The word from Wiser Academy, as they look at the potential consequences of changes to the Apprenticeship Levy;
Wiser Academy, the award-winning provider of insurance training and development, is warning that recently announced changes to the Apprenticeship Levy risk creating a serious “apprenticeship gap” unless government urgently rethinks how unspent funds are treated.
Under new rules announced in the Budget, unspent Levy funds in an employer’s account will now expire after 12 months instead of 24, while the government contribution for Levy-paying employers who exhaust their pot will fall from 95% to 75%, meaning employers’ investment jumps from 5% to 25%.
Crescens George, Chief Executive of Wiser Academy, believes the combination of shorter expiry and higher co-investment could unintentionally shrink, rather than grow, apprenticeship opportunities in the insurance sector.
“The intention to recycle unspent levy more quickly is understandable, but the way this has been designed risks tying employers’ hands while asking them to swim,” said George.
“If nothing changes, we’re heading for a major crunch in 12 to 18 months’ time, where many firms find they’ve spent their old levy but simply cannot keep up with the pace at which new contributions are expiring.”
George warns that the mechanics of how funds are drawn down could create a “double loss” effect for diligent employers who try to do the right thing and ramp up apprenticeship numbers now.
He explains: “Imagine an employer with £100,000 of unspent Levy and, say, £2,000 going in every month. If they start new apprenticeships tomorrow, the system will use the old £100,000 first. By this time next year, they may feel relieved they’ve finally spent the historic pot, but the newer money that’s been going in each month will also be hitting its 12-month expiry point and simply disappearing.
“In real terms there will be far less apprenticeship funding in the system, even in businesses that have made a big effort to spend their Levy.”
Wiser Academy is calling on the government to adjust the way payments are drawn from Levy accounts so that the oldest funds at risk of expiry are used first in a more balanced way, rather than allowing newer contributions to silently time out unused.
Higher co-investment for large employers
The new regime also significantly increases the cost of additional apprenticeships for Levy-paying employers once their pot has been exhausted.
Previously, when a Levy payer had fully used its Levy, the government met 95% of the cost of further apprenticeships, with the employer contributing 5%. Under the new rules, the employer contribution rises to 25%, with government funding the remaining 75%.
“For big insurance businesses, this is a material shift,” George commented. “Once their Levy pot runs dry, every extra apprentice will cost five times more than before in cash terms. Without careful planning, that will inevitably feed through into fewer opportunities, not more.”
With insurance firms currently setting learning and development budgets for the coming year, Wiser Academy is urging HR, L&D and finance leaders to resist the temptation simply to push as many people as possible into apprenticeships to “use up” the Levy.
Instead, George is calling for a more strategic approach: “Because of this catch-22, employers can’t just chase volume. If you rush to put everyone on a programme and half never complete, you’ve burned through your Levy without building the skills your business actually needs.
“The priority should be those learners who are keen, who sit within a clear succession or development plan, and who will genuinely benefit. Spend the Levy first on people who will complete and progress, then work out how best to deploy the new 12-month money.”
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