Mark McFall, Managing Director at Change Recruitment Group
It is just over a year since the UK government introduced the apprenticeship levy, which requires employers with an annual wage bill of more than £3 million to pay 0.5% towards funding apprenticeships.
The aim is to raise £3 billion to start three million new apprentices by 2020. In theory, this is a good initiative, with a positive goal. All SMEs would agree that support for training and people development is critical to the success of their business.
However, it remains to be seen whether the levy is working in practice and if it is helping businesses in the way it needs to.
The levy has received its fair share of controversy and criticism, most of which focuses on bureaucracy, as well as disparities across the UK.
In England, levy-paying employers have access to an online digital account, where they can reclaim what they’ve contributed in vouchers to fund apprentice training. This is a transparent set-up that offers employers a degree of control and flexibility, whilst ensuring that the funds are dedicated to their intended purpose. However, research revealed that only eight per cent of levy funds had been spent in the first 10 months, with funds sitting unused in digital accounts.
In Scotland, employers don’t have the same level of control over their contributions. The Scottish Government receives a proportionate share of the overall fund through the block grant from the UK Treasury. For the first year, the total fund amounted to £221 million, and an additional £9 million has been allocated for 2018/19, taking the annual total to £230 million.
Without details from Westminster on Scottish contributing employers, the Scottish Government has been unable to set-up business accounts in the same way as England. Instead, the Scottish Government has allocated the fund to deliver a range of interventions that support skills, training and employment.
There has been criticism over this funding framework in Scotland. Earlier this year, the Scottish Retail Consortium (SRC) said there had been no increase in retail apprentices, despite retailers contributing between £12-15 million. The SRC questioned the value of the fund, describing it as a “raw deal”.
As an employer eligible to pay the apprenticeship levy, we support some of the concerns raised by the SRC. Like other SMEs – and some large organisations too, I’m sure – in markets where margins are ever tighter, the contribution towards the levy feels like a significant amount of money. We would all agree that the economy will benefit greatly if the levy helps boost the talent market in Scotland. The question is, is it helping?
Currently, there is a funding cap of £10,000 available to each employer, meaning Scottish employers are not gaining equal return. For our business, this isn’t enough to fund the recruitment of a new apprentice and it is likely we will spend it on development training for existing staff. However, the funding framework requires us to use specific providers, and this raises questions around suitability of training to match our knowledge and skills gaps.
Under the current arrangements, reflecting on our own experience and that of other sectors, there are questions to be answered around the impact of the levy to do what it was created for – to start new apprentices. We are keen to see Scotland-wide reporting on how the funding has been allocated in its first year and the business impact and benefit.
We have skills gaps across a range of sectors in Scotland. These are the areas where employers need the most support. Apprenticeship funding is a vital part of the skills system to help plug those gaps. However, if support can’t be tailored and matched to business needs then individuals, employers and the economy are set to suffer.