Autumn Statement: The Apprenticeship Levy

November 26, 2015

This is the first fully Conservative Autumn Statement since the Conservatives came into power and it has been full of surprises from the Chancellor, who has made unexpected u-turns on austerity whilst increasing overseas aid and introducing an “Apprenticeship levy”.

Obviously as an Apprenticeship training provider, this news is of great importance to ourselves and our employer customers, so what is the Apprenticeship levy supposed to do?

The Budget suggests that the Government is pinning its hopes on all UK industries raising more than £3bn a year which will fund its commitment to deliver three million apprenticeships over the next 5 years.

A spokesman for the Department for Business, Innovation and Skills said the levy would raise money to fund increases in Apprenticeship numbers and quality, and will be entirely funded by employers rather than the government, establishing the Apprenticeship training that the economy needs to grow and prosper.

It adds that the Apprenticeship levy will support all post-16 Apprenticeships in England, with funding directly controlled by employers via the digital Apprenticeships voucher. The Government Response Paper adds that ensuring the administrative burden on employers is kept to a minimum is a priority.

The question for most of our employers will be “how will the new funds be collected and who will pay it?”

The new levy has been set at 0.5% of an employer’s wage bill and will apply to firms with a pay bill of more than £3 million a year, which the government says will only actually apply to 2% of employers. The levy will be collected monthly via PAYE and will be offset by a £15,000 tax-free allowance.

To answer criticisms from Ofsted that the recent trend for Apprenticeships is quantity over quality, the Conservatives will establish a new employer-led body to set Apprenticeship standards. The body will be independent of the party and will also advise on the level of levy funding each apprenticeship should receive. There will be formal engagement with business on the implementation of the levy at the spending review in the autumn.

In the Autumn Statement, Mr Osborne also revealed that 18- to 21-year-olds who do not “earn or learn” will lose State support.

To ensure young people have the “skills they need to move into sustainable employment” the Treasury states that within six months of submitting a claim, they will be obliged to gain work-based skills, go on a mandatory work placement or apply for an Apprenticeship or traineeship.

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