Businesses fear the levy is a tax, not a skills system

8th July 2016 at 00:00

Over the past few months, I’ve lost count of the conversations I’ve had with friends and colleagues who work in further education that have started: “Of course, we are in different places when it comes to the apprenticeship levy…”

Now, you don’t have to go far into the press to find real concern voiced by businesses. The CBI has been vocal. We’re not alone – groups like the Chartered Institute of Personnel and Development and the EEF manufacturers’ organisation, as well as many individual employers, have been clear.

But to assume that this concern represents a different overall view to colleges and other skills providers just isn’t right. The CBI – and our members – aren’t against a big increase in training. Nor have we ever argued against businesses paying their share. The key is quality and encouraging investment.

Delivering more quality training is a vital part of the CBI’s new prosperity agenda and something we hope to make real progress on over this Parliament. For us, quality means good wage returns for learners and closing skills gaps for businesses. It means relevant and timely programmes for companies and transferable skills for employees.

And that’s the problem. It’s why you have heard so many grumbles. Without a radical rethink, this levy just isn’t going to deliver.

First, the incentives for firms don’t work. Levy funds will be spread very thinly. So thinly, in fact, that it will be next to impossible for many firms to get their money back – even when they make big new commitments.

In fact, each new apprenticeship will actually cost a business a lot more to create than they will be able to recoup through the levy. This imbalance encourages companies to view the levy as a tax, not a skills system. It raises the suspicion that this is primarily a fiscal policy.

This issue can be addressed. We’ll be looking to make sure that the forthcoming rates of repayment for the new system fully cover costs and that a route is found that enables firms to recover their legitimate spending on capital and staff time. Most successful systems have this sort of “allowable expense” regime – especially for engineering, where capital investment is significant.

Second, we need to be able to train people in the right areas, so that the curriculum is relevant to them and their employers. This means a wider range of standards, with flexibility in the system to allow firms to train non-standard workers, such as agency temps.

For the longer term, a training levy might be a more effective idea than an apprenticeship levy. But in the current context, simple steps – like ensuring that new standards can be readily developed and that no business is taxed without a route to recovering some of the money – would be helpful.

This would also help to forestall the productivity drag of firms rebadging existing training so that it can be covered by the levy. This is a process without a pay-off, driven by the policy and tacitly encouraged by officials.

Finally, we need to get the system delivered in a timely way with some critical issues addressed, such as how it will function across the whole UK. Timelines are tight and details for businesses too few. April 2017 is not very far away. If we are going to build a system that sticks, these issues need to be addressed now.

A couple of weeks ago, Baroness Wolf accused the CBI of trying to “gut” the apprentice levy. Nothing could be further from the truth. We are trying to make it work – to build a skills system that works all over Britain from a fiscal policy that works in Whitehall. As ever, we’ll welcome all the help we can get.

Neil Carberry is director for employment and skills at the CBI @gramscisghost

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