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Let’s not be so quick to plan a raid on the levy pot

By Nick Linford, Editor at FE Week:

Readers of FE Week will be familiar with the excruciatingly slow start to the apprenticeship levy reforms since last May. According to the Department for Education, employers spent just 10 per cent (£200 million out of £2 billion) of their levy contributions in the first year. Each month that three million starts target slips further away.

Inevitably, there are more demands for a change of course, anything from scrapping the target to scrapping the Institute for Apprenticeships, but as I’ve explained before and won’t repeat now, it is far too soon to panic. But this does raise questions about what will happen to any unspent funding, particularly when public finances are tight.

This week the eight metro mayors signed a joint statement asking the government to let them raid unspent funds to boost devolved education budgets from August 2019.

It is an attractive pitch, but there are at least five compelling reasons why it would be a mistake.
1. The apprenticeship reforms have been designed on the basis that many employers will fail to use all of the levy. Why? Because
without unspent levy there would be no funding for small, non-levy-paying employers, English and maths qualifications, employer and provider incentives, and the 10-per-cent levy account top-ups.
2. Apprenticeship providers say they have demand from small employers but not enough non-levy funding, so they should be first in the queue when large employers choose not to use their funds.
3. Unspent funding could be used to incentive the growth of apprenticeships where a market intervention is needed. For example, the government will pay £1,000 to care leavers who start an apprenticeship from this August. They could also increase incentives to recruit 16- to 18-year-olds, either fully-funding them or increasing the £1,000 employer incentive.
4. Many employers are waiting for standards to become available for delivery (over 280 are currently in development according the IfA) and have 24 months to spend their levy money before losing access to it. Raiding it now would likely result in a significant overspend
in a year’s time.
5. The government is making it easier for large employers to use their levy, by allowing them to transfer up to 10 per cent to those in their supply chain.

So although I’m sure the mayors won’t be alone in eyeing up a slice of levy pie, long term underspend may not even be crumbs.

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