- November 13, 2018
- Posted by: Jenna Jack
- Categories: apprenticeships, Innovation, People Plus
Snakes and Ladders – The Chancellor, the Budget and the Apprenticeship Levy
It has been fascinating to see how the mood music around the Apprenticeship Levy has changed for employers over recent months. As the Autumn Statement approached, commentators were feeling more optimistic that rates would not be increased any time soon and they seem to have been proven right at least this side of an Election.
Rewind to the Summer and there were clear messages about the need to make the Levy money go further in order to fund the ambition of an additional 3 million Apprenticeships by 2020. This was despite a lower than expected ‘starts’ trajectory, as new Standards took longer than expected to gain approval and employers adjusted to the new arrangements.
Employers were generally downbeat about future prospects for the Levy. While there were consultations about additional flexibilities, the real expectation was that the Levy rate would be raised or the threshold for Levy payments lowered. The reviews of funding bands were seen primarily as a cost-cutting exercise despite the more rounded rhetoric from the IfA.
Fast forward to the Party conference season. In response to a change of public mood and the domestic agenda focus of other political parties, there was a raft of new policy statements rather than a fixation on Brexit. These new policies began to emerge as a post-austerity agenda. Apprenticeships and the Levy featured as part of the response to a range of social and economic problems. Treasury’s ownership of the Levy and of the national productivity planning undoubtedly helped Apprenticeships to secure this national profile.
In the game of policy ‘snakes and ladders’, there was one further important influence moving Apprenticeships and the Levy up. Reconnecting to business was one of the principal themes of the Conservative party conference. Lobbying by business groups about the Levy had an effect. Worries about adding to the employer costs of the Levy were eased by positive messages about the need to review, to seek further flexibilities, to increase capacity and to provide extra money for up-skilling.
Modest optimism replaced earlier fears. While Apprenticeships and the Levy did not have anything like the same political momentum as the NHS, social care or universal credit, speeches at the party conference had trailed broadly good news about future plans.
So what did the Autumn Statement bring? Apprenticeships remain the cornerstone of the Government’s skills policies. Indeed there was little else in the skills section of the Budget statement, though the National Retraining Scheme and a second phase looking at job-specific retraining was of considerable interest in view of its importance for future productivity growth.
There were few new announcements but there was helpful confirmation of the positive details trailed at the party conference and some encouraging rhetoric about employer ownership of Levy funds.
In this instance, I believe the message was important. There had been worries that the Levy money would simply be hoovered up by the Treasury tax collecting machine and the source largely forgotten. However, here was the Chancellor reminding people that the Apprenticeship Levy “ is paid for by employers and it has to work for employers.” This is of course an important principle and it is encouraging to hear it from Government.
There was reinforcement of earlier announcements about consulting employers on ways to improve the Levy arrangements and the various flexibilities, especially in using 25% of their Levy pot for working with the supply chain. It will be valuable for employers to see and learn from the experiences of those who are making this work well.
The announcement that attracted most attention was the halving of the contribution required from smaller firms towards 19+ Apprenticeship training to 5%. Government has been responsive to messages from the training sector and must hope this makes a real difference. There was little further room for Government manoeuvre because abolishing the contribution would have risked recreating the ‘free training’ culture for 19+ that failed in the past.
The reaction from the sector has been positive. It will be fascinating to see if this does the trick and Apprenticeships can get back towards the trajectory needed to meet Government ambitions for 3 million new high quality Apprenticeships in this parliament. I am pleased that the Government is listening to what providers say they need and I hope they are right.
It is now six years since Jason Holt’s excellent report into making Apprenticeships more accessible to SMEs. My abiding memory of Jason’s analysis and discussions with him at the time is that while funding certainly helps, small employers need a range of other support services to feel confident in taking on and supporting Apprenticeships. The reduction in employer contribution is helpful but it is not in itself a panacea for improved growth in ‘starts’.
There was one announcement that seems to have gone largely under the radar but could be very important. The government will provide up to £5 million to identify gaps in the training provider market and increase the number of employer-designed apprenticeship standards available to employers. My hope is that this will focus on those occupations facing the most acute skills shortages and on key gaps in progression to Higher and Degree Apprenticeship standards. We need to complete the ‘ladders of progression’ that will allow more young people and their parents to see Apprenticeships as the best route to the top in their chosen occupation.
The National Retraining Scheme is an important signal of intent. The need for widespread up-skilling and retraining is obvious in all of the sectors with which I work. The difficulty is that while it is important to Government, Treasury rightly sees this as the primary responsibility of employers. The amount of Government money allocated, while welcome, can do little more than help point the way for the best use of co-investment funding in future. We need this Scheme to succeed.
I have described the Budget statement as the opportunity to move Apprenticeships up or down the policy priority board like a game of ‘snakes and ladders.’ My judgement is that there are helpful ladders here and we should be grateful for these at a time when there are so many funding pressures on Government and the NHS is absorbing such a high proportion of the funding available.
There were opportunities to put other ladders in place that would make a real difference such as further backing for Degree Apprenticeships. We will need to look to the Spending Review and Departmental decisions on the detailed allocations of funds to see whether these and others are put in place. We will also have the benefit of the National Audit Office report and its comments on how funding band decisions are having an impact on quality.
While the Chancellor highlighted the target of 3 million more Apprenticeships by 2020 in his speech and indicated that Government expects to achieve this, I would like to see a return to the heady days when the primary policy ambition from the very top of Government was for all young people to go to university or to begin an Apprenticeship. With Degree Apprenticeships, it will be increasingly possible to do both! A proper funded delivery plan sitting behind that ambition would get the post-austerity era off to a great start.
Finally, I am asked a lot about what this might all mean for future Levy arrangements? In my view, it would seem very unlikely that there will be any increases until after the promised consultation. While almost all employers are failing to use the majority of their Levy funds at the current rate, any increase in rates would be unpalatable.
It is more likely that there will be some preparatory modelling of the impact of possible changes to Levy payment thresholds beyond 2020. The £3 million turnover threshold is entirely arbitrary and has few if any parallels across the world. The Levy arrangements will have been tried and tested and ready for any future changes Government feels it needs to make.
If this is the direction of travel post-2020, Government should give employers plenty of notice. Experience shows that most companies seeking to achieve best value from their Levy payments have needed at least a couple of years to drive the necessary processes and changes in training practice. To borrow an expression popular with Chancellors at Budget time, giving employers the opportunity to prepare properly would certainly be prudent!
David Way CBE
Apprenticeship Ambassador to PeoplePlus, former CEO of the National Apprenticeship Service and Editor of ‘A Race to the Top – Achieving Three Million More Apprenticeships by 2020.’