Sweeping reforms are needed to rescue the Government’s Apprenticeship Levy which had “laudable aims” but a “highly damaging” impact, according to manufacturers’ association EEF.
The organisation called calling for an urgent summit with the Government to discuss fundamental reforms to make the levy work and create new high value manufacturing and engineering apprenticeships.
The move followed an EEF survey of levy paying manufacturers, which showed that an overwhelming 95% want changes to the levy in some form.
The levy, launched just over a year ago, promised to help create an additional three million apprenticeship starts in England over all sectors by 2020. But latest figures show a 40% fall in starts for February 2018 compared with the same period last year.
EEF head of education and skills policy Verity Davidge said: “Everyone shares the ambition of creating high quality apprenticeships, which are essential if industry is going to access the skills it will need in the future, especially in a post-Brexit world where fewer skilled workers will come to the UK.
“But while the apprenticeship levy had laudable aims, its impact has been highly damaging for employers and apprentices, and what should have been a win-win situation has turned into a lose-lose.
She added: “We have to address the alarming drop in starts initially, and then look at positive solutions to make the levy work for employers and learners in the long term. The Government must now sit down with business and find a way to rescue the levy so that it meets the original pledges made to companies when it was introduced.”
The survey shows that 8% of companies have cancelled or delayed engineering apprenticeships for a new recruit specifically because of the levy, while 11% have done the same in connection with an existing employee.
Furthermore, the survey backs criticism that the levy was rushed in, with over half of respondents saying that apprenticeship standards have not been ready. Two-fifths say colleges and training providers are either unable or unwilling to provide the apprenticeships that manufacturers want.
To help make the levy work EEF is proposing a number of measures:
- Move the Government’s apprenticeship budget from department expenditure limit to annually managed expenditure. This would mean that the budget was based on demand and would allow more spending on apprenticeships where there is demand from employers.
- Increase the time that employers have to spend their levy to at least 48 months – the length of an engineering apprenticeship.
- Review the funding band structure by removing the upper limit of £27,000. This, says EEF, would honour one of the key pledges Government made to employers on the introduction of the levy, to cover the true cost of training and assessment.
- Expand incentive payments to employers, providers and learners for STEM apprenticeships, an area of consistently reported skills gaps. This would align with Government ambitions to meet increasing demand for technicians.
- Increase the amount of unused funds employers can transfer to over 50%, and remove restrictions on transferring to a single employer. This would persuade more employers to buy into transfers and create more apprenticeships.
- Allow employers to agree a payment schedule with their provider. This would support apprenticeships in higher cost subjects such as engineering, where EEF says there is currently a disincentive for colleges and training providers due to the high up-front cost.
- The process of signing off standards for apprenticeships must become quicker and more transparent to empower the role of employers further to drive standards for delivery.
EEF is also calling for government action to help boost productivity growth in the manufacturing sector through creation of the previously promised Industrial Strategy Council.
UK manufacturing productivity grew by 4.7% a year between 2000 and 2007, since 2008 this has flat lined at less than 1% a year. The Industrial Strategy Council, says EEF, should be set up and given the urgent task of setting clear goals that will focus on solutions to improve this trend.