It’s a game-changer – that is the general reaction to the news of a levy on large employers to pay for apprentices. It has been met with much surprise, too. Is this really what we expect from a Conservative government? Something that three successive Labour governments felt was a step too far?
Labour talked of the “last-chance saloon” after the 2005 Leitch report. But the latest evidence of declining employer investment and dire productivity show that skills, in general, have got worse since then. Workplace training has halved in the past two decades. Chancellor George Osborne had to act.
The levy will make all large employers pay something, perhaps half a per cent of the cost of their payroll. More than half of all large employers don’t have any apprentices. They will now have to pay their way. The levy is a way of making every large employer share the cost equally.
If employers do have apprentices, they won’t have to pay the levy. For those that don’t, either they pay the levy or start hiring apprentices themselves. The levy could raise about £2 billion, which will be used to pay for government support to train apprentices.
For unions, it is welcome news. The TUC has argued for a levy ever since such collective measures were largely abolished by Margaret Thatcher. If employers simply won’t pay, despite all the incentives and exhortations, then the state must step in. Even a free-market Conservative government must react to such evidence of market failure.
It is not because employers are always “bad”. It is simply that many can’t risk the expense of training unless their competitors do likewise. Although, of course, there are always some bad employers who will always try to avoid their fair share of costs. When Baroness Alison Wolf made the same case for a levy in a recent paper for the left-leaning Resolution Foundation, it was clear that the skills policy paradigm was shifting in the Department for Business, Innovation and Skills (Bis) and, more importantly, the Treasury.
Unionlearn received assurances within hours of the budget that Bis was keen to involve unions in the design and oversight of the new scheme. That is also very welcome. There have been two recent visits to Germany involving senior government officials, unions and employers. This levy does not go as far as the German skills system, which involves unions a great deal, since cultures can never be simply transplanted, but it is a step in that direction.
Again, it may seem strange that a Conservative government is supporting union involvement. Indeed, the skills minister, Nick Boles, combines trade union “reform” alongside this new levy in his job description. But it is very welcome that unions’ contribution to the skills agenda, as in Germany and most other advanced economies, is being recognised. Unionlearn can take some credit for that.
The big worry is quality. We need to ensure that the new hypothecated pot of apprenticeship money does not become a magnet for those aiming make money by hitting the 3 million target for apprenticeships as quickly and cheaply as possible. Some providers may be tempted to devise deals, showing employers how to avoid the levy at least cost.
The history of individual learning accounts or Train to Gain show how good intentions can quickly go wrong. Equally, plenty of evidence shows that levies can be designed to work well. Employers in the driving seat will want to ensure their levy money is buying quality. Those newly spurred on to invest in apprenticeships (to avoid paying the levy) will want to invest in high standard schemes. Unionlearn itself has not been afraid to shine a light on poor quality schemes or to champion good quality. Our apprenticeships quality award was recently won by Babcock for the firm's excellent apprenticeship scheme.
Unions monitor actual practice and delivery, often very different from fine words on paper. And unions negotiate content and curriculum, ensuring that apprentices receive well-rounded training.
There is much evidence from overseas on how to design a good levy scheme, starting with a clear oversight body. This body must have the power to intervene quickly where quality is at risk. It must oversee the setting of clear standards, sector by sector. Of course it must be owned by employers, but it must also involve unions. And it must operate as far as possible by consensus.
Already in the UK (although the levy will only apply to England) we have an outline partnership structure that is building such a consensus, through the UK Commission for Employment and Skills, sector skills councils and industrial partnerships. Oversight of the new levy should build on that structure. Unionlearn looks forward to playing its part in making sure this long-overdue measure is a success, building higher productivity through better skills and jobs.
This is an edited version of a blog first published by Touchstone.