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Is the Apprenticeship Levy more than meets the eye?
Governments love soundbites but for many reasons are often not so willing to expand on the detail. So “3 Million Apprenticeships” sounds great until you realise that they will be paid for by an additional business tax, subtly named The Apprenticeship Levy.
But don’t worry folks because another soundbite stated that “only 2% of businesses will pay the levy”. However, before the remaining 98% of SMEs breathe a collective sigh of relief and simply ignore the whole process, they might want to take time to look beyond the headlines and study these proposals in greater depth.Although the government has not yet provided full details, my understanding having read the latest joint BIS/Department of Education briefing document “English Apprenticeships: Our 2020 Vision” is that in fact all businesses in the UK will pay the levy. At the same time, the government intends to pay an allowance of up to £15.000 to every company in England, thereby neutralizing the effect of the levy for companies with a staff wage bill of £3m or less.However, any business owner who believes that this “allowance” will arrive in the form of a cheque through the post from HMG, may need to think again. The allowance will in fact be paid directly into the employer’s virtual bank account, a key feature of the new Digital Apprenticeship Service (no doubt soon to be known as DAS). As such, it can only be used to pay for services in connection with Apprenticeship training and support. Moreover, the government is introducing a “Use It, Or Lose It” clause into the process so unless the allowance is used within a defined period, it will be removed and redistributed to other employers who require additional funding for their Apprenticeship programmes.So let’s consider a medium-sized company with a staff wage of £1m. They will be charged a levy of £5000 which will then be returned as a rebate into their DAS bank account. The government then hopes that since they now have money in their Apprenticeship pot, that they will want to participate in the new programme. But of course in order to do so, they will have to make further payments into their virtual “bank account” before the government starts making its own contribution on a £2 for every employer £1 basis.I suspect that for many employers who are currently involved in provider-led Apprenticeship programmes, this is all going to come as a horrible shock. Whilst I can see this model being attractive to the 85% of employers who currently don’t participate in the Apprenticeship programme but who will want to put their “allowance” to good use, the great unknown will be the reaction of those employers who currently run Apprenticeship programmes primarily because they are “free” and require no input, cost or commitment.At the moment, I can’t make up my mind whether the Apprenticeship Levy is a sneaky trick to almost force employers into the programme or a brilliant, innovative idea which will kick start a huge increase in quality Apprenticeships. However, whichever the case, I suspect that the reality of how this system will work may be very different from the current perception that “I’m OK, because it doesn’t apply to me”.To be fair to the government, if the proposed rates of funding are maintained, then they represent a significant increase on current levels and there are valuable incentives for small companies (less than 50 employees), 16-18 year old Apprentices and successful completions. The exception to this largesse is Functional Skills where the proposed funding of £471 per Aim compared with a current level of £724, is totally unsustainable. That apart, higher levels of funding should attract new providers into the arena and the increased competition will drive up quality. If at the same time, the government allows existing sub-contractors to negotiate and contract with an employer as a “Lead Provider”, then we really could be entering an exciting new Apprenticeship era.
Roger Francis is a director with Creative Learning Partners Ltd, a specialist vocational training company focusing on the delivery of Functional Skills
Source:: FE News
Noaman Islam, Director of Studies-Further Education, Regent Skills Training and Paresh Thakker, Business Development & Sales Manager
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