Richard Morgan runs his own Leadership & Management Training Consultancy and is currently Leader of the Conservative Group on Cotswold District Council. He is the candidate for Bristol South in the 2019 General Election.
Central to the Conservatives’ youth offering at the last election was the policy on apprenticeships and specifically the Apprenticeship Levy. The levy was introduced in April 2017 to help achieve the ambitious target of three million new, high-quality apprenticeships by 2020.
In theory, this policy should be fertile ground in terms of attracting voters of all ages. For business owners, the levy offers a way to plug skills gaps, attract and retain talent and bring fresh skills and ideas into their organisation in a very affordable and sustainable way. For the employee, the levy should offer abundant, well-paid, long term skilled employment opportunities without the debt associated with the traditional university route. On paper, this policy should be a win-win.
The levy was supported by great intentions, and was specifically targeted to developing young people, providing opportunity and increasing social mobility whilst boosting nationwide productivity. Indeed, some of our nation’s largest employers have heralded the levy as a huge success, with companies like BT, BBC, Ricoh, River Island and MBDA systems all articulating how successful the levy scheme has been for them and their staff.
However, the introduction of the levy is far from a total success story. The number of new apprenticeships is falling (375,800 in 2017/18), and the Government’s target of three million new apprenticeships by 2020 seems to be a distant pipedream.
Philip Hammond announced some reforms to the levy in October 2018, but they did not go far enough to turn the situation around, and there are now calls for the Government to abandon the policy altogether, with all eyes waiting to see what direction the new Conservative Party manifesto will take.
If the Conservatives are serious about developing a high-skilled, high-wage, low tax economy then our policy on apprenticeships should be high profile during this general election campaign. I think that rather than abandon the Apprenticeship Levy, the Conservatives should radically reform it!
The first issue with the levy we need to address is the complexity and rigidity of the system. Many businesses view the levy as nothing more than a painful additional tax, and bemoan the additional levels of bureaucracy. Currently, less than a quarter of the available funds are being used by businesses, and nearly £300m a month is being lost back to the Treasury. The system needs to be simplified and streamlined.
Central to our thinking should be that business owners (not central government) are best placed to understand the needs and requirements of their industry, and we should give them the freedom to spend their own money how they see fit.
As long as the money is being spent in the UK and being spent on training and developing the skills of our own residents, we should give businesses freedom and allow them to spend on the areas they think need it most. For example, if a business wants to spend more than 25% of their levy money on their own supply chain, they obviously think that it’s justified so why is central government standing in the way?
The second issue is that not enough funds are flowing through to the crucial 16-18 age group, who are often key targets from small and medium-sized businesses. In Germany, for example, 35% of all post-secondary school students (16-18-year-olds) are on an apprenticeship, but in the UK it is still just 4%. The Government needs to address the fact that there is not enough supply of young apprentices for small and medium-sized businesses, and that there are not enough funds flowing through to this key development area.
In the Cotswolds, for example, we are lucky to have the excellent South Gloucestershire and Stroud College, but this establishment is crying out for more financial support so it can meet the huge local demand for trained apprentices.
There are three ways the Government could boost funds for the 16 to 18 age group. Firstly, remove the 10% top-up it gives to large PAYE contributors and redirect this money directly to the 16-18 age group. Secondly, you could give businesses the freedom to spend their levy money on local education projects in their own communities if that’s how they think it is best spent. Thirdly, you could fund apprenticeships (for 16–18-year-olds) directly from the education budget, rather than the apprenticeship levy (requiring an additional £400m per year, but potentially radically changing the youth employment market).
The Apprenticeship Levy was introduced with great intentions, and it is helping some businesses and creating opportunities for some young people. However, the policy still needs to be reformed, simplified and deregulated so it can have a wider impact.
Central government should get out of the way, and trust business owners to do the right thing and spend (their own) money on the priorities they think matter most. Also, more financial support needs to be directed specifically to the key 16-18 age group.
If these two key areas are addressed, the levy could yet go on to achieve the ambitious targets that were set, and the policy could be a popular vote winner on 12 December.