What’s happening with Skills England and the Apprenticeship Levy?
Posted on: 16 September, 2024
One of Labour’s first acts after winning the UK General Election was to announce changes to the Apprenticeship Levy. Here’s what these changes could mean for businesses.
July 2024 welcomed a new Labour government, and with it, new pledges to tackle a growing skills gap in the United Kingdom. According to research, 20% of the UK workforce (around 6.5 million people) will be ‘significantly’ underskilled for their jobs by 2030, and over quarter (27%) currently lack the sufficient digital skills required for their role.
When the UK’s shortage of skills is coupled with a shrinking workforce – around a third of all workers are now aged 50 or over and approaching retirement – it’s no surprise that Labour have acted quickly to address this looming crisis. In its plans, the party has signalled its commitment to broaden the Apprenticeship Levy into a ‘Growth and Skills’ Levy. But what exactly will this look like, and how will the levy change?
Why is the Apprenticeship Levy being changed?
The apprenticeship levy is a tax on employers that can be accessed to pay for apprenticeship training. It was introduced at the beginning of the 2017/18 tax year by the Conservative government, and while the decision to increase investment in apprenticeships was met with praise, the levy itself wasn’t without its critics.
In early 2023, Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), said that the government ‘must urgently fix this £3.5bn mistake,’ claiming that ‘it risks letting the UK’s anaemic productivity trail further behind its international counterparts’. Further criticism was aimed at the restrictions on what training employers can spend on, with unspent funds from the levy reportedly approaching £4bn.
Labour themselves described the previous levy as ‘broken’ in its manifesto for this year’s election, stating that ‘the current rigid rules ignore vital skills and training needed to access apprenticeships.’ It has already announced plans to overhaul the system and formed a new professional body to implement this – Skills England.
What is Skills England?
Skills England is a professional body which aims to ‘bring together the fractured skills landscape’ and ‘create a shared national ambition to boost the nation’s skills’. With a focus on working in partnership with employers, unions, education and training providers, Skills England has begun work to identify local and national skills gaps. In time it will take over from the Institute for Apprenticeships and Technical Education (IfATE). As a statement on IfATE’s website read:
“Bringing these areas together under a single entity is an exciting opportunity to have more impact on this complex area and for employers to continue to be at the heart of the skills system.”
What will happen to the Apprenticeship Levy?
Labour plans to launch the Growth and Skills Levy as a successor to the Apprenticeship Levy, with Skills England playing an important role in its launch. In the Growth and Skills Levy, employers will be able to use 50% of their levy contributions to fund training through routes other than apprenticeships, giving them more flexibility on how their money is spent.
The reaction so far to this news has been positive. 57 business leaders signed a letter of support for the plans before the election, and the formation of Skills England has been celebrated as ‘a big win’. However, there are concerns that employers still need to get on board, and clear guidance will need to be provided on which courses can provide the most value.
What exactly the overhaul of the Apprenticeship Levy could mean for apprenticeships is at this time unclear. The flexibility of how business can spend their funds may lead to an uptake in apprenticeships alongside in different learning models, like Continuing Professional Development (CPD). It may even lead to a downturn in money being spent on apprenticeships. Whatever the case, it’s hoped that it will prompt more businesses to make use of the £4bn of unspent funds available to them.
We will update this article with more details and further perspectives as Skills England and Labour’s Growth and Skills Levy plan are put into practice.
