Large employers fail to spend apprenticeship money

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Apprentice stonemasonImage source, Getty Images

Employers are failing to use hundreds of millions of pounds that was intended for training apprentices, according to figures obtained by the BBC.

At least 55 of the largest employers in England have each released more than £1m back to the government which was meant to be spent on apprentices.

In total around 5,000 English employers relinquished more than £400m of funding raised by the apprenticeship levy in the first eight-month period when sums could expire.

That's about a quarter of the money made available for apprentice training and covers about one in three of those employers who then had to pay the levy.

This suggests that some large companies seem happier to treat the levy simply like an extra tax and say goodbye to the money involved, rather than take advantage of it to improve the skills of younger workers.

'Urgent need for reform'

Some employers also complain about what they regard as inflexible and impractical rules on how the funded apprenticeships must be organised, which they say do not suit the nature of their workforce and make it harder to implement the scheme. The government says it never envisaged that all the money raised would be used.

Matthew Fell, the CBI's chief UK policy director, said: "It's clear that the current system is in need of urgent reform. The government must use the upcoming budget to announce a comprehensive review into the levy."

Larger employers have to pay the levy since it was introduced in April 2017 to boost finance for apprenticeships, which combine on-the-job training with a study programme. It now generates around £2.5bn annually.

Any employer who spends more than £3m annually on wages has to put in 0.5% of its payroll above the £3m threshold. This money is then topped up with an extra 10% from government funds and kept in a digital account for that employer to deploy on its own training arrangements for apprentices.

The scheme operates on a "use it or lose it" basis. Funds that are not allocated by the employer within 24 months expire and get passed to the government.

'More money available'

Using the freedom of information law the BBC has obtained figures from the Education and Skills Funding Agency which reveal the unspent sums transferred in England since the first such payments.

From May to December 2019, 4,991 employer accounts gave up a total of £401m which they could have used to train apprentices.

The sums returned unspent have been increasing on a monthly basis, reaching £82m in December 2019, the latest figure available.

As well as 55 employers who relinquished more than £1m in 2019, another 746 each gave up more than £100,000 of apprenticeship funds. The identity of the actual employers involved cannot be disclosed under HMRC rules.

The Department for Education says expired funds will be used to support other apprenticeship training by smaller employers.

A spokesperson said: "The levy means more money is available than ever before for training, and this year we have increased investment. We recognise that not all levy-paying employers want to use all of the funds available to them. Levy payers also have the option to transfer up to 25% of their levy funds to other employers."

"We have already said we will look at how we can improve the working of the levy to ensure more people and employers can benefit from it," they added.

For Labour, shadow education secretary Angela Rayner said it was "absurd" the funds had been left to expire "when so many young people are unable to access a high-quality apprenticeship".

"Vast sums of money going unspent are a sign of a system in need of fundamental reform to make it work for learners and small businesses," she added.

Ms Rayner called on the new Chancellor, Rishi Sunak, to "fix this ineffective system, to give people the support they need", in his March Budget.

The scheme is administered differently in Scotland, Wales and Northern Ireland.

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