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Briefings

Member Briefing: Government consultation on new Apprenticeship Levy

Date: 21/08/15

Government consultation on new Apprenticeship Levy

The Government has today launched a public consultation on its proposed introduction of a new Apprenticeship Levy for larger employers. The consultation is open until 2 October.

A copy of the consultation document can be downloaded via the link here.

The Government says its rationale for proposing of the Levy is that “under investment in skills is harming our productivity and the economy”.

It sees a national Levy payable by all larger employers across the economy “as an answer to [the] structural decline [in] time spent by employees in training … and will put investment in training, and apprenticeships specifically, on a long-term, sustainable footing.” The Levy would be collected from larger employers in both the public and private sectors. It is envisaged the new Levy would be introduced in 2017.

The consultation covers only the implementation of the Levy. The Government says it will provide more detail on the Levy rate and scope later in the year – we understand in connection with the Comprehensive Spending Review.

Key points in the consultation document are that:

  • The Government “intends for the levy to be calculated on the basis of employee earnings and for employers to pay the levy through their PAYE return to HMRC.”
  • “The Government intends that the size of employers will be calculated in relation to the total number of employees. However, recognising that data on the number of employees is not currently provided through PAYE at employer level and the potential for some more complex cases (such as franchises), the Government would welcome views on how the size of firm should be calculated.”
  • Although the new Levy would only be paid by larger employers (however defined following the consultation), the Government is “proposing that employers of all sizes in England will use the same digital voucher system to pay for the apprenticeship training they want. As such, all employers, both those who pay the levy and those who do not, will use the same system.”
  • “In the autumn, we will set out more detail about how employers who are outside of the scope of the levy can access apprenticeships funding. Government remains committed to cash contributions for those employers who aren’t in scope of the levy to make sure that all employers have a stake in the apprenticeship systems in future. We will also need to consider how the funding raised from the levy interacts with funding for those employers who don’t pay the levy. For example, some employers have suggested that they would like to spend their funding on training for apprentices that are employed by other employers, for example to support training in supply chain companies.”
  • The Government envisages that companies committed to training should be able to get back more than they put in, subject to suitable caps and controls.
  • All employers (that is, both those paying the Levy and those who do not) would use their own digital voucher accounts to exercise purchasing power directly to ensure they can obtain the apprenticeships they want from training providers. The digital voucher accounts “would be part of a broader digital system that enables employers to advertise vacancies, search for applicants and engage registered providers to provide training for their apprentices. This system puts employers at the centre of the apprenticeship system and will help them to make commercial purchasing decisions on the training they want.”

Relationship of the new Levy to the existing CITB Levy

The consultation document raises the question of future arrangements for the existing CITB Levy given that construction employers would be within scope of the new Apprenticeship Levy.

It states (paragraphs 28, 29 and 30) that:

“One option is for employers in the construction and engineering construction industries to pay the apprenticeship levy whilst continuing to pay the existing industry levy. If this were to happen we would expect companies in the industries to fund their apprenticeships using the apprenticeship levy.

“Another option is to potentially remove the statutory industry levy arrangements completely, so that employers only pay the apprenticeship levy. This would represent a significant change to training arrangements in the construction and engineering construction industries and we would need to understand what effects this would have on the skills and capabilities of the UK construction industry.”

“The Construction Industry Training Board and Engineering Construction Industry Training Board will consult with employers before the introduction of the apprenticeship levy on whether they should continue to pay the industry levy.”

HBF comment

This is an important consultation that raises significant issues both in relation to the operation of the new Apprenticeship Levy and its implications for the existing CITB Levy and Grant system.

HBF will prepare a substantive consultation response based on the views of all HBF members and will seek feedback on the Government’s proposals at forthcoming member meetings in September, including the scheduled meeting of the Careers, Skills and Training Committee.

We will also be discussing the Government’s proposals with the CITB and other construction trade associations in order to work through the issues raised and the options for the future for the construction sector.

 

John Slaughter

Director of External Affairs