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Revealed: £300m of public sector apprenticeship money has been returned to the Treasury

Unspent Apprenticeship Levy funds mean employers like the NHS and police have lost out on a potential 30,000 new workers.

By Harry Clarke-Ezzidio

More than £300m of funding for apprenticeships available to the NHS, local government, police force and other public sector employers has been left unspent since 2018, a Freedom of Information (FoI) request exclusively shared with New Statesman Spotlight has revealed. 

Despite the public sector generating more than £1.2bn through the Apprenticeship Levy, much of the money generated has been returned to the Treasury, the research from non-profit organisation Workwhile has shown.

The Apprenticeship Levy is a tax introduced by the government in 2017, requiring all employers with an annual payroll of £3m or more to contribute 0.5 per cent of their total pay bill to finance apprenticeships. Any employers subject to the levy can then access the funds they contribute, plus a government top-up. The money cannot be used on day-to-day operations; organisations have 24 months to use the funds on apprenticeships, with any unused funds taken back by the government.

This £300m of unused funding could have helped the public sector create nearly 30,000 more apprentices, according to Workwhile. Public sector organisations paying the levy are losing £1 of every £4 it raised, according to estimates.

In 2022-23, 1.7 per cent of the public sector workforce started apprenticeships. That figure is below the 2.3 per cent target the government set for public sector bodies between 2017-22. The number of apprenticeship starts across public and private sector employers totalled 337,140 in 2022-23, down 3.5 per cent on the previous year.

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Many employers paying the levy, across both the private and public sector, have complained of the restrictive requirements they must meet in order to access the funding. Earlier this year, trade bodies across the retail, hospitality, technology and recruitment sectors sent a joint letter to the government criticising the way in which the Apprenticeship Levy is set up, claiming that it is “holding back investment” and hindering economic growth.

Under the current “use it or lose it” system, more than £3.5bn of unused funds have been returned to the Treasury from all eligible employers.

Ahead of the general election later this year, Labour has promised to reform the current set up and rebrand it as a “growth and skills levy”, which would allow the money generated to be used more flexibly “on the greater range of training courses that businesses tell us they need”. This means employers would be able to use up to 50 per cent of their contributions to the levy on non-apprenticeship training. To coincide with National Apprenticeship Week (5-11 February), the shadow skills minister Seema Malhotra told Spotlight in an exclusive interview that the Apprenticeship Levy has “failed” both employers and young people, with 200,000 fewer people starting apprenticeships since 2017.

But the Conservatives have pushed back on reform. The skills minister Robert Halfon also recently wrote for Spotlight that the Apprenticeship Levy is “an important part” of the government’s current provisions for further adult education. “I do not agree with the calls to spend it on other skills,” he wrote.

Anna Ambrose, the co-founder and director of Workwhile, said that the Apprenticeship Levy, as it currently functions, operates in an “over-centralised, bureaucratic system”. Greater flexibility on how levy funds can be spent could provide relief to the “recruitment and retention crisis” many public sector employers face. “Local councils are struggling to retain top talent as their budgets are being slashed, police forces are now backfilling the officers made redundant a decade ago, and NHS Trust provision could be affected by new immigration rules,” Ambrose added.  

She continued: “With £1 in every £4 unspent, giving the public sector greater control over creating apprenticeships is an essential part of the solution to crises facing the public sector and in doing so can ensure that communities have better access to more resilient services.”

[See also: Keep the Apprenticeship Levy for apprenticeships]

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