The apprenticeship levy will fail to raise the income expected by the government – and this year is set to generate £100 million less than anticipated, according to the Office for Budget Responsibility (OBR).
Its latest economic and fiscal outlook, released yesterday, states: “Since the original costing we have made regular downward adjustments to our earnings forecast and – though this has been partly offset by higher expected employment growth – the overall effect is to lower the apprenticeship levy forecast.”
This financial year will see £2.6 billion raised from the levy rather than the £2.7 billion previously expected.
When the apprenticeship levy was announced in 2015, it was expected to raise £11.6 billion in its first four years.
But the OBR’s forecast has now reduced to £10.7 billion during that period.
The economic and fiscal outlook adds: “The levy came into force in April 2017 and HMRC statistics show that £1.8 billion of cash receipts have been received in the first nine months. Our latest forecast is that this will raise £2.6 billion in 2017-18 and a cumulative £10.7 billion in its first four years, an 8 per cent drop from the original costing.”
Impact on apprenticeships
Julian Gravatt, deputy chief executive, Association of Colleges, commented: “The levy is an important source of tax revenue for the Treasury. It's disappointing if revenue is lower than expected. The key thing for government and DfE is to protect apprenticeship spending."
Mark Dawe, chief executive, Association of Employment and Learning Providers (AELP), warned: “A predicted downgrade in receipts of £100 million a year is potentially £100 million less to fund the apprenticeships of SMEs, which would be potentially very damaging.”
He added: “This is why AELP has consistently called for a standalone minimum budget of £1 billion a year for non-levy payer apprenticeships to drive forward increases in workforce productivity across all areas of the country and protect social mobility.”
A Department for Education spokesperson said: "The Office for Budget Responsibility’s forecast of the apprenticeships levy has no impact on the department’s budget for apprenticeships between now and 2020. Over £2.45 billion will be invested in apprenticeships in England by 2019/20; double what was spent in 2010/11".