Plans revealed in the Queen’s Speech to create an adult education and training system that is fit for the future will be fatally flawed as there is no decision to reform the Apprenticeship Levy, the CIPD has said. This comes as new data shows employers have been forced to write-off £2bn of levy funds over the last two years.

The CIPD has obtained data using FOI requests, which show that £1.999bn of employers’ levy funds expired and were returned to the Treasury between May 2019 and March 2021, as they were unable to use them on apprenticeships.

Organisations in the UK can receive government funding to pay for apprenticeship training, depending on their turnover. If an organisation does not need to pay the levy (because its pay bill does not exceed £3m each year), it will pay 5% towards the cost of training and assessing each apprentice. Organisations agree a payment schedule with the training organisation and pay them directly for the training. The government then pays the rest (95%) up to the funding band maximum, directly to the training organisation. Organisations can be eligible for extra funding depending on both their and the apprentice’s circumstances.

The analysis also shows that employers are spending increasing amounts on generic management apprenticeships. Overall, employers spent £378m on just four generic management apprenticeship standards between 2017/18 and 2081/19, as employers seek ways of spending their levy funds.

While employers have doubled their expenditure on management apprenticeships, in the same two years the number of apprenticeships going to young people under the age of 19 fell by 8%.

At the same time, as CIPD revealed in March, overall employer investment in apprenticeships, including for young people, and in skills more widely has fallen since the levy was introduced.

Speaking after the Queen’s Speech, Ben Willmott, head of public policy for the CIPD, said:

“We welcome the ambition to put employers at the heart of the skills system and ensure local skills provision meets local business needs. However, without a fundamental rethink of the Apprenticeship Levy, plans to boost employer engagement with local education and training providers are likely to be fatally undermined.

“The levy is failing to deliver the right results for learners and employers. We need an effective skills system more than ever if the government’s ‘levelling up’ agenda is to succeed.

“A more flexible training levy would enable employers to invest in other forms of accredited training and development, and would maximise opportunities for employers to work with their local further education colleges and universities.

“Instead, employers are currently losing £1bn a year on levy funds they can’t spend because the scheme is too inflexible. This money should be going towards other forms of adult skills investment and training and could supplement the new flexible loans for adult learners."

Willmott also commented on the Speech’s lack of attention to the proposed Employment Bill, stating:

“Today’s announcements were a missed opportunity to confirm the government’s commitment to measures in the Employment Bill. Improving labour market enforcement, flexible working and enhancing leave for carers are key issues for working people and the ambition to build back better.

“The labour market enforcement system in particular is broken and requires urgent attention to boost state-based enforcement and address the weaknesses in the employment tribunal system. This is already close to breaking as demand rises from people seeking redress over breaches to employment rights, with many employees waiting more than year for tribunal cases to be heard.

“It’s crucial government moves quickly to tackle these issues as the pandemic and its aftermath will create employment relations challenges for employers and increase the risks that workers’ rights could be undermined."

Read the CIPD’s full comments here.