Boris Johnson recently pledged to provide apprenticeships for every young person in the UK in order to counter the surge in unemployment caused by COVID-19.
He acknowledged that young people are likely to be hardest hit by the rise in unemployment and that apprenticeships are ‘going to play a huge part in getting people back onto the jobs market’. However, it remains unclear how the Government will guarantee these apprenticeship opportunities, particularly when the current Apprenticeship Levy Scheme is already underperforming and in desperate need of reform.
The apprenticeship levy was introduced in 2017 to combat growing skills shortages and boost productivity in particular industries. In essence, it requires employers with an annual wage bill of more than £3 million to contribute to the levy fund a sum equivalent to 0.5% of their wage bill in excess of the £3 million threshold. Employers can then access the fund to help pay for training apprentices through approved providers.
Despite aiming to create 3 million new apprenticeships by 2020, the total number of apprenticeships has actually decreased since the introduction of the levy. Even after attempts were made to streamline the levy in October 2018 to make it simpler and more accessible, figures show that only a tiny fraction of the funding available has been accessed by employers.
This is largely due to a number of issues with the scheme in its current form. Critics have highlighted its lack of flexibility and opaqueness, particularly in relation to the 20% ‘off-the-job’ training rule and the shift from the arguably clearer skills frameworks to the newer standards. Employers struggle to know how to use the scheme to their advantage and there is, in fact, a perception amongst businesses that the levy is simply a tax by another name.
The 2018 reforms, which included the reduction of fees for small to medium-sized businesses (from 10% to 5%) and the ability for employers to transfer 25% of their available funds to another company within their supply chain were criticised for not going far enough. The transfer process has been criticised for being unnecessarily complex and laborious, given that it can only be transferred on a month-by-month basis, and capping the transfer to only 25% of available funds is needlessly limiting its usefulness.
Nevertheless, businesses should not be deterred from accessing the levy fund, particularly in the current climate. Indeed, the funding may now be more valuable than ever, helping to train new or existing staff in new roles that reflect a new “post-COVID-19” business landscape. However, whilst apprenticeships have the potential to lessen the impact of coronavirus on the economy, before Boris Johnson can claim that the levy will fix unemployment rates and the UK economy, he must first fix the scheme itself.
First published on London Loves Business. Reproduced with permission.