Introduced in April 2017, the Apprenticeship Levy was introduced as a method of increasing national productivity. With the aim of developing vocational skills and increasing both the quality and quantity of apprenticeships in the UK, the government committed to 3m new apprenticeship starts in England by 2020.
A 0.5% tax was placed on an employer’s pay bill over £3m, to be paid into a digital apprenticeship service account. Each employer then receives a £15,000 exemption to be paid towards training and assessment for approved apprenticeships. Although the levy makes sense in theory as an incentive to encourage apprenticeships, in reality the effect doesn’t seem to be the desired one.
Quite the opposite in fact, with apprentice start numbers actually dwindling since its introduction. In February of 2018, England saw 21,800 new apprenticeship starts. To put that into perspective, in the same month of the year prior, we saw 36,400. That’s a 40 per cent fall over the course of 12 months. Looking through a wider lens, between August 2017 and February 2018, apprenticeship starts actually fell from 309,000 for the previous year to just 232,700. These are simply not the numbers that were hoped for or expected.
Charlie Mullins, Founder and CEO of Pimlico, knows the benefits and intricacies of apprenticeships better than most. Although he was initially hopeful upon the levy’s announcement, he’s now confident that it is not the solution to the UK’s skills shortage.
“There are many reasons why this is the case but mainly because it’s so complicated. It has led to businesses seeing it as a cost rather than the way to invest in the future. And as we all know, costs and indeed taxes, are never a business’ favourite thing.”
So what is the solution? Ask Charlie and he’ll tell you that it’s time to scrap the levy and replace it with something that really gives the necessary control to employers.
“We need to make sure that every young person who leaves the school system has either a job, university place or apprenticeship to go on to. It’s that simple.”
This would be in line with what happens in Germany, who famously benefit from their strong skills-based manufacturing industry. Time will tell whether or not the government decide to follow that suggestion but it appears that the current plan isn’t working and a change is necessary, sooner rather than later.