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ViewPoint: Apprenticeship Levy Needs ‘shake up’ to Serve Businesses and Communities
December 17, 2019



There needs to be greater flexibility to allow businesses to use unspent levy funds to support people in local communities. Neil Bates, who has spent three decades as a leader in technical education, said: “The current levy system is simply not working. Less than a quarter of the available funds are being used and nearly £300m a month is being lost back to the Treasury. 

“We are seeing lots of rebadging of training for existing older workers rather than planned investment in creating a talent pipeline of young people from the local community who could benefit from an apprenticeship.”

Baumback, who started his career as an apprentice with Seetec and is now Group MD, added: “We know that most large businesses understand their corporate responsibilities, and many have ambitious CSR programmes to support communities, schools and good causes. 

“My idea is simple, rather than unspent levy being given back to HM Treasury, businesses should be able to use these funds to support educational programmes in their local communities. There are many examples of businesses like Investec, JLR, Greggs, Ford, UBS and BP who invest in education and in young people. It makes good business sense to do so because these young people are the workforce of the future.” 

The call for more flexibility is supported by CBI Deputy Director, Josh Hardie, who last year highlighted the case of a large insurer which runs an apprenticeship programme, internships, traineeships and work placements, but none are Levy-compliant due to the inflexibility of the scheme.

Unintended consequences
In the first six months of the levy in 2017, apprenticeship starts fell off a cliff, plummeting by 40% on the previous year. In the Levy’s first full year, employers used just 15% of the £3.9 billion pot. While this rose to 22% by January 2019, this still amounted to some £300m a month of unspent levy being taken back by HM Treasury.

 A survey of employers for People Management highlighted that, of those that planned to use the levy, 35% planned to use it on MBA or management training. Bates says  while there is nothing wrong with genuine apprenticeships for older workers, there is little evidence of funding being used to encourage more school leavers to secure a high-quality apprenticeship.

He believes the absence of an early talent pipeline will impact on UK businesses in a post-Brexit world where technical skills will be at a premium. An Edge Foundation report highlights that two thirds of UK apprentice starts are conversions of existing workers over the age of 25. In Germany and Austria 35% of all post-secondary school students are on an apprenticeship, in the UK it is just 4%. Bates says the low numbers of 16-18 year olds starting on high quality advanced apprenticeships, particularly in STEM subjects, is a fundamental weakness in the UK skills system. 

The levy is not enough
Baumback stresses that the best UK employers understand the need for a skills strategy to ensure a pipeline of talent to compete in a global market. Most also have a Corporate Social Responsibility (CSR) strategy linking the business to the local community and the education system to ensure that growth is inclusive.

Baumback and Bates argue that the best way to achieve long-term employer buy-in is to link these strategies. Allowing levy funds to be used for educational CSR initiatives would make a compelling business and social case.  

Building lasting partnerships
A strong example is Ford’s Next Generation Learning (NGL) programme, recently introduced into the UK in partnership with the Edge Foundation, North East LEP and local schools.

The aims are to strengthen the talent pipeline, prepare young people for college, careers, lifelong learning and leadership, achieve educational equity and increase community prosperity.

According to Bates and Baumback, this is one of many examples of large employers engaging with their local communities and building links between schools and employers. 

Bates cites Basildon, which grew up around the automotive industry in the 1960s, as an example of a community which could benefit from this approach. While technological change has transformed the town into an advanced engineering powerhouse, with highly-skilled, well-paid jobs, he argues the local education system has not kept pace.

“The consequence is that many residents do not have the education and skills needed to access these well-paid jobs. Young people, especially, are not sharing in this success. We need to make growth inclusive and allowing big business to use their levy to invest in the community benefits everyone”. 

Bates and Baumback say this would make the levy a force for good, fostering partnerships between large employers, local authorities, schools and communities. It would build on regional skills devolution, shifting control of policy and resources away from central government and into the hands of those that will benefit from it. 

This would be a logical next step in the reform of apprenticeships and technical education, they conclude. They are urging business groups to campaign for more flexibility, while developing a strategy to use the levy more productively.

Apprenticeship Levy Failing to Deliver Entry-Level Routes: Resolution Foundation Report
August 30, 2019

Young people are at risk of missing out as employers prioritise high-level apprenticeships, which mainly go to people already in work, according to the Resolution Foundation.

Its report found that there has been a significant increase in the number of higher-level apprenticeship starts, with the number of starts at Level 4 and above (higher education equivalent) rising from 19,800 in 2014/15 to 48,200 in 2017/18. Additionally, in the first three quarters of 2018/19 there were 19,000 starts at Levels 6 and 7 (degree or Master’s degree equivalent).

Over-25s accounted for 59% of the growth in these higher-level programmes, and in 2018/19 they accounted for 44% of all apprenticeship starts, and 65% of all higher-level starts.

Starts at these higher levels are not typically undertaken by those at the beginning of their careers, the think tank said, raising concerns that the levy system is not delivering on its objective of providing young people with a high-quality route into a career.

In a survey conducted by the Department for Education published in 2017, 83% of all higher-level apprentices aged 25 and over said they were employed by the same firm prior to beginning their apprenticeship. In a follow-up survey published in 2018 62% of apprentices of all ages and levels said they were employed by the same firm prior to beginning their apprenticeship.

