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IoD response to Department for Business, Innovation & Skills consultation on apprenticeships levy

01 Oct 2015
Apprentice working alongside her mentor

In his summer budget presented to Parliament on 8 July, Chancellor George Osborne announced the introduction of a levy on large employers that is intended to provide an employer contribution to supplement government funding for apprenticeship training.

Funds raised by the levy would provide apprenticeship employers with an electronic voucher that could be used to purchase training from recognised providers. Further details of the apprenticeship levy were then provided by the Treasury in their productivity plan.

Co-funding of apprenticeship by all the parties that benefit – the employer, the apprentice and the government – is the accepted financing model in all modern economies. But in the UK it has proved especially difficult to find a way of ensuring that employers make a contribution to the costs of apprentice training. An earlier levy/grant requirement covered most of British industry in the 1970s and was administered by tripartite bodies. It was greatly resented by large employers and – with the exception of two sectors that opted to retain the levy (construction and engineering), it was progressively legislated out of existence during the 1980s. Despite their continuance of the levy, both the construction and engineering sectors still face serious skills shortages to this day. The introduction of Modern Apprenticeships in 1994 committed the government to contributing to the financing of apprenticeship training. But these funds were routed exclusively to training providers, many of which then sold ‘cut-price’ apprenticeships to employers without requiring the employer contribution that government expected. Employers’ expectations of ‘free’ apprenticeship training became firmly established over the 25-year period that this system operated.

The government has correctly identified apprenticeships as a key factor in boosting Britain’s productivity. In our May 2015 poll IoD members cited skills shortages as their number one concern. The greatest asset any employer has is their workforce yet the level of employer provided training volumes in this country has halved in the last 20 years, and the UK lags well behind other OECD countries when comparing levels of investment in workforce training. The UK needs to invest more in education and training if we are to address the challenges of the skills shortage and boost our productivity. Our members understand that they have a role to play.

However, while IoD members welcome this focus on skills and training, the emphasis must be on quality. The coalition government did an excellent job of increasing the number of apprenticeships, but many of these were not of the required standard, with one in four apprentices failing to complete their placement. Steps must be taken to ensure that future apprenticeships are of the quality and standard that employers need.

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