Institute of Fiscal Studies has released a report highlighting the “poor value for money” that UK businesses will receive on the government’s new ‘apprenticeship levy’.
The IFS Green Budget 2017 says the planned ‘apprenticeship levy’ (a 0.5% tax on an employer’s paybill above £3 million per year), is estimated to raise £2.8 billion in 2019–20. The government spending on apprenticeships in England is only expected to increase by £640 million between 2016–17 and 2019–20. The conclusion reached by the Institute of Fiscal Studies is that “most of the revenue raised is being spent elsewhere.”
The report also highlights the fact that new subsidies for employers to train apprentices mean that employers will have to pay nothing, or at most 10%, of off-the-job training costs for apprentices, up to certain price caps set by the government. While this is good news for employers , the near zero cost of training poses considerable risks to the efficient use of public money. Employers will have little incentive to choose training providers who can provide training at a lower price.
Neil Amin-Smith, an author of the report, commented: “We desperately need an effective system for supporting training of young people in the UK. But the new apprenticeship levy, and associated targets, risk repeating the mistakes of recent decades by encouraging employers and training providers to relabel current activity and seek subsidy rather than seek the best training. There is a risk that the focus on targets will distort policy and lead to the inefficient use of public money.”
Jonathan Cribb, another author of the report, added: “With the subsidies for apprentices’ training costs at 90% or 100%, employers are encouraged to take on more apprentices. But this also provides them with little or no incentive to choose a training provider with a lower price. In addition, the specific targets for most public sector employers in England to employ apprentices could lead to costly, and potentially damaging, re-organisations, and should be dropped.”
