Are the funds fair

Natalie Razeen gives an update on government plans for the new apprenticeship funding scheme

New year, new apprentice funding scheme. It appears that it is full steam ahead to implement the new apprentice funding scheme in May 2017 despite recommendations from various commercial organisations, including the CBI, that the implementation should be delayed to allow businesses the opportunity to adjust to the new measures and to consider whether the proposals will indeed improve the quality of apprenticeships in the UK.

The government issued its updated policy paper on apprenticeship funding, following the response to the consultation in October 2016, to reflect the proposals made by businesses, unions and industry groups. A technical consultation on the draft regulations remained open for response until 3 February 2017 but the purpose of these draft regulations is to set out the operational side of the policy, such as how payroll operators will calculate, report and pay the levy. The policy itself is currently due to be introduced in May 2017.

The new funding scheme implements an apprentice levy which is designed to replace all tax payer funding for apprenticeships. Employers with a pay bill of over £3 million (once an offset of allowance of £15,000 is applied) will be required to pay the levy, with connected companies able to share this £15,000 allowance between them. The government states that less than two per cent of employers will have to pay the apprenticeship levy. Employers who are required to pay the levy will be able to reclaim their levy contributions through digital vouchers [the voucher scheme will not apply in Scotland, Wales and Northern Ireland. The right to regulate apprenticeships is devolved and this article only deals with the proposed changes to funding in England]. Funds in the digital account will need to be used within 24 months, failing which they will expire. In addition the government will provide such employers with a top up of ten per cent of their total monthly contributions in England.

When he unveiled the levy in 2015 George Osborne stated that employers who were required to pay it would get back more than they put in. More recently, the government has stated in its guidance on apprentice funding that for every £1 that enters an apprentice service account employers will receive £1.10 in funding for apprenticeships. Employers who do not have to pay the levy will not be required to use digital vouchers until at least 2018 and training providers will be paid directly by the government. However, these employers will need to select a training provider from a list of registered providers and negotiate a price.

There are funding caps for the various qualifications and these employers will have to contribute ten per cent of funding towards the cost of apprenticeship training. This is known as ‘coinvestment’. In addition the government has announced a further 20 per cent increase in the funding for the training of 16-18 year olds and retaining additional support for those from disadvantaged backgrounds (though this is subject to review).

The apprenticeship levy has been the cause of particular concern in the construction industry. Though it seems to be recognised in the sector that there is a need to increase the number of high quality apprenticeships, with Build UK noting that ‘Skills shortages remain a potential brake on the industry’s ability to deliver projects’, when the apprenticeship levy was announced larger construction firms were concerned that they would be double levied. This is because the Construction Industry Training Board (CITB) already imposes a levy for training. It was estimated that up to 900 companies in the sector would be forced to pay this double levy, in the first 12 months after the introduction of the apprenticeship levy. The CITB will be carrying out a consultation on the way in which the CITB levy should work alongside the apprenticeship funding scheme. The CITB has introduced a temporary transition package in order to alleviate concerns. Under these transitional procedures companies who are forced to pay both levies will be eligible to collect enhanced training grants from the CITB up to the maximum of the total amount the company is required to pay under the apprenticeship levy.

We are yet to see the options the CITB employer led Levy Working Party will put forward on how the CITB levy should work alongside the apprenticeship levy, with a view to implementing a new CITB Levy Order 2018. The CITB surveyed 212 of the biggest construction companies in 2015 and found that 59 per cent of them favoured having some sort of hybrid apprentice levy and CITB levy system. It is reported that the CITB hopes to obtain a consensus on the levy system by September 2017.

The government stated, in its policy document ‘English apprenticeships: our 2020 vision’, that the aim of the levy was to provide funds to put investment in training and apprenticeships on a sustainable long term footing and build a robust world class training system. However, there are concerns that a one size fits all training scheme will not necessarily benefit employers and employees, despite the government’s claims that the new system places employers at the heart of paying for and choosing apprenticeship training. The Chartered Institute of Professional Development has been particularly critical of the speed at which the levy has been rushed through at a time of economic uncertainty. There is concern that the government is more interested in meeting its aim of creating three million new apprenticeships than ensuring that apprenticeships serve as a meaningful alternative to university.

One positive for the construction and engineering industry is that apprenticeships are commonly used in the industry, whereas there will be large employers in other sectors who will not be able to recover the sums paid towards the levy, as their businesses are not designed to accommodate apprenticeships. It could therefore be an advantage that helping employers facilitate apprenticeships is an area of policy focus. However, even the construction and engineering industry needs to understand what impact having an apprenticeship levy will have on skills and capabilities in the sector. Despite the inconvenience and increased cost of a double levy, it seems likely that the CITB levy will be retained for some time.

Natalie Razeen is an Associate at Russell-Cooke. Russell-Cooke is a top 100, Londonbased law firm with around 200 highly regarded specialist solicitors and lawyers. It advises a mix of commercial, not-for-profit, regulatory and personal clients.

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