But the think tank said that a drop in low-quality low-paid apprenticeships should nonetheless be welcomed.

It found that there were 25% fewer apprenticeship starts in 2017/18 than in 2014/15, driven by a notable fall of 45% in lower-level apprenticeships. Retail apprenticeship starts at Levels 2 and 3 accounted for 118% of all starts in 2014/15, despite the fact that only 9% of the labour force were employed in non-managerial retail roles. These lower-level programmes also often involved lower-than-average rates of work-related training, with more than a quarter (26%) of apprentices in these areas unaware that they were actually undertaking an apprenticeship.

You can access the full report by following the link below.


Kathleen Henehan, research and policy analyst at the Resolution Foundation, confirmed that the increase in high-quality apprenticeships is a positive development.

“Rather than being a cause for concern, the recent drop in apprenticeship starts has been driven by a welcome fall in many low-value apprenticeship programmes. While the controversial apprenticeship levy has been blamed, the fall has been driven by stronger regulations to ensure apprenticeship quality,” she said.

Henehan added that policymakers should now focus on delivering more apprenticeships for new starters and prioritising genuine learning and skills development.

“In contrast a marked rise in the number of apprenticeship starts at higher levels has been influenced by the introduction of the levy in 2017, with employers using the system to upskill established employees rather than offering enough young people and new starters a route to a lasting career,” she said.

“Policymakers should stick to their guns on quality improvements but ensure apprenticeships deliver their core purpose by requiring firms to spend half of their apprenticeship funding on new starters and half on workers aged under 30. This won’t be uncontroversial but building a high-quality clear route to skills and a good career is crucial to our country’s future.”

Spring Statement 2019
March 14, 2019

The Chancellor has presented his Spring Statement to Parliament – here’s a summary of what he saidplaceholder

Education and skills

Ensuring people have the skills that employers need is vital to creating the workforce of the future. The Budget set out steps to equip people with the skills to succeed in the modern economy, and today the Chancellor announced:

  • updates to apprenticeship reforms announced at Budget that mean from April 1st employers will see the co-investment rate they pay cut by a half from 10% to 5%, at the same time as levy-paying employers are able to share more levy funds across their supply chains, with the maximum amount rising from 10% to 25%
  • to tackle period poverty in schools, the Department for Education will lead work to develop a national scheme in England to provide free sanitary products to girls in secondary schools
  • the government has appointed Professor Arindajit Dube to undertake a review of the latest international evidence on the impact of minimum wages, to inform future National Living Wage policy after 2020

Read more

Sector Response to Apprenticeships and Levy statistics: February 2019
March 4, 2019

28 February 2019 DfE published their Apprenticeships and levy statistics: February 2019

  • There has been 192,100 apprenticeship starts on the frameworks and new standards reported to date between August 2018 and December 2018 for the 2018/19 academic year, a 9.7 per cent increase compared to the equivalent period in 2017/18 (175,100).
  • At 31 January 2019, there have been a total of 16,400 accounts registered on the apprenticeship service.
  • We have seen 122,700 commitments recorded in the apprenticeship service for the 2018/19 academic year, compared to 98,000 recorded at the equivalent point last year for 2017/18. [A commitment is where a potential apprentice, who is expected to go on to start an apprenticeship, has been recorded on the Apprenticeship Service].

Apprenticeships and Skills Minister Anne Milton said:

“I’m thrilled to see the number of people starting apprenticeships has gone up by 9.7% on this time last year. This is good news and really highlights how employers up and down the country are realising the huge benefits apprenticeships are bringing to their business

“Apprenticeships offer people of all ages and backgrounds a high quality route to skilled employment with the option to train at every level. You get paid while you train and can start a great career in a huge range of professions like accountancy, nursing, teaching and law.

“I want as many people as possible to know about the amazing apprenticeship opportunities out there. Our new campaign ‘Fire it Up’ is playing a vital role in this, helping to challenge outdated perceptions and raising awareness of the huge variety of options available”.

Mark Dawe, Chief Executive of the Association of Employment and Learning Providers (AELP) comments on the numbers

 ‘The funding issues have now made the availability of intermediate level apprenticeships for young people in SMEs across the country the biggest problem we face.  The answer is to make level 2 apprenticeships fully state funded whether the money comes from the levy or not.’

The AELP highlighted Intermediate level starts are at 5,800, down 23% from 2017 and 56% from 2016.  So less than half pre-Apprenticeship Levy.

No Sign of Recovery in Apprenticeship Starts
July 13, 2018

The following article is by Julia Belgutay 

According to the latest provisional data released on 12th July 2018, there were 24,100 starts in April 2018. This down by two-thirds from the provisional figure for April 2017, which stood at more than 70,000. However, this was the month which saw a spike in new starts ahead of the introduction of the levy.

The latest figures show a continuation of the trend of a steepening in the year-on-year decline in apprenticeship starts, compared to the drop of more than half in reported March.

However, given the sharp drop in apprenticeship starts reported in May 2017, the figures for May 2018, due to be published in August, should see more stability return to the statistics.

Quarterly starts Read more