From the TUC

Apprentices levy: government skills policy paradigm shift

13 Jul 2015, by in Labour market

It’s a game changer – that is the general reaction to the news of a levy on large employers to pay for apprentices. It has met with much surprise too. Is this really what we expect from a Conservative government? Something that three successive Labour governments felt was a step too far?

Labour talked of the “last chance saloon” after the 2005 Leitch Report. But the latest evidence of declining employer investment and dire productivity show skills, in general, have since then got worse. Workplace training has halved in the last two decades. Osborne had to act.

The Levy will make all large employers pay something, perhaps half a percent of the cost of their payroll. Over half of all large employers don’t have any apprentices. They will now have to pay their way. The levy is a way of making every large employer share the cost equally.

If employers do have apprentices, they won’t have to pay the levy. For those that don’t, either they pay the levy or start hiring apprentices themselves. The levy could raise around £2bn, which will be used to pay for government support to train apprentices.

For unions, it is welcome news. The TUC has argued for a levy ever since such collective measures were largely abolished by Mrs Thatcher. If employers simply won’t pay, despite all the incentives and exhortations, then the state must step in. Even a free market Conservative government must react to such evidence of market failure.

It is not because employers are always “bad”. It is simply that many can’t risk the expense of training unless their competitors do likewise. Though, of course, there are always some bad employers who will always try to avoid their fair share of costs. When Baroness Alison Wolf made the same case for a levy in a recent paper for the left-leaning Resolution Foundation, it was clear that the skills policy paradigm was shifting in BIS and, more importantly, the Treasury.

Unionlearn received assurances within hours of the budget that BIS are keen to involve unions in the design and oversight of the new scheme. That is also very welcome. There have been two recent visits to Germany involving senior government officials, unions and employers. This levy does not go so far as the German skills system, which involves unions a great deal, since cultures can never be simply transplanted, but it is a step in that direction.

Again, it may seem strange that a Conservative government is supporting union involvement. Indeed the Skills Minister, Nick Boles, combines Trade union “reform” alongside this new levy in his job description. But it is very welcome that unions’ contribution to the skills agenda, as in Germany and most other advanced economies, is being recognised. Unionlearn can take some credit for that.

The big worry is quality. We need to ensure that the new hypothecated pot of apprenticeship money does not become a magnet for those aiming make money by hitting the 3million target for apprenticeships as quickly and cheaply as possible. Some providers may be tempted to devise deals, showing employers how to avoid the levy at least cost.

The history of Individual Learning Accounts or Train to Gain show how good intentions can quickly go wrong. Equally, there is plenty of evidence that Levies can be designed to work well. Employers in the driving seat will want to ensure their levy money is buying quality. Those newly spurred to invest in apprenticeships (to avoid paying the levy) will want to invest in high standard schemes. Unionlearn itself has not been afraid to shine a light on poor quality schemes or to champion good quality. Our Apprenticeships Quality Award was recently won by Babcock for their excellent apprenticeship scheme.

Unions monitor actual practice and delivery, often very different from fine words on paper. And unions negotiate over content and curriculum, ensuring apprentices receive well rounded training.

There is much evidence from abroad on how to design a good levy scheme. That evidence shows there must be a clear oversight body. It must have powers to intervene quickly where quality is at risk. It must oversee the setting of clear standards, sector by sector. Of course it must be owned by employers, but it must also involve unions. And it must work as much as possible by consensus.

Already in the UK (though the levy will only apply to England) we have an outline partnership structure that is building such a consensus, through the UKCES, SSC’s and Industrial Partnerships. Oversight of the new levy should build on that structure. Unionlearn looks forward to playing our part in making sure this long overdue measure is a success, building higher productivity through better skills and jobs.

2 Responses to Apprentices levy: government skills policy paradigm shift

  1. George Thompson
    Jul 14th 2015, 9:15 am

    Hi Tom

    Interesting article. I have one query you say “If employers do have apprentices, they won’t have to pay the levy. For those that don’t, either they pay the levy or start hiring apprentices themselves.”

    Is this correct? My reading of the Summer Budget was that all large employers will have to pay whether they currently employ apprentices or not. But those that do employ apprentices will get out more than they put in.


  2. Darryn Lewis
    Jul 14th 2015, 8:55 pm

    Great article Tom and some good insight into what can only be described as a game changer/curve ball by the government to push for the 3million target on apprenticeships. I for one believe this levy is a good practise and should be policed correctly not to gain bad publicity but to encourage employers to see the benefits. At a glance this may seem harsh or a benefit to some however the bigger picture is this. The government have done an amazing job to get this country back on its feet and reduce borrowing and more then anything reduce unemployment which has had a knock on affect in terms of skills shortages and companies have to act now to secure them for the future…eventually they won’t be able to by in the skills, so start training people up now at a margin of the cost and it will benefit them in the future!