Magazine article Times Educational Supplement

'The Apprenticeship Levy Is a Missed Opportunity'

Magazine article Times Educational Supplement

'The Apprenticeship Levy Is a Missed Opportunity'

Article excerpt

Ministers must make a U-turn if they want a skills revolution, writes one expert

One ironic outcome of the Conservatives' election victory has been the number of government policies that were espoused by Labour, or easily could have been. The apprenticeship levy - whereby, in effect, employers with annual payrolls of more than £3 million will pay a (reclaimable) 0.5 per cent levy to the government - is a case in point. If Labour had introduced such a measure, the business lobby and the right-wing press would have been up in arms. As it is, although there has been a good deal of grumbling from the CBI and others, there seems to be a general acceptance of the measure. But what is it intended to achieve, and will it meet its aims?

The government's declared objective is to increase the amount of training so that by 2020, 3 million apprenticeships will have been created across the country. There is a general recognition that British firms' investment in education and training leaves a good deal to be desired. International surveys repeatedly show the UK at or near the bottom of the skills development league.

It needs only the rumour of an economic recovery for complaints about skills shortages to surface. On some surveys, the amount of employer-funded training has actually fallen since the late 1990s, at a time when corporate profitability and savings have increased.

Various voluntary schemes, such as those promoted in the 2006 Leitch report, have made little difference. Nor have quite generous tax incentives. Will compulsion do the trick, after supply-side reforms have so far failed?

To begin with, the levy only applies to larger firms and it is unclear how smaller ones will respond: they are also having to cope with pension auto-enrolment and a significant increase in the national minimum wage. There are the obvious difficulties: dead weight (firms rebadging jobs as apprenticeships to meet their targets and reclaim the levy, when we know that many existing "apprenticeships" are just conversions of existing jobs); quality (the amount of spend per apprenticeship is only sufficient to pay for low-quality places, unless employers are willing to contribute more); and the mismatch between apprenticeship supply and demand. The supply has so far mainly been at lower skill levels when it is higher-level skills that are increasingly needed.

This, indeed, is one reason why, in spite of the fact that a levy scheme has operated in the sector for many years, two-thirds of construction firms are reported to be suffering from skill shortages.

It has also been suggested that some employers will respond by cutting other spending on workforce training and development and/or on wages, which are still only recovering from the 2008 financial crisis.

Comments have also been made about the amount of bureaucracy that is involved in companies paying money to the government, receiving vouchers for the same amount, using them to pay training providers, and the latter then exchanging these for money from the government.

Finally, it has been pointed out that while the levy is intended to raise £3 billion each year, the Treasury is planning to spend only £900 million on apprenticeships by 2020: is crafty chancellor George Osborne raising revenue by every means that he can without increasing personal taxes?

Better use of funds

All this suggests that a scheme that includes an element of compulsion but is targeted at sectors, areas and types of firm where there is an acute, unsupplied need for higher-level skills - with the initiative closely monitored for numbers, quality and value for money by an independent agency such as the National Audit Office - would be a much better use of the public and private resources involved than a blanket levy. …

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