Government’s apprentice plan to take money from NHS and councils

David Cameron has unveiled a plan to “boost apprenticeships and transform training”. No doubt it will have positive aspects, but – as so often – the cheery message hides some issues that should concern us.

Organisations are currently incentivised to take on apprentices with Government funding from BIS. For larger organisations in the public and private sector that is about to change. The funding will disappear completely and, instead, they will pay a tax called the “Apprenticeship Levy” to cover the costs.

This tax or levy will be hypothecated: companies will get first call on their own money and will be expected to spend it on the apprenticeship and training programmes where BIS previously covered much of the cost.

The fate of SMEs and other smaller organisations is currently unknown. They won’t have to pay the new levy. If a big company underspends, the left-over money might be passed on to smaller companies. There may also be some money left in the BIS pot to fund those apprenticeships for SMEs, even after Osborne’s 25-40% spending cuts have gone through.

This new tax/levy will apply to public sector organisations. Councils will need to pay it, as will the NHS and the rest of the public sector. This looks like being a simple transfer. At the moment, BIS covers the cost. In the future, the NHS will be expected to divert funds from patient care to apprenticeships and local councils will need to cut more than currently planned to pay their Apprenticeship Levy.

While Liberal Democrats will surely welcome the stated objective of increasing the number of people in high quality apprenticeships, we may question both whether the policy will achieve that aim and whether the costs should be moved from BIS to other parts of the public sector along with larger businesses.

The Government is currently consulting on the details of how the levy will operate – that consultation ends on 2nd October 2015.

* Iain Roberts is the former leader of Stockport Liberal Democrats and Lib Dem Campaign Manager in Greater Manchester Mayoral election and for Cheadle constituency in the General Election

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5 Comments

  • Thanks for highlighting this. It has the makings of yet another wholly unnecessary administrative overhead for companies large and small while failing to address the real issues.

    If apprenticeships were universally good value and worthwhile, then it would be a no-brainer to fund them via deficit spending; the government would get its financial outlay back with interest through higher taxes on the increased earnings of trainees and employers alike. And that’s before factoring in the intangibles of better motivation, social inclusion and so on which are huge.

    So I suspect that, either the government is financially and economically incompetent or too many apprenticeships aren’t worth very much at all – are in fact just make-work schemes. Of course both could be true simultaneously which is my guess.

    We need a different approach. Those who will don’t want to/can’t sensibly aim for university are a substantial majority of the school-leaving cohort (and that’s not even counting mature job-changers) yet political discussion is almost exclusively focussed on the minority for whom university is a good option. That’s not good enough.

  • The problem is that for far too many decades UK industry hasn’t invested in apprentices and staff training; seemingly preferring to lobby government about the “skills shortage” and the need to allow high levels of immigration so that they can buy in ‘skills’ from overseas.

    This isn’t to say that the UK is alone – I found it rather odd that a French company I worked for was prepared to spend 300M euro’s pa over a couple years on “retraining people for new jobs, that were not necessarily within the company”, but only once it had determined it wanted to make them redundant and hence had to follow French law on such matters…

    And clearly the BIS incentives haven’t been sufficient to make much of an impression on this situation, so in some respects a stick approach, which the “Apprenticeship Levy” represents might encourage companies to do more particularly if monies spent are restricted to school leavers, who have a attended a UK secondary school for Key Stages 3 and 4.

    My main concerns of the proposed new system are: firstly the seeming withdrawal of BIS funding to SME’s (and organisations in the third-sector?) and secondly, the opportunity for employers to perform a simple slight of hand with record keeping and accounting and thus simply re-allocate existing training and staff costs to offset their “Apprenticeship Levy” ie. account for any employee under 25 say, as an apprentice.

  • Graham Evans 18th Sep '15 - 9:21pm

    @ Gordon I broadly agree though there is an argument that we should oblige all employers big and small to fund apprenticeships. Imposing a training levy and them rebating the cost, say through NI, is no more bureaucratic than the current system in which apprenticeship s are funded through training providers, the only difference would be that employers would bear the cost, not taxpayers. Historically training has always been the first point of call when British employed are looking to save money, while those who do provide high quality training often find their best trainees poached by others who have avoided the cost of generating their own in-house talent

  • Graham Evans 18th Sep '15 - 9:35pm

    @ Roland
    It depending on your definition of an SME. The usual BIS definition includes companies with turnovers running into millions. Any taxpayer support should be restricted to genuinely small companies, in terms of both numbers employed and turnover.

  • Iain Roberts 21st Sep '15 - 5:17pm

    I’m told BIS hasn’t decided the definition of an SME for this purpose. The standard is under 250 employees and it will probably be that sort of area.

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