At a time when unemployment is rising and training opportunities are needed more than ever, the apprenticeship system is failing people, London Councils warns.
The government introduced the Apprenticeship Levy to give employers a greater role in addressing skills shortages and to create more apprenticeships. However, the current apprenticeship system is flawed and many employers – including London’s boroughs – cannot make the most of the funds available to them.
London Councils surveyed boroughs about their use of the apprenticeship levy and found that between April 2018 and March 2020, boroughs have spent just 26% of their levy, meaning £38 million has been returned to the government. This is due to various barriers within the current levy system which are preventing employers from making use of the funds.
One of the major barriers to employers making full use of the apprenticeship levy has been the lack of flexibility in how the levy can be spent. At present the levy can be used to fund training costs for apprentices, but the employer must bear the costs of the apprentice’s wages, as well as having to dedicate resources to administration, recruitment and management.
Whilst the recently announced payments of £1,500 or £2,000 to employers taking on apprentices are welcome, the levy should be reformed further to incentivise employers to take on more apprentices. Given the rise in unemployment, particularly amongst young people, it is essential that there is more flexibility in the levy to allow for more of this funding to be put to use.
In last week’s Government Spending Review, some reforms were announced to the apprenticeship levy, however, further changes are still needed to maximise its use.
London Councils is calling on central government to introduce greater flexibilities to the apprenticeship levy. These flexibilities include:
- Allowing for pooling and joint purchasing of transferred apprenticeships
- Allowing some levy funding to be used for pre-employment training to get people ready for an apprenticeship
- Allowing up to 10% of levy funding to cover administration costs
- Working with employers and providers to explore ways to increase the number of more flexible or part time apprenticeships.
Cllr Clare Coghill, London Councils’ Executive Member for Skills and Employment, said:
“Apprenticeships have a hugely important role to play, not only in helping people enter the capital’s workforce, but in laying solid career foundations and expanding the horizons of Londoners of all ages.
“While the apprenticeship levy is a welcome financial boost, the system used to obtain these funds is flawed. The government needs to give employers more flexibility to allow our citizens to get the skills they need to succeed. They provide vital learning for talented Londoners to succeed as an alternative to academic programmes.
“The Covid-19 pandemic has already had a severe impact on apprenticeships with a huge drop in apprenticeship starts this financial year. This is a time when apprenticeships should be used to alleviate the risk of long-term unemployment.
“Because of these unnecessary barriers to the levy, Londoners are missing out on vital opportunities to gain skills and experience – skills that are essential to London’s recovery.”
