Labour pledges to unlock growth with Growth and Skills levy after research finds Treasury clawing back £500m for funding new apprenticeships

Monday, 25 September 2023 00:01

Labour today pledged to unlock economic growth by “giving businesses back control” over skilling up their workforces after new research from the party found that more than half a billion pounds of money earmarked for new apprenticeships has gone unspent in the previous two years. The Apprenticeships Levy, introduced by the Conservatives in 2017 for all employers paying a wage bill of more than £3 million per year, is supposed to allow all businesses in England to reinvest...Request free trial

The Apprenticeships Levy, introduced by the Conservatives in 2017 for all employers paying a wage bill of more than £3 million per year, is supposed to allow all businesses in England to reinvest back into their workforce in the form of apprenticeship training.

Labour analysis, however, has found that since its introduction the amount of money from the levy used by to fund apprenticeships have fallen by £500,302,000 since 2021.

Funds from the levy can only be spent on apprenticeship training and assessment with a training provider, with levy money unspent by businesses then clawed back by the Treasury.

Labour says this is firm evidence that the current Apprenticeships Levy was failing to give businesses the flexibility to invest in their workforces, resulting in fewer apprenticeship starts. The party’s analysis found that there were 275,630 apprenticeship starts last year, down from 288,800 2021/22, a fall of 4.6%.

Last year Labour announced its plan to turn the Conservatives’ failed Apprenticeships Levy into a ‘Growth and Skills Levy’.

Under this system companies will have the freedom to use up to 50% of their total levy contributions on non-apprenticeship training, with at least 50% reserved for apprenticeships, so it can be used on the greater range of training courses that businesses need, so that adults can gain new skills and businesses can grow.

Bridget Phillipson MP, Labour’s Shadow Education Secretary, said:

“This is firm evidence that despite the Conservatives’ rhetoric on skills, their Apprenticeships Levy isn’t giving businesses up and down the flexibility they’re crying out for.

“We can only make, do and sell more in Britain and get our economy growing if we invest in building the skills of our young people.

“That’s why Labour has a plan to give businesses back control over training their workforces through our Growth and Skills Levy, with the flexibility they need to train young people in the skills our companies need to flourish and deliver the growth we need.”

Ends

Notes

The table below shows the amount of apprenticeship levy paid in by employers in each year since 2017/18 and the amount allocated to the ring-fenced apprenticeship fund or spent on apprenticeships in England alongside estimated spend on apprenticeships in Scotland, Wales and Northern Ireland as per allocations under the Barnett Formula.

Year	Levy revenue	Scotland (9.67%)	Wales (5.6%)	Northern Ireland (3.35%)	Total	Barnett only total	Revenue minus barnett	Ring-fenced budget	Difference	%
17/18	£2,270,000,000	£219,509,000	£127,120,000	£76,045,000	£2,692,674,000	£422,674,000	£1,847,326,000	£2,010,000,000	-£162,674,000	-9%
18/19	£2,710,000,000	£262,057,000	£151,760,000	£90,785,000	£3,214,602,000	£504,602,000	£2,205,398,000	£2,230,000,000	-£24,602,000	-1%
19/20	£2,800,000,000	£270,760,000	£156,800,000	£93,800,000	£3,321,360,000	£521,360,000	£2,278,640,000	£2,470,000,000	-£191,360,000	-8%
20/21	£2,910,000,000	£281,397,000	£162,960,000	£97,485,000	£3,451,842,000	£541,842,000	£2,368,158,000	£2,470,000,000	-£101,842,000	-4%
21/22	£3,210,000,000	£310,407,000	£179,760,000	£107,535,000	£3,807,702,000	£597,702,000	£2,612,298,000	£2,470,000,000	£142,298,000	5%
22/23	£3,580,000,000	£346,186,000	£200,480,000	£119,930,000	£4,246,596,000	£666,596,000	£2,913,404,000	£2,555,400,000	£358,004,000	12%

Written Answer from Robert Halfon MP to Toby Perkins MP, dated 17 July 2023

To ask the Secretary of State for Education, how much of the apprenticeship budget has been spent by (a) apprenticeship levy payers and (b) non-levy payers in each year since 2017.

The UK government, via His Majesty’s Revenue and Customs, collects an apprenticeship levy of 0.5% on total payroll from businesses across the UK with an annual payroll expenditure of more than £3 million. The amount raised by the apprenticeship levy is available in this publication: https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk.

From this, His Majesty’s Treasury sets an English apprenticeships budget for the department, and the devolved administrations receive a share of the funding calculated using the Barnett formula.

The apprenticeships budget in England is used to fund the training and assessment of new apprenticeship starts for all employers of all sizes, both those who pay the levy and those who do not.

The budget is also used to cover the ongoing costs of apprentices already in training and any additional payments made to employers, providers and apprentices. Apprenticeships are employer led, and the department does not allocate a specific percentage of the budget to either levy paying or non-levy paying employers.

The table below shows the total apprenticeship budget and spend in England in the last five financial years, with spend broken down by levy payers and non-levy payers. It also includes the budget forthe 2022/23 and 2023/24 financial years. In addition, the table reflects the spend on apprenticeships that started prior to the introduction of the levy, and the department’s spend on the operation of the wider apprenticeship system, such as the cost of running digital services, marketing and communications campaigns.

Financial Year	2017/18	2018/19	2019/20	2020/21	2021/22	2022/23	2023/24
Apprenticeship budget £m	2,010	2,231	2,469	2,467	2,466	2,554	2,585
Levy spend	268	864	1,156	1,251	1,592	-	-
Non-levy spend	189	528	650	557	817	-	-
Spend on apprenticeships started prior to the introduction of the levy	1,086	305	65	22	7	-	-
Wider apprenticeship system spend	43	41	48	33	39	-	-
Total spend	1,586	1,738	1,919	1,863	2,455	-	-

Source: https://questions-statements.parliament.uk/written-questions/detail/2023-07-10/193101/

Labour’s Growth and Skills Levy

Labour will give businesses the flexibility they’re asking for to train their workforce and deliver growth. We will start by turning the Tories’ failed Apprenticeships Levy into a ‘Growth and Skills Levy’ so it can be used on the greater range of training courses that businesses tell us they need, so adults can gain new skills and businesses can grow.

Under this system companies will have the freedom to use up to 50% of their total levy contributions on non-apprenticeship training, with at least 50% reserved for apprenticeships. Small and medium size employers who do not currently pay the apprenticeships levy will continue to receive 95% co-payments.

Skills England will hold a list of approved qualifications on which businesses can flexibly spend their levy money, developed in collaboration with devolved authorities, businesses, unions and wider experts. This will include:

Modular courses in priority areas, which lie at the core of our industrial strategy, including digital and green skills, social care and childcare, that would boost training opportunities with a view to supporting national ambitions such as the transition to net zero.
Functional skills and pre-apprenticeships training, helping tackle key skills gaps especially around basic digital skills that hold back individuals and organisations.

As the development of technology and digital skills changes the way we work, individuals will need more regular, flexible access to training. This flexible approach, encouraging modular learning alongside apprenticeships, could help enable non-apprentices to get access to and training in using the latest technologies.

Labour’s changes will create opportunities in this changing landscape and ensure that individuals who are starting out alongside those who are already well skilled can get access to training courses to help our economy grow.