Levy shortage starving small firms

Levy shortage starving small firms

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Levy shortage starving small firms

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Poses early test for Johnson campaign pledge

Levy shortage starving small firms

Small and medium sized businesses across the country are being prevented from offering new apprenticeships because the levy which funds the government’s flagship skills programme is running short of cash.

The levy funding shortage is so acute that a new survey has found that three out of four apprenticeship training providers can no longer meet demand from SME employers to train new apprentices.

The lack of funding is happening at the worst possible time when thousands of school leavers aged 16 or 18 are looking to earn and learn debt-free on an apprenticeship instead of pursuing another option such as a traditional university degree.

SMEs don’t pay the apprenticeship levy and they rely on funding being left over from it for their apprenticeships after large levy-paying employers have first taken back their entitlement. The government now admits that it badly underestimated how much of the levy the big employers would use up.

As a result, research by the Association of Employment and Learning Providers (AELP) has also found that this year:

  • a quarter of apprenticeship training providers have had to turn away a prospective new SME employer of apprentices
  • 17% of providers have stopped recruiting apprentices altogether for new and existing SME employer customers
  • a further 25% have had to cut back on apprentice recruitment for their employer customers due to a lack of funding and
    a third of the providers need up to 25% of additional funding on their government funding contract to meet current demand.
  • The new hard evidence about the negative effects of the levy running dry comes almost six months after the National Audit Office issued warnings about the programme’s creaking funding system and just after latest monthly data showing that overall new apprenticeship starts are flat-lining again.

SMEs have traditionally been the main recruiters of young people, including school leavers, as apprentices but the official statistics show that programme starts for 16 to 18 year olds in 2018-19 have fallen by 7% so far compared with last year and by 23% compared with the year before the levy system began. With the survey results now in, AELP is sure that the decrease is directly linked to the shortage of funding available for smaller employers.

Prime Minister’s funding promise for apprenticeships

Boris Johnson promised in early July that apprenticeships under his premiership would be ‘properly funded’. Prior to this, AELP which represents over 900 apprenticeship training providers had been urging the government to make more funding available because its members had been reporting unavoidable reductions in starts or a complete stopping of them altogether.

Commenting on the survey results, AELP CEO Mark Dawe said:

“It’s been over four months since the DfE’s permanent secretary told a Commons committee that ‘something is going to have to give’ unless more funding for apprenticeships was forthcoming and we’re saying that the damage is already being done.

“More recently the Prime Minister said that apprentices are ‘indispensable to this country’ and that ‘we have a desperate shortage in this country of people with the right skills‘. The clear message from apprenticeship training providers is that the shortage will quickly become much worse unless the government delivers quickly on Boris Johnson’s funding promise.”

Evidence of the damage already inflicted is set out in the quotes below submitted by apprenticeship training providers from all over the country.

Martin McTague, Policy and Advocacy Chair of the Federation of Small Businesses (FSB) said:

“Properly funded apprenticeships are vital in tackling the chronic skills shortages which affect many small businesses, and that’s why many small firms themselves are great champions of apprenticeships. But unless urgent action is taken, there is a real danger of apprenticeships becoming unaffordable for smaller businesses. AELP’s research puts in clear focus the looming black hole, which unaddressed will exacerbate skills shortages and deny opportunities to young people and those furthest from the jobs market. More than 90 per cent of all apprenticeships offered by small businesses are held by 16-24 year olds.”

Source: Association of Employment and Learning Providers