Still confused by the Apprenticeship Levy one year on?

It’s been one year since the introduction of the Apprenticeship Levy on 6^th April 2017. What is the Levy, how have the past twelve months gone and are employers any clearer on how to utilise it?

What is the Apprenticeship Levy and who has to pay?

It’s a UK Government employment tax that is collected from all employers (public, private and third sector) with a pay bill of over £3 million a year from companies in England, Wales, Scotland and Northern Ireland. The Levy rate is 0.5% of the company’s pay bill, but they receive an allowance of £15,000 per year to offset this cost.

In England

You may be aware that Levy-paying companies in England receive vouchers to spend on staff training and are given access to a digital account to find training providers, choose Apprenticeship programmes, find candidates and pay for Apprentice training.

This is however, not the case for levy-paying businesses in Wales, Scotland and Northern Ireland.

Devolved differences

The differences between the English system and the other regional systems has been a cause of confusion for many levy-paying Welsh, Scottish and Northern Irish businesses.

With the devolved nations being in charge of their own skills policy, Wales, Scotland and Northern Ireland received a population-based share of the levy pot to be invested as their respective governments saw fit.

UK-wide businesses

Contributions into the levy pot are based on all UK employees, but you can only spend the electronic vouchers on employees living in England. For Apprentices outside England, you have to navigate each regional system.

In Wales

The Welsh system delivers its Apprenticeships through the training provider network (this is where ACT come in) where Apprenticeships are fully-funded for eligible learners, regardless if businesses are paying into the Levy or not.

For the first year of the Levy, Wales received £128 million from the UK Government. However, this isn’t extra money as the funds were offset by the retraction of £90 million due to Wales under the old, pre-levy system. On the other hand, the Welsh Government has stated that it increased investment in Apprenticeships from £96 million to £111.5 million from April 2017.

Essentially, for Welsh businesses looking for funded training, not much has changed, even if your business is paying into the Levy. You still access funding for work-based learning through the country’s training providers like ACT Training.

One year on

Ministers hope the levy will raise £3 billion annually by 2020 and lead to 3 million Apprenticeship starts by 2020. But how realistic is this based on the current uptake?

The Open University has reported that in the one year since the Apprenticeship Levy’s introduction, a huge £1.28 billion of the £1.39 billion paid into the Levy pot by UK employers is still sitting there unused. That’s a lot of available funds that employers aren’t seeing the benefit from.

There have been complaints about the complexity of the system, particularly in England, which was acknowledged by Chancellor Philip Hammond in his Spring statement, saying that £80m would be granted to small and medium-sized enterprises (SMEs) to help them navigate the system.

However, with the two year ‘use it or lose it’ clause on the Levy pot, employers could be returning over £1 billion to HMRC if Levy spending doesn’t increase. This is money going down the drain for work-based learning, funds that could be used to upskill workforces and employ Apprentices.

It has been labelled by some, including a Welsh Government spokesman, as a UK government imposed employment tax that “completely overlooks and undermines our [Wales’] very distinctive approach to supporting Apprenticeships”.

He continued: “Its introduction has come at a considerable cost to Wales and any Barnett consequentials we have received from the Levy have been largely offset by cuts made elsewhere, meaning there is no significant new money coming to Wales.”

What next?

There is still a year left for businesses to draw funds from the levy pot, but with it taking a few months for a business to set up an Apprenticeship programme, how many Apprentices will be signed up and how much of the levy pot will end up staying put and being reabsorbed by HMRC?

Regardless of where you stand on the Levy, in Wales it is very much ‘business as usual’ and we are here to support you. If you’re looking to upskill your workforce with Apprenticeships or take on an Apprentice in Wales, contact us on info@acttraining.org.uk or 029 2046 4727 to find more.