Government departments will be able to transfer more of their apprenticeship levy funding to their service providers and suppliers from next year, the chancellor, Philip Hammond, has announced.
As of April 2019, public and private sector employers will be able to put up to a quarter of their levy funding towards apprenticeships at businesses in their supply chains, Hammond said at the Conservative Party conference in Birmingham yesterday. At the moment, employers can only transfer up to 10% of their annual funds to other organisations.
The rule change comes as part of a package of measures to boost the uptake of apprenticeships, including £90m in government funding to support the levy.
The change was in response to employers' “concerns about how the apprenticeship levy is working”, Hammond said. It would give employers more flexibility in how they spend their funds, he said.
The number of people starting apprenticeships in England has dropped significantly since the levy was introduced. In the 2017-18 academic year 341,700 people became apprentices, according to Department for Education figures, down from 472,500 the previous year and 485,000 in 2015-16.
The government wants public bodies to boost this number by having new apprentices make up 2.3% of their workforce each year by March 2021. Yesterday, CSW reported that progress across the civil service towards the target is patchy. While some departments are on track to meet the goal – and the Department for Education has already exceeded it – others are lagging far behind.
Departments have also so far been slow to spend the funds they have paid into the apprenticeship levy. More than 70% of funds they have accrued since it was introduced have yet to be spent, TES reported last week.
“We know that we may need to do more to ensure that the levy supports the development of the skilled workforce our economy needs,” Hammond said.
He pledged to consult with businesses on the long-term operation of the levy. The government will set out a consultation process in the coming weeks to seek views how it should operate after 2020.
Hammond also announced a £5m boost for the Institute of Apprenticeships to develop standards that will broaden the range of apprenticeship courses on offer. A new standards framework is due to come into force by the start of the 2020-21 academic year.
The levy was first introduced in April 2017 as part of a drive to kick-start three million new apprenticeships by the end of this parliament. The Department for Education, which oversees the levy and apprenticeship targets, announced plans to allow employers to transfer a portion of their funding to another organisation in its apprenticeship funding policy guide in October 2016. The policy also appeared in the Conservatives’ general election manifesto.
Funds generated from the levy are ringfenced for two years, after which they are transferred into government funds and lost to the businesses that accrued them.