Apprenticeship Levy: why UK businesses are losing out on £1 billion in funds and how to turn this around

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The Apprenticeship Levy is being underused by UK businesses at the moment but, with a few tweaks, it could offer massive benefits to a lot of organisations.

The Apprenticeship Levy constitutes the most significant development in employer-led training seen yet. Despite all the opportunities involved for both levy payers and non-payers to revive their focus on development, and test the potential for productivity gains and innovation, the evidence so far points to employers wasting, or even ignoring this moment in time.

More than £1 billion in funds have already been left unspent and there are rumours of the expenditure being written off as a tax. Just 8% of levy funds were spent in the first 10 months of the initiative.

At the same time, there have also been organisations that have been able to capitalise on the levy opportunity in unexpected ways.

Ultimately, while the scheme is a piece of public policy aimed at addressing UK issues of productivity and growth, the burden of responsibility is centred on employers - their ambition, their energy, their imagination. So what’s happening?

Cutting through red tape

From our experiences of listening to large employers, the reasons behind the levy caution are straightforward enough. Complexity is generally a problem. The number of standards now available is considerable, as are the burdens of compliance.

The current scheme requires considerable investment in administration by organisations.

Lessons have been learned from the first year of the levy, and there just needs to be some tweaking to address criticisms that would allow the scheme to fly.

Many organisations have had to employ an Apprenticeship Levy management team to ensure staff are compliant with the associated requirements. This has meant reconfiguring existing organisational units including those that focus on learning and education, professional development and human resources management.

A more flexible approach would reduce the emphasis on compliance and instead focus on how professional development aligns with the capabilities, processes and systems already present in many UK organisations.

Accommodating different types of jobs

Beyond this, there is the narrowness of the standards, which only capture certain job types adequately enough - mostly traditional occupations that have remained largely unchanged for long periods (e.g. carpenters, plumbers, or nurses) or very general occupations (senior leaders).

There’s little scope to accommodate new, flexible, more dynamic occupations that are less codifiable.

This means that the standards start to look like anchors in a world that requires continual adaptation and, as a result, there appear to be relatively few employers interested in many of the standards available (despite the industry input into Trailblazer planning groups).

A boost for management skills

We shouldn’t, however, let teething problems with the mechanics cause the Apprenticeship Levy to break down.

There have already been many benefits for the UK economy and employers just with the 8% investment made so far.

A core challenge for UK plc is poor management, leading to lost productivity valued at tens of billions of pounds each year according to bodies such as the Chartered Management Institute.

The good news is that the levy has already led to an upturn in general management programmes like the MBA. There’s been an increased emphasis on industry/university/professional body cooperation, galvanising activity and leading to more understanding and the ability to tailor to specific needs.

More generally, there has been increased uptake in the number of apprenticeships across many areas in which this may not have otherwise been the case.

Repositioning the levy

In an ideal world, the funds collected through the Apprenticeship Levy would be fully spent on the professional development of the UK workforce.

There are many areas where this could have positive impacts. Lessons have been learned from the first year of the levy, and there just needs to be some tweaking to address criticisms that would allow the scheme to fly.

First, there is a need for a more flexible approach to using funds, e.g. repositioning the Apprenticeship Levy as a ‘Training’ Levy, which would imply a broader set of options for using funds and accommodate the dynamic and unknown nature of most future professions.

The standards need to be in tune with the future of work, and more in line with new and next generations of rapidly evolving and multi-faceted jobs.

There should be less emphasis on compliance with the new processes, and all the additional staff roles this demands, to allow organisations simply to align what they’re doing with existing professional development capabilities and systems.

Most importantly, the standards need to be in tune with the future of work, and more in line with new and next generations of rapidly evolving and multi-faceted jobs.

Fit for the future

The Apprenticeship Levy has been underpinned by an assumption that there are significant numbers of unemployed or under-employed people in the UK workforce and that access to an Apprenticeship is a silver bullet.

For industries that have longstanding apprenticeships, the Levy appears to have made little difference since this was already an established employment path.

For other industries, where an apprenticeship is a relatively new employment option, there is little acknowledgement of the implied differences that exist.

Many organisations have conservative approaches to recruitment and retention and, consequently, a new option such as an apprenticeship is still treated conservatively. A revised scheme should acknowledge this kind of dynamic.

In a world of change, the Apprenticeship Levy has looked a little flat-footed, which is a real shame because, with some relatively minor tinkering, it can be a huge resource for making sure the UK keeps up in terms of professional development, collaboration and innovation.

Want to learn more about this topic? Check out our Apprentieship Levy content hub for all the latest information, advice and thinking on this topic. 

 

About Daniel Prior

Daniel Prior

Dr Daniel Prior is Director of the Executive MBA at Cranfield School of Management. Before re-joining academia in 2009, Dr Prior held roles in industries such as IT, Defence and Professional Services for companies including Acer Computer Australia, Tenix Defence, KPMG and Orima Research. Dr Prior is a Senior Fellow of the Higher Education Academy,  a Fellow and Certified Practicing Marketer of the Australian Marketing Institute, a Fellow of the Academy of Marketing Science, a Member of the American Marketing Association and a Member of the Academy of Management (USA).

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