Exemptions for smaller businesses mean they will pay only 10 per cent of training costs; CIPD says it is ‘irresponsible’ to continue with current plans and April 2017 launch date
After months of lying in the political long grass, the government has today published details of how employers will administer the upcoming apprenticeship levy – but the CIPD is among a range of employer bodies that bemoaned a missed opportunity to delay or substantially rethink the new system.
The creation of a levy – which requires all firms with a wage bill of £3m or more to pay in at a rate of 0.5 per cent from next April – has been widely trailed, but has been scant on detail, especially regarding how those employers that fall under this pay threshold will be able to offer their own apprenticeships.
The government has now confirmed that firms with a wage bill of less than £3m (which accounts for 98 per cent of all businesses, according to ONS statistics) will only pay 10 per cent of the cost of training an apprentice, substantially less than the 33 per cent that was set in pilot areas. Those with fewer than 50 staff will not pay anything towards the cost of an apprenticeship offered to a 16 to 18-year-old.
Larger, levy-paying employers will receive a proposed annual 10 per cent allowance to offset against the cost of the levy, it has been confirmed. If such employers’ digital accounts are still insufficient to buy the apprenticeship training it needs, then 90 per cent of the ‘additional’ training costs will be subsidised. The government has launched an online calculator to help employers work out how much apprenticeships will cost under the system.
The new detail also confirms that the level of subsidy available to employers of different sizes is effectively the same, but that larger businesses are being mandated to put money aside for apprenticeships, in a move the government hopes will nudge them towards increasing apprenticeship numbers. It has set a target of achieving three million apprenticeship starts in the five years to 2020.
But the CIPD is among a number of bodies that remain highly critical of the broader apprenticeship framework, arguing that “radical reform” is needed throughout the entire apprenticeship system before apprenticeships can be regarded as genuine alternatives to a university education.
It points to the fact that 60 per cent of currently apprenticeships are at Level 2 – equivalent to just five GCSE passes. The CIPD’s report, Where next for apprenticeships?, suggests that using apprenticeships to meet the training needs of low-paid workers undermines the concept.
Peter Cheese, CEO of the CIPD, said: “Our in-depth analysis of the UK's apprenticeship system suggests there is still a long way to go before the majority of apprenticeships in the UK really do provide a meaningful, high-quality vocational pathway into employment that is a genuine alternative to university.
“The focus on hitting the three million target threatens to further undermine quality. If we are to have an apprenticeship levy at all then we will need to make it far more flexible, otherwise we risk undermining the quality of apprenticeships further. The CIPD has already called for a delay in the introduction of the levy because we are concerned that rushing it through will have damaging, unintended consequences.”
Ben Willmott, head of public policy at the CIPD, added that it was “irresponsible” to press ahead with the policy at a time of economic uncertainty: “It is disappointing the government has not taken the opportunity afforded by a new ministerial team – and change to the department responsible for skills policy in the UK – to look again at the levy. The ‘one size fits all’ approach will damage attempts to improve the UK’s workplace productivity and will not address the downward trend in employer investment in training in recent years.”
The Federation of Small Business was also critical of the plans, while CBI director general Carolyn Fairbairn said: “The apprenticeship levy in its current form risks turning the clock back on recent progress through poor design and rushed timescales. Without a radical rethink it could damage, not raise, training quality.”
The government insists that quality is being addressed, and as part of the latest update announced a new register of apprentice training providers that will be operational by April 2017. Any training provider that wants to deliver apprenticeship training must apply from October 2016 to be on the list. Employers will negotiate prices with providers within 15 different ‘bands’ depending on the type of apprenticeship.
Robert Halfon, the new apprenticeships and skills minister, said: “Our businesses can only grow and compete on the world stage if they have the right people, with the right skills. The apprenticeship levy will help create millions of opportunities for individuals and employers.”
Others urged businesses to unite behind the levy. Catherine Sermon, employment director at Business in the Community, said: “The apprenticeship levy creates an opportunity for businesses to take a more active role in developing skills through vocational learning, which is a good thing. We now need to work together with businesses and government to help mitigate against negative unintended consequences that may arise as a result.”