According to new data analysis commissioned by The Open University (OU), more than £1.28 billion paid by employers into the apprenticeship levy is still unused and held in National Apprenticeship Service accounts.
Just 8% (£108 million) of apprenticeship levy funds, out of the original £1.39bn paid in by businesses, had been spent in the 10 months since the scheme’s launch.
Since April 2017, eligible organisations i.e. those with an annual wage bill of more than £3m, have had to pay an apprenticeship levy to the Education and Skills Funding Agency (ESFA). Companies can then recoup the funds from a digital ESFA administered by the National Apprenticeship Service under a PAYE scheme. However, any funding that remains in their National Apprenticeship Service accounts will expire after 24 months. The OU’s report states that employers must, therefore, act quickly to make the most of the fund, as if organisations in England continue to use the funding at the same rate, they risk losing as much as £139 million a month from April 2019.
Concerns have been expressed that organisations could be writing the levy off as a tax and not choosing not to spend it. In the report released by the OU, it was found that 40% of business leaders reported treating the levy as a tax, and 17% stated they had no expectation of recouping their funds. These figures were confirmed by the Department for Education and Skills.
However, Anne Milton - Apprenticeships and Skills Minister stated:
“I’ve met lots of businesses up and down the country that have already kick-started amazing apprenticeship programmes and are using their levy funds to help change lives and get the skills they need.”
She added:
“It has taken some businesses longer to get going on their apprenticeship programmes using the levy, while many that I have met are forging ahead growing the numbers of apprentices within their businesses, getting a skilled and loyal workforce.”
Chief policy officer at the Association of Employment and Learning Providers - Simon Ashworth - stated that levy-payers were aware that there was a two-year funding window and added:
“We don’t recognise the gloomy picture that this report paints and remain convinced that the levy will be a success. Our training provider members tell us that the levy-payers they are supporting are well aware of the two-year window in which to utilise their funding, and are strategically planning the roll-out of their apprenticeship programmes accordingly.”
“Many employers are still waiting for the apprenticeship programme they specifically want to be available to spend their levy on. We have also made it clear to the government that the absence of proper end point assessment for many standards has the making of a car crash unless action is taken quickly.”
David Willett - Corporate Director at The Open University - said:
“With such a huge amount being paid into the apprenticeship levy, it’s essential that employers in England get return on investment by embracing apprenticeships.”
“While it’s encouraging that the majority of business leaders agree with the levy in principle, it’s clear that adjustments are needed to make the levy work harder for employers. The lack of flexibility needs to be urgently addressed to ensure that organisations get value for money, and we think that modular apprenticeships, which allow organisations to develop tailor-made programmes that fit their specific needs, could be an attractive solution for both employers and the UK government.”
The full OU analysis can be read here.
