Labour: Use unspent levy funds to boost apprenticeships with wage subsidy

Labour is calling again for the UK government to put unspent funds from its apprenticeship levy towards a wage subsidy that could create 85,000 new apprenticeships for young people aged between 16 and 24 this year.

Ahead of a virtual visit on Tuesday to an apprenticeship provider in the East Midlands for National Apprenticeship Week, Labour’s Kate Green stressed the need for new opportunities in terms of both jobs and training.

The party has argued that the money not spent from the levy, which amounted to over £330m in 2019/20, could be used to create 85,000 new apprenticeships across the country and help young people “rebuild from the pandemic”.

The Shadow Education Secretary said: “The government is trying to get away with quick fixes, which are selling young people short and failing to create the training and employment opportunities they need.

“The Chancellor’s failure to secure our economy means the pandemic is wreaking havoc with the jobs market and now more than ever people need access to training and the chance to learn new skills.

“Labour has repeatedly called for a plan to rebuild businesses, investing in local communities to create the jobs people need after this pandemic.”

The levy introduced in April 2017 requires businesses with an annual payroll of over £3m to contribute 0.5% of their wage bill into a fund each month. The cash then has to be used within 24 months to fund apprenticeships.

Up to 25% of any of the unused money left at the end of the year can be transferred to fund opportunities provided by smaller companies, which do not pay the levy, while the rest is returned to the Treasury.

Data uncovered by The Open University in 2019 found that over £3bn of funding remained untouched. The higher education institution learned through a freedom of information request that only £480m of total funding had been used.

The number of new apprenticeships in the country has fallen significantly over the past few years, declining by 189,000 between 2016/17 and 2019/20, and new starts were down 27.6% in August to October 2020 on the same period in 2019.

The government announced an incentive last July of either £2,000 or £1,500 for those taking on a new apprentice. Ministers budgeted for 100,000 payments, but data shows that only 18,670 young people have been taken on under the scheme.

Unite the Union assistant general secretary Steve Turner called on government ministers, when the Chancellor announced the additional cash incentive last year, to release the “£3bn of levy money sitting in the Treasury’s coffers”.

Turner renewed his demand in a LabourList piece for National Apprenticeship Week. “I say again to Rishi Sunak, find the key to that pot, get the cash working and give our young people and planet hope of a brighter tomorrow,” he wrote.

“Act now to address your own government figures, which show a 60% decline in apprenticeship starts between May 2019-20. Intermediate level starts fell by 74% and those aged under 19 starting an apprenticeship at this level have fallen by a staggering 83%.”

Unite has called for a National Manufacturing Skills Taskforce to bring together employers, skills bodies and unions to ensure programmes, qualifications and lifetime training opportunities meet employer, individual and industry needs.

The assistant general secretary pointed out that this is “normal business in so many countries”. He cited Germany as an example, which has a tripartite system of federal government, unions and employers working together.

Labour has proposed that the government provide a full wage subsidy for a new apprentice’s first three months, a 50% wage subsidy for six months and subsidy of 25% for the final three months. This would save employers over £3,500 per apprentice.

Shadow further education and skills minister Toby Perkins commented: “Young people are being let down by the government’s irresponsible handling of this crisis, which has led to soaring unemployment rates and the worst recession of any major economy.

“The government should adopt Labour’s proposal for a structured wage subsidy instead of their failing cash incentives and create the apprenticeship opportunities young people need to gain productive skills and long-term employment.”