|Date:||31 January 2017|
|Authors:||Neil Amin-Smith , Jonathan Cribb and Luke Sibieta|
In April 2017, the government is introducing an ‘apprenticeship levy’ (a 0.5% tax on an employer’s paybill above £3 million per year), which is estimated to raise £2.8 billion in 2019–20. At the same time, it is introducing more generous subsidies for employers training apprentices in England. However, government spending on apprenticeships in England is only expected to increase by £640 million between 2016–17 and 2019–20. So most of the revenue raised is being spent elsewhere.
This new funding system is intended to help the government meet its commitment that there will be 3 million apprenticeships starting in England between 2015 and 2020. However, the significant expansion and design of the new system risks it being poor value for money. Specific elements of the system could end up being particularly damaging to the public sector.
It is already the case that 44% of new apprentices are aged 25 and over and the new target is likely to increase this fraction. There is a risk that the apprentice ‘brand’ is becoming just another term for training.
These are among the conclusions from new analysis of reforms to apprenticeship funding by IFS researchers, which forms part of the forthcoming IFS Green Budget 2017, produced in association with ICAEW and funded by the Nuffield Foundation. The analysis examines the new system for funding apprenticeships and its potential effects. It finds that:
Neil Amin-Smith, an author of the report, said: “We desperately need an effective system for supporting training of young people in the UK. But the new apprenticeship levy, and associated targets, risk repeating the mistakes of recent decades by encouraging employers and training providers to relabel current activity and seek subsidy rather than seek the best training. There is a risk that the focus on targets will distort policy and lead to the inefficient use of public money.”
Jonathan Cribb, another author of the report, said: “With the subsidies for apprentices’ training costs at 90% or 100%, employers are encouraged to take on more apprentices. But this also provides them with little or no incentive to choose a training provider with a lower price. In addition, the specific targets for most public sector employers in England to employ apprentices could lead to costly, and potentially damaging, re-organisations, and should be dropped.”
1. ‘Reforms to apprenticeship funding in England’ by Neil Amin-Smith, Jonathan Cribb and Luke Sibieta is a pre-released chapter from the IFS Green Budget 2017, edited by Carl Emmerson, Paul Johnson and Robert Joyce. The chapter is now available on the IFS website
Please contact Bonnie Brimstone in the IFS press office 020 7291 4818 / 07730 667013 if you have any queries.
2. The full Green Budget publication, with analysis from IFS and additional analysis from ICAEW and Oxford Economics, will be launched at 10:00 on Tuesday 7 February 2017 at Guildhall London and will be published in full on the IFS website then.
If you wish to reserve a place at the launch event, please do so here. The event will also be webcast in full, you can register to watch it here:
3. ICAEW is a world leading professional membership organisation that promotes, develops and supports over 147,000 chartered accountants worldwide. They provide qualifications and professional development and share their knowledge, insight and technical expertise, and protect the quality and integrity of the accountancy and finance profession. As leaders in accountancy, finance and business ICAEW members have the knowledge, skills and commitment to maintain the highest professional standards and integrity. Together they contribute to the success of individuals, organisations, communities and economies around the world. Because of this, people can do business with confidence. ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance.
4. The Nuffield Foundation is an endowed charitable trust that aims to improve social well-being in the widest sense. It funds research and innovation in education and social policy and also works to build capacity in education, science and social science research. The Nuffield Foundation has funded this project, but the views expressed are those of the authors and not necessarily those of the Foundation. More information is available at nuffieldfoundation.org.