Retailers, hospitality businesses, the technology industry and recruiters have called for urgent reform of the apprenticeship levy, calling it a “£3.5 billion mistake”.
In a letter to ministers, the British Retail Consortium (BRC), UKHospitality, techUK and the Recruitment & Employment Confederation (REC) said the government was “halting investment” in critical training that could boost productivity, fuel economic growth and raise wages.
Helen Dickinson, chief executive of the British Retail Consortium, which represents most of the big retailers, said: “The Government must urgently fix this £3.5bn mistake or risk leaving the UK with anemic productivity behind from its international counterparts.
“Retailers want to invest more in training a higher skilled, more productive and better paid workforce. They want to create more opportunities for people up and down the country. They want to contribute more to development. But the broken apprenticeship system is a ball and chain around their efforts.”
Under the current system, companies contribute hundreds of millions of pounds into a pot, which can only be spent on very specific types of training. For example, businesses cannot use the money to fund courses that last less than a year. They say this has left them unable to spend £3.5bn of funds they have set aside.
Introduced in April 2017, the apprenticeship levy sees large organizations set aside 0.5% of their payroll for apprenticeships.
But many employers say they cannot use the funds – which are taken from the Treasury if they are not used within two years. A report by the Resolution Foundation warned of a boom in the number of expensive, high-level apprenticeships for people already in work that could “crowd out” young people.
Trade bodies want the government to expand the apprenticeship levy into a broader skills levy that can be spent on a wider range of accredited courses, including shorter, more targeted courses.
Kate Nicholls, chief executive of UKHospitality, said an overhaul of the system would help get those who had become economically inactive, including over-50s, back into work to fill skills gaps.
“Hospitality businesses are keen to invest more in upskilling, training and developing their workforce, particularly when vacancies are so high. Apprenticeship levy reform is urgently needed to give businesses more flexibility, particularly in how the funding is used.”
Julian David, chief executive of techUK, said: “There is a real need to continue to support young people and entrants into the workforce using apprenticeships, but also to support those in the existing workforce to progress and gain the skills they need. they need for the future of work. Key to this will be reforming the apprenticeship levy to make it flexible and fit for purpose.”
Education Secretary Robert Halfon said the government had “transformed the country’s skills supply” since 2010.
“To date we have supported more than 5 million apprenticeship starts across more than 650 high-quality standards, ensuring your career goals can be achieved through an apprenticeship, and we will further boost funding to £2.7bn by 2024-25. We are launching and expanding T-levels, Institutes of Technology and skills boot camps – all with £3.8bn of support,” Halfon said.
“This Conservative government is on the side of business – that’s why all our skills programs are designed with employers to meet the needs of business and industry.”