The apprenticeship levy: How to make the best of bad policy

The apprenticeship levy is badly designed and implemented even worse, but schools are stuck with it for now, says Jon Coles

Although the government is keen that the apprenticeship levy is not seen as a tax, it is very clearly a payroll tax. It drives up the costs of employment and – especially in a heavily regulated sector like education, where funding is capped and pay rates cannot float freely – is likely to reduce employment.

The money raised is nominally ring-fenced to be spent on apprenticeship training, in the assumption that the government knows better than employers how much training they should provide and that it can use tax-and-spend policies to ensure that the optimum amount and type of training is provided in the workplace.

This has been less controversial than expected, perhaps partly because we all have a traditional picture of what an apprenticeship is: a training job offered to a new entrant to the labour market who receives substantial education and training away from the workstation. Apprentices, we believe, are young school-leavers not on the university pathway, getting training in a skill they might otherwise not have. Right? Wrong, unfortunately.

This payroll tax could far more usefully be added to teachers’ pay

Driven partly by an arbitrary target for “starts”, the definition of “apprenticeship” has been stretched beyond breaking point. Firstly, a start is not necessarily (nor even usually) a new employee. An apprentice may have been employed in the same role for a number of years but be considered a start because they begin government-funded training.

Secondly, there may be little off-the-job training – far from the old model of day release or block release for the deeper training which prepares you for a whole career, lower-level apprenticeships today may be little more than training to do the job you’re doing, though government rules state that at least 20 per cent of an apprentice’s time must be spent training off the job. Finally, “apprentices” may be already highly qualified people (including graduates) undertaking training at government expense.

Partly as a result, this is not good policy. Deadweight costs are high – government money is being used to fund training that employers would have provided anyway. The remaining money from the levy is then free money for employers – they might as well spend it on only marginally useful training rather than lose it. This may lead to private returns for employers and individuals undertaking training, but social returns are weaker than they should be. The incentives are weak for employers to focus on individuals who are at risk of being excluded from the labour market.

The effect of this in education is impossible to defend. The speed of implementation has meant that apprenticeship standards are only slowly coming on stream, few providers are available to offer suitable training, and quality is very variable. This is making it difficult to spend the money available through the levy on valuable training.

As a result, money is being withdrawn from schools – where it would have been well spent on educating the next generation – to fund the training of adults in other sectors who are often already well qualified and established in work and whom employers already have strong incentives to train. In the current context, it is clear that this payroll tax could far more usefully be added to teachers’ pay.

However, while lobbying to get policy change, leaders should also look to use the money they have as best they can. The NHS realised long ago that it would have to redesign its apprenticeship offering to avoid losing public money. Schools need to wake up and do the same.

From that perspective, my advice would be to take advantage of everything that I think makes this bad policy – remember that experienced and highly qualified staff are eligible, and many things that you would not think of as an apprenticeship can qualify.

Look at how much of your existing training plan can map to apprenticeship standards and be funded from the levy. With any money you have left, identify the most useful training that you could get funded and think about doing that as well, even if normally it would be in the nice-to-have bucket.

Jon Coles is Chief Executive of United Learning

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