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Business leaders call for 'radical rethink' over apprenticeship levy

Published 28/04/2016

Director-general of the CBI Carolyn Fairbairn warned against rushing out a
Director-general of the CBI Carolyn Fairbairn warned against rushing out a "poorly thought-through" plan

The Government is being urged to "radically rethink" its controversial apprenticeship levy amid growing concerns in firms about its viability.

The director-general of the CBI will warn ministers about rushing out a "poorly thought-through" plan.

The levy comes into effect in April 2017 at a rate of 0.5% of an employer's pay bill and will apply to firms with salary costs above £3 million, raising an estimated £3 billion a year by 2019/20 to fund three million new apprenticeships.

Carolyn Fairbairn will tell a business meeting that companies are committed to raising skills levels and support the Government's drive to increase the number of apprenticeships.

She will say that the Government has the opportunity to create a "once-in-a-generation revolution" in skills, but it is only likely to deliver another "once-in-an-administration shake-up".

She will say: "Firms across the UK are emphatic that tackling skills shortages is the only way to succeed and create prosperity.

"They want to create quality apprenticeships and they're ready to work with the Government to do this.

"But as it stands that's not what the levy is doing.

"We need to change that, which is why we are calling for a radical rethink.

"The Government has set out a target to create three million apprenticeships by 2020 and it deserves credit for its level of ambition.

"Business shares this goal to raise numbers, yet despite the Government's good intentions the target could have unintended consequences.

"What's being counted is three million started apprenticeships, not three million qualified apprentices. There's a big difference.

"Indeed, measuring success by the number of starts tells us little about whether the system is really delivering and could even drive the wrong outcomes."

Ms Fairbairn will say that the pressure of the Government's deadline means that firms lack crucial information about the levy and a realistic lead-in time to prepare for it, adding: " Today, firms are having to treat the levy as a tax, because the headline cost is all they're certain of.

"Businesses of all sectors and sizes are still in the dark.

"Government needs to work with business to resolve these issues before the levy launches."

Skills Minister Nick Boles said: "Businesses across the country can only grow and compete on the world stage if they have the right people. The apprenticeship levy will deliver the highly skilled workers our businesses are crying out for.

"Our reforms are about putting employers in the driving seat. We are working closely with businesses to determine how the levy will work for them and are giving employers the freedom to purchase the apprenticeship training that best meets their needs.

"We will also be working with businesses in the coming months on the development of the independent, employer-led Institute for Apprenticeships that will ensure employers are at the heart of driving up the quality of apprenticeship training."

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