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‘Radical rethink’ required for apprenticeship levy, says CBI director-general

The Government must collaborate with business to ‘radically rethink’ the design of the apprenticeship levy, if it is to deliver the quality skills training needed to support a more prosperous society, CBI director-general, Carolyn Fairbairn, will warn today.


The CBI says she will highlight that businesses are committed to raising skill levels and support the Government’s ambition to boost apprentice numbers, but that there are growing concerns among firms about the current design and viability of the system. Fairbairn will say that the Government has the opportunity to create a “once-in-a-generation revolution” in skills, but it is currently only likely to deliver another “once-in-an-administration shake-up.”


Speaking to an audience of business leaders in the City of London, CBI states that she will say that “firms are passionate about apprenticeships, and it’s this passion which drives deep frustration over the levy plans as they currently stand.”


She will emphasise that the Government must “take the time to draw on business' vast experience to make sure that the levy works for everyone, rather than rushing out a poorly thought through plan. This isn’t what businesses want, and we don’t believe it is what Government wants either." 


The CBI is calling for:


  • A stronger role for the new Institute for apprenticeships - include measuring and managing the system around the levy;
  • More flexibility in how firms can spend the levy – including on existing training and high-quality support for apprentices;
  • The digital system which manages levy spend must be ready and able to support the delivery of apprenticeship training which businesses need, in full and from the start. 


In her speech, Fairbairn will say, “Firms across the UK are emphatic that tackling skills shortages is the only way to succeed and create prosperity. They want to create quality apprenticeships and they’re ready to work with the Government to do this.


“But as it stands that’s not what the levy is doing. We need to change that, which is why we are calling for a ‘radical rethink’.”


On the objective of the Apprenticeship Levy and the Government’s 3m target, she will comment, “As a nation, what outcome are we trying to achieve on skills? The Government has set out a target to create three million apprenticeships by 2020 and it deserves credit for its level of ambition.


“Business shares this goal to raise numbers - yet - despite the Government’s good intentions - the target could have unintended consequences.


“What’s being counted is three million started apprenticeships, not three million qualified apprentices. There’s a big difference. Indeed, measuring success by the number of starts tells us little about whether the system is really delivering and could even drive the wrong outcomes. We don’t want this and I’m confident that the Government doesn’t either.”


On the design of the Apprenticeship Levy, Carolyn will add:


The Institute for Apprenticeships


“The Institute risks being an afterthought, a mere ‘standard-setter’, rubber-stamping standards in a system where key decisions have already been made. Instead of this, we think the Institute should be a ‘standard-bearer’, with the authority to shape big decisions on design.


“These would include measuring and managing the system around the levy, establishing success criteria which measure how it supports careers and closes the skills gap.”


Design flaws


“It is crucial firms get closer to doing what the Government promised - being able to get your money back if you have a good programme. 


“Currently, the levy misunderstands training only as apprenticeships and the current design encourages firms to rebadge their existing programmes.


“Companies are having to change the ‘spec’ of graduate or management training schemes - programmes that are working perfectly well - just to fit apprenticeship standards.


“When it comes to training – business knows best. They should have the flexibility to choose the kind of training which is right for them, whether it’s labelled an ‘apprenticeship’ or not.


“Other levy systems in Ireland, Germany, Denmark, France and Quebec, give greater flexibility on spend than the UK Government is proposing. So it can be done – and this is how our levy should work too.


“It is also placing the value of apprenticeships only in ‘off-the-job’ training, restricting eligible spend to training with an external provider.  It risks devaluing the very thing that makes apprenticeships great. Learning in work, on the job, from someone who knows the ropes. 


“That’s why the CBI is pushing for an ‘allowable expenses’ regime for the levy so firms can recover the cost of valuable staff time and capital investment.”  


Transfer or pool funds


“Under the current plans, in the first year only spending within a company would be allowed. If firms can’t transfer or pool funds, this would have real consequences for their business models and training practices.


“It’s positive the Government have said they eventually want to allow transferring and pooling, but after the levy has started. Committed employers will have to abandon much training that’s already working.”


On the current UK skills landscape, Carolyn will state, “Skills are the number one business priority. They’re crucial for raising our productivity and staying globally competitive.


“Specific sectors - such as construction, IT and manufacturing - are struggling to recruit. We’ve got a critical shortage of technicians – the area best served by an apprenticeship system.


“Business are up for the challenge. They know that they need to work with Government and civil society to find the right solutions.


“In the last parliament, we saw positive reform to the skills system with apprenticeships really taking off and almost two a half million people being trained. That’s fantastic. But in this parliament, firms want to see the same progress at higher levels that we’ve seen with level 2 and 3 skills. And business is ready to help do this.”


On the levy timetable, Carolyn will conclude, “We’re less than 12 months from the levy’s planned start date in April 2017 – and for business, that’s the equivalent of tomorrow. The pressure of the Government’s deadline means that firms lack crucial information about the levy and a realistic lead-in time to prepare for it.


“Today, firms are having to treat the levy as a tax, because the headline cost is all they’re certain of. Businesses of all sectors and sizes are still in the dark - cutting-corners isn’t in anyone’s interest.


“Government needs to work with business to resolve these issues before the levy launches. This means taking the time to get this right to design a flexible, business-led system – through the Institute – that encourages employers to spend on quality training opportunities.


“Government must also make sure the digital system which manages levy spend is ready to support the delivery of quality apprenticeships from day one.


“Business stands ready to help, advise and design a system that is fit for purpose. So let’s seize this opportunity and create change which will last several generations, not just a single administration.”


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