The Apprenticeship levy was announced in Chancellor George Osborne’s summer budget, and was very much seen as a surprise announcement. It will be a hypothecated fund, which means that funds raised by the levy can only be spent on Apprenticeships – this is rare as governments usually like to be able to move money around between budgets.
The levy is due to start in 2017. This is a very ambitious timeframe for implementation, and it remains to be seen whether the government will be able to set up a system for collecting and allocating the funds by then.
The proposed levy will apply to all ‘large employers’. It has been speculated that this will apply to companies that employ more than 250 staff, although this has not been confirmed. The levy will apply in all sectors, including public and charity sectors.
There is a huge unanswered question regarding whether small and medium sized businesses (SMEs) will be able to receive funding from the levy, or whether it will be ring-fenced and therefore only available to those large employers that put the funding in. If SMEs are not included, the government will have to ensure that apprenticeships for SMEs are properly funded.
The initial proposal was that the levy would be collected via PAYE – the rate is unknown, but 0.5% has been heavily rumoured.
Papers released by the Treasury following the announcement stated that the funding will be directly controlled by employers. The levy will operate through a ‘voucher’ system, where the employer has control over the budget, and pays the provider(s) through the voucher.
Employers have been informed that they will have the opportunity to “get more out than they put in.” Unless the fund is topped up from the government, this implies that the government is very confident that not all employers will decide to take on an apprentice, despite the fact that they have paid the levy.
The government’s consultation on the levy closed on 2 October, and it is clear that there are many opposing views to consider. Learners, providers and businesses have all had their say, and it will certainly be difficult to unveil a model that satisfies all parties.
If we assume that the final model will be unveiled around the time of the upcoming Spending Review on 26 November, it leaves a short timeframe in which to make a decision on the final model. However, as we do not yet know when further details will emerge, it could be as late as March 2016 before we know full details of how the levy will work.
