IPPR says apprenticeship levy will deepen north-south divide – with areas like Heathrow benefitting
Date added: 28 March, 2017
One of Heathrow’s most often repeated claims as benefits for a 3rd runway is taking on 5,000 more apprentices, taking the number up to 10,000, by 2030. In reality, much of the training for apprentices comes from the government, so companies benefit. Many of the apprentices are not young people entering a first job, but existing staff improving their skills. Heathrow would benefit, and get money back, that they have to pay into the levy. Now analysis from the Thinktank the Institute for Public Policy Research (IPPR) suggests the new £3 billion levy on larger employers, starting in April 2017, will raise less money and have smaller impact on areas that need it most – in the regions. Instead it will deepen Britain’s north-south divide, with London and the south-east benefiting most, as this is where there is the highest number of big employers. The areas where it is most needed are those that have been hit by deindustrialisation and suffer from low levels of qualifications, low productivity and low pay. Not the Heathrow area. The levy is to be paid by employers in England with a payroll of more than £3m and charged at a rate of 0.5% of their annual wage bill (ie. perhaps nearly £3bn per year.) The IPPR said: the government should analyse the regional impact of its new apprenticeships policy, so it does not leave unemployment hotspots in the north-east or Yorkshire with proportionately less funding. . Tweet
Apprenticeship levy will deepen north-south divide, IPPR says
Thinktank’s analysis suggests new £3bn levy on larger employers will raise less money and have smaller impact on areas that need it most
By Katie Allen (Guardian)
The government’s new £3bn apprenticeship levy threatens to deepen Britain’s north-south divide, according to a new analysis, with London and the south-east benefiting most from the government’s shakeup of staff training.
The Institute for Public Policy Research (IPPR) has warned that the apprenticeship levy, which comes into force next month, will raise less money and have a smaller impact in the areas that need it most. These areas are those that have been hit by deindustrialisation and suffer from low levels of qualifications, low productivity and low pay.
The new levy is designed to increase the number and quality of apprenticeships in the UK, with the government aiming to create 3 million new placements by 2020. It will be paid by employers in England with a payroll of more than £3m and charged at a rate of 0.5% of their annual wage bill. The Treasury has estimated it will raise nearly £3bn a year.
But the IPPR said its analysis of official figures suggested a disproportionate amount of investment would be stimulated in London and the south-east, where there was a relatively high number of big employers. Those areas have 38% of the UK’s large businesses that would be targeted by the levy, but higher levels of employment and only 27% of the population, IPPR’s research found.
Clare McNeil, IPPR associate director for work and families, said: “The government has said that it wants to break down the barriers to social mobility faced by young people in this country. It is clear to see that young people outside of London and the south-east face a much harder time finding a first job or training opportunity – particularly those not going on to university.
“It is extraordinary then that the government has not analysed the regional impact of its new apprenticeships policy, which is likely to boost investment in training precisely in those areas where employment is higher, such as in London and the south-east, leaving unemployment hotspots in the north-east or Yorkshire with proportionately less funding.”
The government has sought to underscore how some of its funding will be targeted at young people most in need of help getting on a career path. Under the new system, employers that are too small to pay the levy – around 98% of those in England – will have 90% of the costs of training paid for by the state. Extra support will also be available for employers with fewer than 50 employees who take on 16- to 18-year-old apprentices or young care leavers.
“We truly are investing in the whole of England by doubling funding for apprenticeships to £2.5bn by 2019-20 – twice what was spent in 2010-11 – and giving employers more power than ever before to design training that meets their needs. ”
The IPPR is urging the government to change the apprenticeship levy system to redistribute some of the money collected to areas with the biggest training needs. It also wants a broader levy that would apply to all employers with 50 or more staff in order to raise more money.
“Unless it changes the policy to ensure that investment is distributed more fairly between north and south, it will exacerbate existing regional disparities in opportunity for young people,” McNeil said.
One main concern is that employers could rebadge existing jobs as apprenticeships to meet training targets and recoup the costs of the levy.
The government prefers the NW Heathrow runway because Heathrow Airport Limited pledge to create 5,000 new apprenticeships by 2030.
It is nice that they plan to create some apprenticeships. What is now known is how many of those are for genuinely unemployed young people, and how many are just retraining existing employees. That is not quite so good. See link and details at bottom of this page, about how companies can “Turn your existing staff into apprentices”.
Heathrow’s apprenticeships promise looks much more like enlightened self-interest, and getting money back from a scheme into which they have to pay, than deliberate generosity or care about local youth unemployment !
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Heathrow’s website says:
Apprenticeships at Heathrow with expansion
Approximately 300 apprenticeships are currently started each year across the airport. This number would double with the opportunities an expanded Heathrow would bring.
This would mean 3,000 apprenticeships in the lead up to construction, a further 3,000 during construction, and then another 4,000 during operation until 2030. We will continue to deliver an apprenticeship programme beyond 2030 and will establish our target for this by 2025.
Expansion at Heathrow has the potential to end youth unemployment in the five surrounding boroughs to the airport – Ealing, Hillingdon, Hounslow, Slough and Spelthorne. Youth unemployment currently accounts for a third of total unemployment in the five local boroughs.
The UK government is sticking to plans for a levy on employers to help fund apprenticeships, ignoring business groups’ calls for the charge to be delayed because of the economic uncertainty sparked by the Brexit vote.
