Apprentice levy could mean fewer apprentices, says CBI

6th May 2016 at 00:00
Businesses in Scotland demand assurances about tax

A new business levy designed to increase the number of apprenticeships on offer could actually have the opposite effect in Scotland, business leaders have claimed.

Under the new apprenticeship levy, large employers across the UK will have to pay a tax into a central pot, and will then have access to funding for apprenticeships through a digital account.

But it is still unclear how companies operating in Scotland will be able to benefit from funding raised through the levy, the Confederation of British Industry (CBI) Scotland warned.

The organisation’s head of education and skills, Pippa Morgan (pictured, inset), explained that companies that are operating only in England would be able to access their entire levy payment through the Skills Funding Agency. But in Scotland, she said, the levy money would go to the Scottish government, and it is not yet clear how it would be redistributed.

This could lead to businesses reducing the number of apprenticeships in Scotland, she argued. “We think that the money needs to be ring-fenced,” she said. “It is a real concern, particularly for those who have workforce either side of the border.

“If there is no visibility of the businesses’ money in Scotland, but there is in England, there is a choice there whether you may move your people where you see the money.”

The tight timescale for implementation of the levy in April 2017, made even tighter by the Scottish elections this week, was also a concern to businesses, Ms Morgan said.

She urged the Scottish government to make sure that businesses saw a return on their levy investment.

‘We need clarity’

In February, leading politicians from the devolved administrations called for greater clarity around the levy. They said that they feared it had the potential to undermine devolved apprenticeship policies.

Earlier this year, the Scottish government increased the target for modern apprenticeship starts to 26,000 for 2016-17.

There have been more than 101,000 modern apprenticeship starts over the past four years, according to the government.

Ms Morgan made her comments after the CBI’s director general in London, Carolyn Fairbairn, last week called for a “radical rethink” of the apprenticeship levy. She said there was a danger that it could be counter-productive in England, too.

In striving to pay the levy bill, businesses could actually be forced to cut the number of apprenticeships, she said.

A spokesman for Skills Development Scotland, the organisation responsible for the modern apprenticeship scheme, said that employers would be consulted on the best use of their portion of the levy to support apprenticeships.

A spokesman for the SNP said that, if the party was re-elected, it would pursue the issue with the Westminster government, to ensure that Scotland got its “fair share” of the levy.

He added that the funds would be used to support its strategies which aim to deliver 30,000 new modern apprenticeships and 10,000 foundation apprenticeships in schools across Scotland each year by 2020.


How the levy will work

The new apprenticeship levy will come into effect across the UK in April next year.

It will only be paid by large employers with a pay bill of more than £3 million each year.

According to the Westminster government, that means it will be paid by less than 2 per cent of employers.

Chancellor George Osborne has announced that the levy will be set at 0.5 per cent of an employer’s pay bill.

Draft funding rates will be published in June.

The Westminster government hopes that the levy will raise £3 billion and help to deliver its target of 3 million apprenticeship starts in England by 2020.

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