Apprenticeship Levy won’t solve skills crisis, says training chief

Chris Wood

The head of an East Midlands training company says the government’s apprenticeship levy will be insufficient to ease the skills crisis, specifically in the energy and water industries.

Chris Wood, chief executive of Develop Training (DTL) of Derby, which is pioneering the new Trailblazer Apprenticeships with clients from the utility sector, said: “The proposed business levy, which is intended to encourage firms to invest in apprenticeships, appears ill-conceived. Although only big companies with a wage bill of £3 million or more will be affected I can see difficulties in recovering those costs in practice. Most large firms would need to take on hundreds of apprentices with perhaps few prepared for this in the near-term, not least because of the dearth of suitable candidates. Rather than being perceived as a training panacea the levy risks being seen simply as another short-term tax on large businesses.”

The government will introduce the apprenticeship levy from April 2017 at a rate of 0.5 per cent of an employer’s wage bill. However because employers will receive an allowance of £15,000 against the levy it will only be paid on payrolls in excess of £3m. For a large organisation, with a payroll of £800m, the annual levy would amount to £4m. Therefore, to realise a financial return, that firm would probably need to recruit 200 to 300 apprentices per year.

Wood continued: “When it comes to investing in training and skills there seems only ever to be two courses of action: tax-and-spend or borrow-and-spend. Not only do these approaches involve generally unpalatable sources of funding but importantly both call for direct government action. In essence they involve the abdication of corporate responsibility.

“Instead of simply taxing businesses, the government should look to encourage British business owners to invest directly in the people who will ultimately operate and manage their companies. The government could help in this respect through supportive tax-breaks or other incentives but, frankly, it should also be driven by commercial common sense.”