Apprenticeship Levy: the system is not working

Employment Law

Written by Brabners LLP

The current apprenticeship system is failing people from disadvantaged backgrounds.

That is the conclusion of a report entitled “Apprenticeships and social mobility: Fulfilling potential” which was published on 24 June 2020 by the Social Mobility Committee (“SMC”). The SMC is an independent advisory non-departmental public body. It has a duty to assess progress in improving social mobility in the UK and to promote social mobility in England. The report, which is published on the gov.uk website, comes to the clear conclusion that the apprenticeship levy system, introduced in April 2017 as the brainchild of the former chancellor, George Osborne, “is not working”.

The SMC found that the 2017 apprenticeship levy reform was followed by a collapse in the overall number of apprenticeship starts, which hit disadvantaged learners hardest.

Between 2015/16 and 2017/18, there was a 36% decline in disadvantaged apprentice starts in England, compared with a 23% decline for more privileged apprentices.

The SMC also found that disadvantaged apprentices are less likely than their more privileged peers to complete their course. The main reasons for dropping out included low levels of pay, with SMEs more likely to pay apprentices the minimum wage.

In addition, the findings of the SMC were that most of the benefits of apprenticeships are going to more privileged learners. This echoes the findings of a report published by independent think tank, EDSK, earlier this year. EDSK found that some employers have exploited weaknesses in the apprenticeship levy reforms by inappropriately labelling training courses as ‘apprenticeships’ in order to access the levy funding. The re-labelled courses included Masters degrees for CEOs and CFOs who were already in highly-paid jobs.

On the other hand, many employers are not spending their apprenticeship levy funds. Unspent funds are lost after 24 months if not spent. In May 2019 (when unspent funds paid in April 2017 could expire), £11m of apprenticeship levy funds were lost.

Despite the apparent flaws in the system, the SMC did stress how effective apprenticeships can be in promoting social mobility. People from less privileged backgrounds who complete an apprenticeship get a bigger boost in their earnings than other learners.

The apprenticeship levy system has now had 3 years to bed in, but it still does not appear to be fit for purpose. It seems clear that a re-think is required, but with so many other issues on the Government’s agenda, who knows when that may happen.

In the meantime, levy-paying employers would be well-advised to have a fresh look at how they spend their funds, taking care not to let them expire and considering carefully how they may best be spent.

 

This bulletin is for general guidance purposes only and should not be used for any other purpose. Brabners is a Limited Liability Partnership

 

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