The amount that smaller businesses will need to contribute through co-investment of Apprenticeship funding will half from 10 per cent to five per cent, the Chancellor has announced. It’s important to note, however, that this has no effect on larger businesses who pay a levy amount through their payroll returns each month.
In the 2018 Budget, Philip Hammond outlined that the Apprenticeship Levy is a system that is paid for by employers and that must work for employers.
“In addition to the flexibilities I announced earlier this month, I can announce that for smaller firms taking on apprentices we will half the amount they have to contribute from 10 per cent to five per cent. In total a £695 million package to support apprenticeships,” he said.
Despite this move, Ian Brinkley, acting chief economist for the CIPD, the professional body for HR and people development, remained sceptical that the additional £240 million of funding to support this change will have a significant impact.
“It’s promising to see that the government has halved the apprenticeship levy contribution for smaller businesses but this is unlikely to greatly boost the number of apprenticeships offered by small firms, many of which lack the capacity to take on apprentices,” he said.
“The levy is still far too rigid to work in practice for many employers. We need a more flexible training levy that can help organisations fulfil a number of training and development needs rather than shoe-horning funds and efforts into the apprenticeships model alone.”
Stephen Martin, director general of the Institute of Directors, added that the reduced co-investment rate for small firms, coupled with the Chancellor’s recent announcement on levy transfers should help to increase the number of apprenticeships. However, he warned that the race to build the UK skills framework was “far from won”.
“Looking ahead, the aim should still be for the levy to do more heavy lifting,” said Martin. “A wider training levy, one that acknowledges a much wider need for flexible provision on top of apprenticeships, should remain the goal for ministers as they plan beyond this parliament.”
