The government’s plan to charge a new levy on businesses to help reach ambitious apprenticeship targets is facing resistance from big employer groups who warn ministers not to sacrifice quality of training.
Chancellor George Osborne announced the levy in his summer budget as a key part of his bid to show he was on the side of working people. The government haspitched it to business as a way to end years of under-investment in training and solve skills shortages with 3m new apprenticeships by 2020.
But as an initial consultation on the levy closes on Friday, two leading business groups have expressed scepticism. One main concern is that employers could rebadge existing jobs as apprenticeships to meet training targets and recoup the costs of the levy.
Manufacturers’ organisation EEF describes the levy, scheduled to be introduced in 2017, as “little more than a tax on business”. In its response to the consultation, it is sceptical about the government achieving its 3m target, a goal that would require 600,000 new apprenticeship starts every year.
“Companies have serious concerns as to how the scheme will work in practice,” said Tim Thomas, EEF head of employment & skills policy.
“If this proposal is to avoid being a pile-them-high, sell-them-cheap approach and actually increase the quality of apprenticeships as well as hitting the government’s 3m target, then the government must sit down with employers as a matter of urgency to design a workable scheme,” added Thomas.
The CBI employers group, which represents about 190,000 businesses, wants assurances that the scheme will not prove costly to companies. Its submission recommends all funds raised by the new levy must be ringfenced for training and that the levy rate be set by a new politically independent levy board.The government says it will provide more detail on the levy rate and scope later in the year but has insisted those employers who are “committed to apprenticeship training” will be able to get back more than they put in.
“Business is committed to working with the government to tackle head-on the skills shortages many of our high-growth sectors face, and we have been vocal in our support of employer contributions in the past,” said Katja Hall, CBI deputy director-general.
“But at a time when firms are already investing over £40bn a year on formal training and increasing apprenticeships, there is a high risk it could undermine the system not strengthen it.
“A new levy won’t be welcomed by business, so we want to see a new politically independent levy board setting the rate based on clear evidence with the funds ringfenced.”
Employers have also raised concerns that the levy could divert funds away from other forms of training just as the government seeks to improve the UK’s woeful record on productivity – a measure of the output per hour worked that has long lagged the performance in other advanced economies.
A further 22% said the levy could encourage employers to accredit training they would be running anyway as apprenticeship schemes, while just 20% believed the levy would drive up quality of apprenticeship schemes.A survey of big employers by the Chartered Institute of Personnel and Development (CIPD), the trade association for the human resources sector, showed that almost a third (31%) believed the levy would cause them to reduce their investment in other areas of workforce training and development.
The poll of 275 employers, conducted to inform CIPD’s response to the consultation, found employers were divided over the levy plans, with 39% in favour in principle, 31% opposed and a further 30% undecided.
“Our survey suggests that boosting both numbers and quality at the same time will be a significant challenge,” said CIPD chief executive Peter Cheese.