Other groups, however, have welcomed the scheme as an important step in addressing skills shortages and a way of broadening young people’s routes into decent careers.
Theresa May has made tackling inequality a key theme of her new government, and this marks the second time in a week the prime minister has stood up to big business groups concerned about rising salary bills. On Monday, Downing Street dismissed pressure to slow the implementation of the “national living wage”.
Robert Halfon, the apprenticeships and skills minister, said the levy would help to ensure “people of all ages and backgrounds have a chance to get on in life”.
“Apprenticeships give young people, especially those from disadvantaged backgrounds, a ladder of opportunity. That’s why we continue to work tirelessly to deliver the skills our country needs. The apprenticeship levy is absolutely crucial to this,” he said.
The levy is designed to fund 3m places for apprentices. It will be paid by employers in England with a payroll of more than £3m and charged at a rate of 0.5% of their annual pay bill. When George Osborne unveiled the levy last year, the former chancellor said those paying it would “get out more than they put in”.
The government has also said employers that are too small to pay it – around 98% of those in England – will have 90% of the costs of training paid for by the state. Extra support, worth £2,000 per trainee, will also be available for employers and training providers who take on 16 to 18-year-old apprentices or young care leavers.
One body for the construction industry described the levy as a “fair settlement for small employers”. The Federation of Master Builders (FMB) said the only cure for the industry’s skills shortages was to recruit and train more people.
The FMB’s chief executive, Brian Berry, said: “Small and medium-sized firms do the majority of training in our industry. Micro businesses [those employing fewer than 10 people] alone train around half of all construction apprentices. It is therefore crucial that new apprenticeship funding arrangements work for these firms and do not impose higher costs on them.”
The CBI, which represents companies that employ nearly 7 million people, has criticsed the levy and called on the government to push back the April 2017 start date.
Carolyn Fairbairn, the CBI’s director general, said: “We welcome the government’s focus on growing investment in apprenticeships, and business stands ready to step up and increase its own commitment. However, the apprenticeship levy in its current form risks turning the clock back on recent progress through poor design and rushed timescales.”
“The levy is too narrowly defined. It covers only one type of training and employers can only reclaim off-the-job costs. As a result, valuable forms of training risk being cut back, with quantity put ahead of quality.”
The trade group for the human resources sector, the Chartered Institute of Personnel and Development (CIPD), said the levy in its current form risked devaluing apprenticeships by putting the number of beneficiaries ahead of the quality of training they receive.
Ben Willmott, the CIPD’s head of public policy, said: “It is irresponsible for the government, particularly in a time of economic uncertainty in the aftermath of the referendum, to simply press ahead with a policy that is not fit for purpose.”
The British Retail Consortium also called for a delay. “The government should delay its introduction to 2018, allowing more time to design a truly viable system that delivers high-quality training,” said Helen Dickinson,its chief executive.
The British Chambers of Commerce welcomed the support for those taking on 16 to 18-year-old apprentices, but also urged the government to focus on quality. The manufacturers’ organisation EEF welcomed plans to increase funding for apprenticeships in science, technology, engineering and mathematics, but it too said questions remained over the levy’s design and it pushed for a later start date.
The Institute for Public Policy Research (IPPR), however, said the government was right to launch the levy in April.
“Following Brexit, British employers may not be able to rely on recruiting migrant workers to fill skills gaps, so we’ll need more apprenticeships to train up our domestic workforce,” said Jonathan Clifton, IPPR’s associate director for public services.
Did you know that you can up-skill your existing staff by enrolling them onto an apprenticeship course so that they can obtain a nationally recognised qualification whilst working on the job?
The beauty of doing this is that you can give your existing staff NVQ training and qualifications and thus ensuring they have the right skills and training in place.
In order to turn your existing staff into apprentices for FREE then the staff must be aged between 16-18 as the government fully funds this age group. If the staff members are aged 19-24 years old then the funding is cut and there may be a small contribution to pay. In some cases it may be free, but it depends on the training provider and how much funding they have available.
To give you an example, if a 23 year old admin assistant was enrolled onto an apprenticeship, they would gain a Level 2 or Level 3 NVQ in Business Administration in 12 months. This would cost around £150 + VAT as this cost would contribute to the shortfall in the cut in funding.
The amount of money you would have to contribute depends on the qualification as funding varies between industries.
As apprenticeship specialists we would scour the market to get you the best prices possible and try to keep the training free where possible.
Business Administration is a distance learning qualification so you would not lose your staff member to regular College attendance, instead an assessor would visit the workplace every 8 weeks. This varies depending on industry and the amount of staff you place into apprenticeships. For example, Digital Marketing or IT Support would require College attendance 1 day per week, but if there were a number of apprentices in the same workplace, it may be viable for a college to deliver the training on site. We would assess on a case by case basis.
You may get a £1,500 apprenticeship grant if:
You have less than 50 employees
Your apprentice is aged 16 to 24
You can claim support for up to 5 apprentices.
We can help turn existing staff into apprentices if:
Aged 16-18 for fully funded training
Aged 19-24 for part funded training
Aged 24+ you will have to pay a larger fee unless we can source a provider with 24+ funding
You can commit to providing support and on the job training
Are willing for the staff to attend college as necessary
Apprentices work at least 30 hours per week
You have a genuine desire to up-skill your workforce
Keep apprentices on current salary (We won’t work with employers who want to use apprentices as an excuse to provide lower wages)
The staff have at least Grades A – E in Maths and English
