What do you think are some of the major drawbacks of the current apprenticeship levy system? What impacts are they having on access, uptake, achievement, and the overall skills landscape - particularly in engineering and manufacturing?
The number of engineering and manufacturing apprentices has declined by 42 per cent since the introduction of the apprenticeship levy – the current system isn’t working for many businesses.
There is a particular challenge with the viability of engineering and manufacturing apprenticeships at levels 2 and 3. This is where the most significant decline in starts has occurred over recent years, and the challenge is not limited to the functioning of the levy. Funding bands for many of these standards have been routinely underfunded – not even accounting for the recent period of high inflation – and this has led to many manufacturers reporting that they are unable to access the right skills training locally as providers have begun to withdraw provision on the basis that it is unaffordable for them to sustain it with current levels of funding and apprentice intake.
What do you think the key features of a new and reformed apprenticeship levy should be?
Labour’s manifesto committed the new government to introducing the Growth and Skills Levy – this would give levy-payers the flexibility to spend up to half of their levy funds on approved non-apprenticeship training.
Make UK support the principle of flexibility in the levy, but this must be balanced against the need to reverse the decline in the number of engineering and manufacturing apprentices over the last seven years.
The previous government’s apprenticeship growth sector pilot, allocating £50 million over two years to providers to support apprenticeship training delivery on 13 key standards, is a welcome start to exploring flexibility in the funding rules to support providers with current ineligible costs in relation to equipment and machinery. The Government should consider the success of the pilot and explore how this can be extended to a broader range of apprenticeship training.
There needs to be more cohesion between the skills system and the immigration system. As part of addressing skills gaps which have been exacerbated by stricter post-Brexit immigration rules, the Government should use revenue from the Immigration Skills Charge to provide additional financial support for relevant apprenticeship standards, reflecting the approach in other points-based immigration systems like Australia.
How could the government go about improving the access to and utilisation of levy funds?
Currently, the apprenticeship budget for England is £2.8 billion. The total revenue collected from employers is due to reach £4 billion – even once the budgets of the devolved nations are accounted for, there is a large differential (roughly £800 million) which the Treasury currently cannot account for.
The first priority of any levy reform should be ensuring that all money paid in employer contributions is spent on skills training – this should be implemented at the Spending Review by reviewing the fixed budget allocated to the apprenticeship programme.
Given the increasing costs of apprenticeship delivery for providers, any additional flexibility in the levy to include other training could eventually lead to the total cost of the programme exceeding total levy contributions. The Government should consider how this would be addressed without increasing the financial burden on employers (i.e. without lowering the eligibility threshold or rate of the levy).
What would these changes mean for the future of skills training and apprenticeships?
There are 63,000 live vacancies in UK manufacturing currently. Make UK’s own research indicates that the cost of unfilled vacancies in the sector to the national economy is in excess of £6 billion per year. Improvement in both manufacturing and engineering apprenticeship starts and wider skills training would have a direct economic impact for the UK. It would mean the UK would be better equipped to drive affordable, clean and secure energy supply, boost productivity through increased digitalisation, and ensure the UK is a competitive place to do business.