pledges made to companies when it was introduced.”
Proposed reforms
In response to manufacturers’ lack of confidence in the levy, the EEF proposed a number of reforms to make it work.
These included a change in how the levy was budgeted, based on employers’ demands for high-quality apprenticeships, and increasing the lifetime of funds that employers have to spend their levy to at least 48 months. A full list can be found in the box below.
Commenting on the results of the EEF’s survey, Justine Fosh, chief executive officer at the National Skills Academy for Food & Drink, said she was not surprised that companies could see opportunities to improve how the levy worked.
“There are certainly some aspects [of the levy] that frustrate employers and that Government could address,” said Fosh. “But it is our experience that there is a limit to what Government can do to make a system entirely responsive to an industry.
“Successful sectors will be those who come together and use the levy and other Government skills initiatives as an opportunity to address long-standing skills challenges. This is just what the food and drink manufacturing industry is doing.”
EEF’s proposed Apprenticeship Levy reforms
- Move the Apprenticeship Levy budget from department expenditure limit to annually managed expenditure. This would mean that the budget for apprenticeships would be based on demand and would allow the Government to spend more on high-quality apprenticeships where there was demand from employers to deliver them.
- Increase the lifetime of funds that employers have to spend their levy to at least 48 months, the length of an engineering apprenticeship. In particular, this would help SMEs who tend to recruit every two to three years to meet their skills needs.
- Review the funding band structure by removing the upper limit of a maximum of £27,000. This would honour one of the key pledges Government made to employers on the introduction of the levy to cover the true cost of training and assessment.
- Expand incentive payments to employers, providers and learners for STEM apprenticeships, an area of consistently reported skills gaps. This would align with Government ambitions to meet increasing demand for technicians.
- Increase the amount of unused funds employers can transfer to over 50% and remove restrictions on transferring to a single employer. Increasing the amount to over 50% would persuade more employers to buy into transfers and create more apprenticeships.
- Allow employers to agree a payment schedule with their provider. This would support the delivery of apprenticeships in higher cost subjects such as engineering, where there is currently a disincentive for colleges and training providers due to the high up-front cost.
- The process of signing off standards for apprenticeships must become quicker and more transparent to empower the role of employers further to drive standards for delivery.