Revealed: The £1bn apprenticeship levy underspend

Expired levy funds increase by 22 per cent for the period May 2020 to February 2021, compared with a year earlier

Julia Belgutay & Kate Parker

Apprenticeship levy: More than £1 billion underspend revealed

More than £1 billion in apprenticeship levy funding paid by employers expired unused between May 2020 and February 2021 alone, it has been revealed.

In a written answer to a parliamentary question from Liberal Democrat MP Layla Moran, skills and apprenticeships minister Gillian Keegan said that, across all employers in England, £1,039 million in levy funds had expired in the nine months following May 2020. 

This is a 22 per cent increase on the year before, when the expired levy value was £847 million for the period between May 2019 and April 2020. 

Introduced in 2017, the apprenticeship levy is paid by all large employers across the UK. Organisations pay into a virtual account and can then use those funds to support training. They have two years to use up their levy pot before it expires. 

News: Btecs and T levels 'have become second-class qualifications'

Covid: Apprenticeship starts almost halve during lockdown

Background: 120,000 fewer apprenticeship starts predicted

Apprenticeship participation has taken a big hit as a result of the Covid pandemic. In May 2020, the Federation for Industry Sector Skills and Standards predicted there would be around 120,000 fewer apprenticeship starts in the year from March 2020 as a direct result of the coronavirus.

Association of Employment and Learning Providers: 'Extremely frustrating' 

The Association of Employment and Learning Providers (AELP) chief executive Jane Hickie said the numbers will be "extremely frustrating for ITPs to see".

She said: "The simple fact is that before the pandemic arrived the money could have been spent on SMEs’ apprenticeships. As we kept telling the government, the employer demand was there but the size and growth in providers’ non-levy contracts was very tightly restricted by the ESFA.

“Obviously with workplaces closed, the pandemic has had a major impact on apprenticeship starts and levy spend but the good news is that as we come out of lockdown, non-levy contracts are about to become a thing of the past with employers of all sizes being able to express demand through the digital apprenticeship service."

Ms Hickie called on the government to launch an awareness campaign for non-levy employers and to review the hiring cap of 10 new apprentices imposed on SMEs using the system.

She said: "Two big things are required from the government however: firstly the number of non-levy employers on the service is low and an awareness campaign is needed to change this; and secondly the government must keep under regular review the hiring cap of 10 new apprentices imposed on SMEs using the system. The more the cap is lifted, the more levy funds will be used up.

“It’s worth remembering that the NAO was predicting an overspend of the levy before the pandemic intervened.  Instead of looking at levy transfers as the panacea to solve this issue, better management of the funds available to the digital service and the employers on it is the solution or a separate standalone budget for SME apprenticeships.”

Apprenticeship levy funds unspent

Ms Keegan said the government would make £2.5 billion available for investment in apprenticeships in the 2021-22 financial year.

She wrote: "Employers are able to use all of the funds in their apprenticeship service accounts to support apprenticeships in their own or others’ businesses. Levy-paying employers can transfer up to 25 per cent of the annual value of funds in their apprenticeship service accounts to other employers. We are simplifying the transfers process, enabling employers to make strategic decisions over where their levy funds are spent. From August 2021, employers will be able to pledge funds for transfer, and we will introduce a new national online matching service, making it quicker and simpler for levy-payers to find employers that share their business priorities to transfer funds to.

"We do not anticipate that all employers who pay the levy will need or want to use all of the funds available to them, but they are able to do so if they wish. Funds raised by the levy are used to support the whole apprenticeship system. Employers’ unused funds are available to support apprenticeships in smaller employers who do not pay the levy and to cover the ongoing costs of apprentices who began training prior to the introduction of the levy.

"We are again making available £2.5 billion for investment in apprenticeships in the 2021-22 financial year, which is double that spent in 2010-11."

Register to continue reading for free

It only takes a moment and you'll get access to more news, plus courses, jobs and teaching resources tailored to you

Julia Belgutay & Kate Parker

Latest stories