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19 February 2020

English firms fail to spend £400m of apprenticeship funding

Employers are required to spend this funds raised by the apprenticeship levy on upskilling workers within two years.

By Samir Jeraj

Around 5,000 employers in England have failed to spend £400m levied from them for upskilling workers through apprenticeships. According to a BBC investigation, around £1.6bn was raised from the levy in the first eight months of 2019/20. A quarter of that was left unspent by employers. Fifty-five of the UK’s largest employers handed over more than £1m each in unspent funds, and a further 746 handed back over £100,000 each, the BBC found.

The apprenticeship levy was introduced in 2017 and applies to employers with a wage bill of over £3m a year, the largest two per cent of employers. These employers have to set aside half a per cent of the wage bill over £3m. The government then adds a grant of £15,000. Employers are required to spend this on apprenticeships within two years or they have to return it to the government.

The government has set a target of 3 million apprenticeship starts in England by 2020. The levy was launched to help achieve that.

Last year, a National Audit Office (NAO) said that employers have only made “limited use” of the apprenticeship levy funds and that apprenticeship starts actually fell after its introduction. At the same time, the NAO noted that if employers genuinely took up the provision of apprenticeships to the level wanted by government the funds would be insufficient to meet demand. Earlier this year, a report by the EDSK think tank found widespread abuse of levy funds by employers. This included examples of CEOs being sent on MBA courses rather than promoting access to skilled work for younger people.

The Confederation of British Industry (CBI) has called for the levy to be reformed. Labour’s Shadow Education Secretary Angela Rayner has described it as “absurd”. Both have called on the government to fix the system as part of the upcoming budget. Unions have also criticised the administration of the levy, with Unite alleging it has seen examples of the levy being taken directly out of wages – something forbidden by the rules around the levy.

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Responding to the figures, the Department for Education said the £400m would be used to support apprenticeship training in smaller employers.