AND FAILURES’ OF AL
History tells us the government’s apprenticeship levy will never deliver, according to Ian Anfield, managing
director at Hudson Contract.
The Apprenticeship Levy (AL) was
introduced in April 2017 for all UK
employers whose PAYE wage bill tops
£3m/year. For firms in that bracket,
HMRC add 0.5% to PAYE to raise funds to pay
for new apprenticeships. It raised £1.39bn in the
first 12 months, but apprentice numbers have
plummeted. For construction firms, the AL is a
double whammy as they already pay 0.35% of
PAYE and 1.25% of net CIS to the Construction
Industry Training Board’s (CITB) levy.
The government said that control of
apprenticeship funding would be given to
employers through the Digital Apprenticeship
Service. The idea being that each employer could
use funds to pay apprenticeship training fees, all
At the last general election, the Conservatives
pledged to add an additional three million
apprenticeship starts in England by 2020, so this
matter has become deeply political.
It was said that, ‘Employers who are committed
to training will be able to get back more than
they put in by training sufficient numbers of
apprentices’. Clearly this is not the case and given
the design, could never have been so.
There are two big falsehoods surrounding
the AL. Firstly, employers will never get back a
penny paid out under
the Apprenticeship Levy,
that’s just not how it
works. And secondly,
employers are not at the
centre of things – the levy
was imposed, where and
when digital vouchers
can be spent is imposed,
and when employers and
industry disagree with the government about
the content or level of an apprenticeship, the
government’s view prevails every time.
The result is that employers are already
confused and disengaged. Most just pay the
new tax and are used to the idea that they won’t
get anything back. The latest statistics from the
Department for Education show that the problems
have sent apprenticeship starts into freefall.
BUILDING PRODUCTS | NOVEMBER 8
In the 12 months to June 2018, a total of
341,700 new apprenticeships were reported
which, compared to 472,500 the previous year, is
a staggering reduction of 28%.
Whilst the government raked in £1.39bn of
levy in the first 12 months, employers have only
managed to spend a theoretical £108m through
digital vouchers. If the money is not spent within
24 months, it disappears into the Treasury’s
In response to criticism, Chancellor Philip
Hammond pledged greater flexibility for firms
to decide how the levy is spent. From next April,
firms will be allowed to transfer up to 25% of
their levy payments to their supply chain.
Waste of time
That might sound like a good thing, but it’s a
complete waste of time which does nothing to
solve AL’s problems. The money still does not
return to the employers or their suppliers, so
suppliers won’t want it passed to them as there is
The reality is that AL is just a tax with no benefit
to training, it shifts cost from government to
business, which some may say isn’t a bad thing,
but it won’t deliver three million apprentices.
It’s no surprise that AL is failing, all major
employer groups said
the motivation was
good but the AL system
wouldn’t work. The truly
disappointing thing is that
we have been through all
of this before. In 1962 the
government published a
white paper, ‘Industrial
Proposals’, which looked at training and skills
across all industries.
The problems with training highlighted back
then were the same as they are today. The result
of the white paper was just as big as AL - The
Industrial Training Act 1964.
Under the act, 30 or so Industrial Training
Boards (ITBs) were established across industries
such as construction; food, drink and tobacco;
footwear, leather and skin wear; engineering; and
iron and steel. Many others were considered but
escaped, including insurance, fishing and forestry.
Each ITB took a levy and paid out grants for
training. None solved the problem and after much
tweaking, most were scrapped in the 1980s.
Construction survived the cull, but most say
it’s been ineffective and a waste of money. The
fact that the same problems identified 50 years
ago remain today, and are as acute if not worse in
construction, is a clear indication that the CITB
levy hasn’t worked.
The government’s only hope for AL is
that would-be graduates take up higher level
apprenticeships to avoid student loans and tuition
fee debt. It won’t help the construction skills
shortage, but if three million university students
are eventually rebranded as apprentices, the
government will claim a huge success.
It’s no surprise that
AL is failing