SMEs could suffer from lack of funding once the new apprenticeship levy is launched

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Written by Jonathan Owen on 24 November 2016 in News

The AELP warns that small and medium-employers, who supply more than half the country’s apprenticeships, could struggle once the new tax comes into force in April next year.

Small and medium sized businesses could be penalised by the new apprenticeship levy and forced to fight for leftovers from the funding raised by big firms paying the new tax, the Association of Employment and Learning Providers has warned.

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The concerns have been prompted by yesterday’s Autumn Statement by Chancellor Philip Hammond. 

Although an increase in the national minimum wage for apprentices was announced, which will see it increase from £3.40 per hour to £3.50, there was no new detail on the apprenticeship levy.

Under the new tax, due to come into force next April, employers with a wage bill of more than £3 million a year will have to pay 0.5 per cent of what they spend on salaries.

Although small and medium-sized enterprises (SMEs) provide more than half of the 905,000 apprenticeships in the country, uncertainty surrounds the amount of funding that will be available for apprenticeships in these smaller employers, according to the AELP.

The concerns over future funding have been heightened by a £600m shortfall in expected income between 2017/18 and 2020/21, due to revised forecasts by the Treasury of the expected amount raised by the levy in this period.

The AELP is “disappointed” that assurances were not given yesterday that a minimum fixed budget will be allocated to smaller employers for the next five years irrespective of how much money is left for them in the levy pot.

Mark Dawe, chief executive, AELP, said: "Without assurances, we are really concerned that non-levy paying employers will be feeding off scraps which will not be good for the social mobility of young people in areas where there aren't big employers."

He added: “The quality of the apprenticeship programme must be our foremost concern but we do need to make sure that enough apprenticeship opportunities are available for young people.”

In a statement, a Department for Education spokesperson said: "Small and medium sized businesses will continue to receive generous government support to take on apprentices. We’ve confirmed that government will pay 90% of training costs for these employers, rising to 100% for smaller employers taking on 16 to 18 year olds. We want to see SMEs continuing to play a strong role in creating apprenticeship opportunities across the country."

This comes amid continued controversy over the apprenticeship levy, with a number of industry bodies having demanded the scheme be delayed due to economic uncertainty in the wake of Brexit. 

Employers are divided over the controversial new tax, which is due to come into force next April, with 45 per cent against the idea, while just 38 per cent support it, according to a survey by the Chartered Institute for Personnel and Development in June. 

And a report released by the City & Guilds Group earlier this month warned that the Government: “has not yet succeeded in generating sufficient support and ownership from employers for the apprenticeship scheme.” 

Citing concerns over the poor quality of apprenticeships, it called on ministers to ensure that they focus on quality rather than quantity and warned: “Delivering apprenticeships for the sake of it is a waste of public resources.”



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