Chancellor George Osbourne used last week’s Autumn Budget to go into greater detail about the apprenticeship levy, which is due to come into effect in April 2017.
The levy, which will be an additional payroll tax, will be set at 0.5% of UK payroll and will affect all employers with an annual wage bill of £3m or more. Groups of companies under common ownership will be treated as one.
Employers will then be able to withdraw funds from their levy in order to fund the external costs of apprenticeship training.
All businesses will have an allowance of up to £15,000, which will mean that the first £3m of an organisation’s annual payroll will be excluded. If a business’ annual payroll is less than £3m then they will not need to pay the levy at all.
Osbourne, who expects the levy to raise £3bn a year, also hopes that it will lead to an increase of growth in ‘earn as you learn’ training courses. This will boost the Government’s efforts to reach its target of three million apprenticeship placements by 2020.
Several industry leaders have expressed concerns that the drive to increase the number of people on apprenticeship courses will lead to a lower quality of training.
The Chancellor addressed this criticism by stating that Government funding per place would rise to ensure that the apprenticeships are high-quality. He also announced the creation of a new standards body to manage the scheme, which will be led by the Business Secretary.
“As a result”, Osbourne said, “we will be spending twice as much on apprenticeships by 2020 compared to when we came to office. It’s a huge reform to raise the skills of the nation and address one of the enduring weaknesses of the British economy.”
Speaking at the European Jobs and Skills Summit, Alison Fuller, a professor at University College London, said that skilled professions such as engineering and accountancy were better suited to apprenticeships than occupations such as retail.
“The debate should be about quality. The definition of an apprenticeship is being stretched to cover reskilling of older adults, among other things, and we need a much more differentiated response. There is a real question over devaluation of the brand if it is being extended to cover things like company induction schemes.”
An apprenticeship can be a valuable resource for a business if the apprentice is supported throughout their learning. Whilst the incoming levy may motivate more employers to offer apprenticeships, the emphasis needs to be on these employers to provide a suitable training environment.