The apprenticeship levy needs to be reformed

Stephen Canning

January 11, 2020

Two decades ago, then-prime minister Tony Blair called for half of young adults to go to university. Four prime ministers later, in September of last year, that target was reached for the first time, and our higher education system is more accessible than ever.

However, we are at risk of forgetting about the other half of young adults who do not go to university. Every year, thousands of teenagers up and down the country opt to forego higher education. The government still needs to provide those people with opportunities – and that’s where further education comes in.

Apprenticeships are a brilliant way of expanding the opportunities available to young people from all backgrounds in an enormous variety of fields. Apprentices learn on the job and develop skills that equip them to build long-term careers.

In 2015, then-chancellor George Osborne decided that there should be at least three million apprenticeships by 2020. He proposed to achieve this through the apprenticeship levy, which is still government policy today.

The apprenticeship levy is essentially the government’s way of nudging employers towards training and progressing staff. It aims to move education away from being the sole domain of the classroom and boost the value of practical, on-the-job experience in the labour market.

The levy works by siphoning off £3m of funds through PAYE at a rate of 0.5 per cent of the employer’s full annual pay bill. That money is then funnelled into a special apprenticeship account. Those who paid it can use it to pay for apprenticeships for up to two years. After that, it passes on to smaller businesses who did not pay the levy, allowing them to start their own schemes and take on apprentices.

Businesses are able to plug skills gaps through the levy. It also allows them to attract and retain young talent in a way that would otherwise have been considerably more difficult. For those on the receiving end, it allows for a well-paid position in skilled, long-term employment, with no mention of university.

Although it came in for more than its fair share of criticism, the levy was very well received by many. Employers like the BBC, BT and River Island went out of their way to communicate how constructive the scheme had been for them and their staff.

To some extent, the apprenticeship levy has been successful in what it set out to do. Apprenticeship numbers have been boosted in recent years. Now, though, is the time to reboot this policy and ensure that we are in the best position possible to support British industry by giving our young people the tools they need to step up to the plate after Brexit.

George Osborne’s three million target, though, remains a long way off being met. His successor as chancellor, Philip Hammond, tried to kick some more life into the policy with a handful of moderate reforms in 2018, but the effects were minimal. And some within the party are now calling for the policy to be scrapped altogether, saying that it has had its day.

It is imperative that the government is not seen to be arbitrarily disposing of schemes designed to give young people a leg-up in the labour market. While the levy is insufficient in its current state, it should be reformed, not abandoned.

Many businesses see the apprenticeship levy as a burden. They view it as an additional tax, soaked in bureaucracy. Around a quarter of the levy’s funding circles straight back to Whitehall in administration costs. This has to change. Simply put, the complexity and rigidity of the system is hindering its progress.

The other main way in which the structure of the levy should be changed is the age groups it targets. As things stand, those aged 16 to 18 are somewhat neglected, with the vast majority of the funds reserved for those who are choosing between university and an apprenticeship at the age of eighteen.

These relatively simple but fundamental changes could transform the levy and increase its success rates exponentially. That would make businesses more receptive to it, improve its efficiency, and bolster the life chances of thousands of young people.

Besides anything else, boosting support for the “forgotten 50 per cent” of young people would be a huge vote winner for the Tories in that demographic, which is the one where their performance was weakest in the general election.

A focus on apprenticeships, then, is a win-win for the government. In this post-Brexit world, and combined with a cut in corporation tax, this would be a great way for the government to show that it has a plan for Britain.


  • Stephen Canning

    Stephen Canning is a County Councillor and Cabinet member at Essex County Council. He is a former District Councillor at Braintree District Council and formerly held a leading role in the Young Conservatives.

Written by Stephen Canning

Stephen Canning is a County Councillor and Cabinet member at Essex County Council. He is a former District Councillor at Braintree District Council and formerly held a leading role in the Young Conservatives.


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