The CIPD stated that apprenticeship starts have fallen since the introduction of the levy which has also negatively impacted the number of young people taking up apprenticeships.
The Chartered Institute of Personnel and Development (CIPD) have criticised the apprenticeship levy which it stated has “failed…on all key measures”.
This news comes just prior to the Chancellor’s Budget where Mr. Sunak is set to announce an additional £126 million for traineeships.
The Apprenticeship Levy came into play in 2017 and meant that a levy is charged to employers’ paybills at a rate of 0.5 per cent.
This measure was intended to support productivity growth through the increase in training. However, the Government did acknowledge that this would mean, for the short-term, it would reduce earnings growth. In the longer-term, it was expected to lead to increased profitability for businesses, and increased wages.
However, according to the body, this has not been the case.
Analysing the figures collected, the CIPD found that the total number of apprenticeship starts dropped after the introduction of the levy. In 2016-2017, it fell from 494,000 to 322,500 by 2019-2020.
Significantly impacted were those aged 18-24. The CIPD found that the number of apprenticeships going to under 19s has fallen from 122,800 in 2016/17 year to just 76,300 in 2019/20.
The same was found when analysing the number of apprenticeships going to 19-24 year-olds which from 142,200 per year to 95,300 per annum over the same period.
In addition, despite the Government’s expectations that the levy would increase employer investment in training, this has not occurred. Instead, employer funded off-the-job training in England falling by £2.3bn between 2017 and 2019.
The CIPD has stated that the apprenticeship levy needs to have an urgent overhaul in order to prevent more damaging effects from coming into place.
The body has stated that, if left in its current state, the levy would further restrict apprenticeship opportunities for young people at a time when they are most needed.
It would also undermine the Government’s Skills for Jobs further education reforms and the plan to boost employer engagement with colleges. The CIPD also felt that the levy would reduce employers’ ability to invest in the skills their business needs for recovery.
This was echoed by businesses – of which almost half that reforming the levy to a more flexible training levy would help them improve workplace productivity and business performance to either a great (23 per cent) or a moderate extent (23 per cent).
On all key measures the apprenticeship levy has failed and is even acting to constrain firms’ investment in apprenticeships and skills more broadly. It appears to have achieved the opposite of its policy objectives. Without reform it will act as handbrake on employer investment in skills, damaging firms’ ability to recover from the pandemic.A more flexible skills levy would mean employers could use it to develop existing staff through other forms of accredited training and skills development which are cheaper and usually much more suitable for employees aged 25 and over, leaving more money to invest in apprenticeships for young people who most need them.Levy flexibility would also help employers fund their employees through training in further education colleges as many technical and vocational courses are not apprenticeships. This key change would provide a big boost to meeting the ambition of the Government Skills for Jobs white paper and boost employer engagement with their local colleges.