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Contractors fear extra cost of new government apprenticeship levy could curb apprentice numbers

The government’s new apprenticeship levy system could leave companies training new workers out of pocket, contractors have warned.

Civil Engineering Contractors Association said it had concerns that the government’s proposed levy system could result in companies paying twice to train apprentices.

CECA chief executive Alasdair Reisner said this could reduce the number of apprentices joining the construction industry.

“My gut feeling at the moment is that we will see a reduction in apprentices going forward,” Mr Reisner said. “It is increasingly looking like it will be less affordable per apprentice for companies than it has been historically.”

According to Mr Reisner, companies would not only have to pay into the government’s apprenticeship levy fund but could also have to pay tens of thousands in additional training costs, not covered by the fund.

Under the current system, the government contributes more than £1.5bn to support apprenticeship training, with employers expected to cover the remaining cost.

However, the new system will see this government support removed, with companies whose annual wage bills exceed £3m having to pay 0.5 per cent into the levy fund.

Apprentice types will be banded, with the government setting a maximum limit on what can be spent on each standard of apprenticeship.

Contractors fear these limits will be lower than the amount it costs to train certain types of apprentice, and that they will have to foot the extra cost.

Mr Reisner said “early indications” from the government were that the banding limits could be set below the level of funding needed to train new apprentices.

“Caps will be set [by government] and some of those that are coming through appear to be below the cost of delivery of an apprentice,” Mr Reisner said.

“If apprenticeships cost more than the cap, there is a challenge over whether companies will be able to fulfil the number of apprenticeships the government wants to achieve.”

The government wants to create an extra three million apprentices by 2020.

CBI head of education and skills Pippa Morgan agreed there was a “real risk” that the banding limits could result in a drop in new apprentice numbers.

“The caps and where they will be set is a big issue for companies,” she said. “The concern is that the design of the levy system is being driven too much by government wanting to make savings.”

Details of the caps will be revealed by the Department for Business, Innovation and Skills in June.

Last month, BIS published new guidance on the apprenticeship levy.

However, Mr Reisner and Ms Morgan said more information was needed for firms, particularly over the caps.

Mr Reisner said: “If it is the case that apprenticeships will cost more than the cap, it is important that we are not in the dark and that contractors have the info early so they can plan their training outgoings for the coming years.”

CITB head of policy Steve Radley said the organisation would be looking at ways of overhauling its own grant system to support companies paying into the levy fund.

He said: “I don’t think we can cover every pound of shortfall but we can definitely make some changes to the grant system.”

A BIS spokeswoman said: “We know employers are keen to understand more about how the levy will work, that’s why we have published guidance on the operating model this week and continue to give as many employers as possible the opportunity to work with us on the implementation.

“As we have previously said, funding detail and draft funding rates will be published in June.”

Readers' comments (2)

  • Robert Hudson

    ALASDAIR is quite correct in his summation what the government offers bears no relation to the cost of training an apprentice

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  • Why are the industry sectors who have been paying levy for many years included in the new levy at all?
    The CITB needed to change and it has taken a while but they are gradually getting there, I strongly believe they are still best placed to help employers with training and apprenticeships in the construction sector.
    We need to be careful that the apprentice initiatives do not draw funding away from other construction related training and up-skilling of existing employees.
    Yes we need new blood, but equally we need to develop our current workforce and build a pipeline of experienced, strong individuals to lead our industry forward and continue to drive change.

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