A Levy for good or another stealth TAX?
I hope you can find a few moments to read about a subject that I believe to offer many challenges to us all as individuals, businesses and the Government, that being the appropriate and intended use of the Apprenticeship Levy, or not as the case may be. These are by no means insurmountable challenges, quite the opposite, and like most things in life they just require some thought, planning and effort.
As we all try to navigate the Apprenticeship Levy, reduce the skills gap and provide more opportunity for those motivated to help themselves individually or on a company level, I am more than a little perplexed as to why this subject isn't being highlighted more publicly and the reasoning behind organisations and the Government not doing more to take advantage of the levy to up skill employees, plan for the future and decrease the skills gap isn't being looked at with a great deal more scrutiny.
The apprenticeship levy has all the potential to provide answers to a multitude of challenges if looked at strategically, planned correctly and executed effectively. Frankly, people deserve the opportunities that this money would afford them but unfortunately in many cases, the combination of legislative complexity coupled with over stretched company executives means that huge sums of money that could be invested in the right way, ethically and commercially are being written off as TAX. Arguably, this could be seen as giving the UK Government exactly what it would seem they intended, further TAX on business and more importantly, diverting funds from having a practical, measurable impact on the skills gap and the future education of those individuals wanting to develop themselves, directly in to the HMRC coffers.
To give some context, in April 2017 a new Government bill was launched called the Apprenticeship Levy. Every organisation with a PAYE of over ￡3 million was mandated to pay 0.5% equivalent of their PAYE into a fund that could only be spent on the training and development of apprenticeships. Monies that weren’t spent internally would go to the Governments central pot to fund SME and non-levy payer’s apprenticeship training. It is estimated that this legislation will create a development pot of ￡3 billion. It is worth making the point that "Apprenticeship" does not always mean school leaver, professional apprenticeships can and should be made available across organisations at all levels.
The government have also published a target of 2 million apprentices in employment in England by 2020, currently there are about 600,000
The issue that I believe should be highlighted is that many organisations, instead of looking for ways to strategically spend the monies on developing their internal talent and increasing their educational development programmes, are just paying it as a tax. Interestingly it is the organisations with the bigger levy pots that are the problem, companies that able to work with large tax accountancy firms to leverage tax rules rather than create transparent development pathways to engage and future proof their employees. Blue Chip organisations with large levy pots in the tens of millions have publicly said they will not be doing anything with their levy as the opportunity cost is too high. Organisations who are just looking to hire more school leavers are not in any way maximising the levy with either the talent opportunity or their ability to recoup their levy and decrease their current L&D spend.
Some commentators believe that the question that should be asked is whether it is actually in the realms of professional misconduct to have a pot of money to spend on developing your employees but blatantly “throwing it away’ rather than taking the time to understand how to strategically maximise it. After all, this is in the best interests of each organisation to protect their ability to have the best, most skilled workforce in future years.
However, the Government has been purposefully vague about policies and best practices as they have already re purposed their own apprenticeship grant pot and need the employers to allow the money to defer to them. The process is complicated and government have changed dates, policies and goal posts several times already. Brexit hasn’t helped and the slew of additional financial and data regulations that are coming out at the same time.
The Government will never name and shame organisations who ignore this development opportunity (in France if you don’t spend your training tax on your employees you get fined, here it just goes back to the Government). They have said that they will name and shame public sector organisations who don’t have the required 2.3% of employees on apprenticeships by 2018, or at least have a plan in place to do so by next year. Presumably as that will affect the likelihood of them achieving their target of 2 million apprentices by 2020. Most organisations would rather focus on Quality than Quantity of apprentices in the UK.
I believe that if organisations don’t want to spend this money on their employees or engagement initiatives then at least they should be able to nominate charities who do develop those who want opportunities and/or need extra help such as NEETS, ex-offenders, military or long term unemployed but right now they can only spend it on new and existing employees.
You don't have to look far for examples of how this money could be invested, there are some amazing initiatives that are currently totally underfunded such as https://theleighutc.org.uk/ and indeed the entire UTC network of 48 schools or www.veteranswork.org.uk or https://stressdownday.uk/ or https://schoolofhardknocks.org.uk/ or https://challengertrust.org/ to name but a few, all of whom are doing amazing things on a shoe string budget. There are so many examples of how wasted levy money could be utilised for the development of those wanting to get on in life and to have a practical and measurable impact on the skills gap in the UK that apparently, is so important to our Government.
I would welcome the opportunity to open the discussion with the wider community about this and would invite you to join the Temple Brown LinkedIn group to discuss this and other subjects relating to the levy.
Daniel Brown
Partner
Temple Brown Consulting
Tel: 0203 823 3525
Mobile:+44 (0) 7879 627 007