‘Radical rethink’ required for apprenticeship levy, says The Confederation of British Industry

Emma Finamore
02 May 2016

The government needs to work with businesses if it is to properly deliver skills, boss warns.

The government must collaborate with business to ‘radically rethink’ the design of the apprenticeship levy if it is to deliver the quality skills training needed to support a more prosperous society, CBI Director-General Carolyn Fairbairn, has warned.

She said in a speech last week that businesses are committed to raising skill levels and support the government’s ambition to boost apprentice numbers, but that there are growing concerns among firms about the current design and viability of the system.

According to Fairbairn, the government has the opportunity to create a “once-in-a-generation revolution” in skills, but it is currently only likely to deliver another “once-in-an-administration shake-up”.

Speaking to an audience of business leaders in the City of London, she said: “Firms are passionate about apprenticeships, and it’s this passion which drives deep frustration over the levy plans as they currently stand.”

Fairbairn emphasised that the government must: “take the time to draw on business' vast experience to make sure that the levy works for everyone, rather than rushing out a poorly thought through plan. This isn’t what businesses want, and we don’t believe it is what Government wants either."

The CBI is calling for a stronger role for the new Institute for Apprenticeships - include measuring and managing the system around the levy; more flexibility in how firms can spend the levy – including on existing training and high-quality support for apprentices.

It is also calling for the digital system which manages levy spend to be ready and able to support the delivery of apprenticeship training which businesses need, in full and from the start.

“Firms across the UK are emphatic that tackling skills shortages is the only way to succeed and create prosperity. They want to create quality apprenticeships and they’re ready to work with the government to do this,” said Fairbairn.

“But as it stands that’s not what the levy is doing. We need to change that, which is why we are calling for a ‘radical rethink’.”

Fairbairn also criticized The Institute for Apprenticeships, calling it an “afterthought, a mere ‘standard-setter’, rubber-stamping standards in a system where key decisions have already been made”.

She said the CIB thinks the Institute should be a “standard-bearer”, with the authority to shape big decisions on design: “These would include measuring and managing the system around the levy, establishing success criteria which measure how it supports careers and closes the skills gap.”

Fairbairn also said that the apprenticeship levy encourages encourages firms to rebadge their existing programmes, such as graduate or management training schemes as apprenticeships – just to fit apprenticeship standards.

The levy – of 0.5% on company payrolls – was announced last year, as a way of raising £3bn a year to fund three million apprenticeships.

The new charge will be imposed from April 2017 and help ensure that big business shoulders the cost of training workers. Firms will get a £15,000 allowance to offset the levy, so only those with a wage bill of more than £3 million will pay.

“When it comes to training – business knows best,” she said. “They should have the flexibility to choose the kind of training which is right for them, whether it’s labelled an ‘apprenticeship’ or not.

“Other levy systems in Ireland, Germany, Denmark, France and Quebec, give greater flexibility on spend than the UK Government is proposing. So it can be done – and this is how our levy should work too.”

The CBI speaks on behalf of 190,000 UK businesses of all sizes and sectors.

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