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Hot topic: Apprenticeship levy, part two

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Will the apprenticeship levy help close the UK's skills gap? Will businesses be able to handle the extra costs?

The Autumn Statement contained a "sting in the tail" in the form of the apprenticeship levy, according to the CBI. Due to come into force in April 2017, at a rate of 0.5% of an employer's pay bill, will this measure help to close the UK's skills gap? Will businesses be able to handle the extra tax, in addition to the National Living Wage, and will it help to improve the quality of apprenticeships?

Andy Smyth, chairman of the City & Guilds Industry Skills Board, said:

"Apprenticeships are vital to enhancing Britain’s productivity and creating a skilled workforce. Annual productivity gains from training an apprentice average £10,280 per year.

When the government set a target of creating three million apprenticeships by 2020 many welcomed the ambition. There is support from the Industry Skills Board (ISB). But the focus should be on high-quality apprenticeships rather than meeting targets. We need a sustainable, long-term funding solution.

The apprenticeship levy could well be that solution. But it will only be successful if employers support it, and so far there has been a mixed reaction. The concerns are not insurmountable, but government must strike the right balance between rigour and bureaucracy to ensure employers create quality apprenticeships.

There is a great deal of work ahead, but it is reassuring to see industry suggestions taken on board. One of the most positive announcements in the Spending Review was for an Institute for Apprenticeships: an independent employer-led body to take responsibility for levy expenditure policies. This is something we recommended, because putting businesses in control of how the levy is used will help to ensure the system works for them.

While we wait to see how this works, it’s important employers don’t rush to develop large-scale apprenticeship programmes purely to spend their levy allocation. Apprenticeships will only be successful if they are allowed to grow sustainably, and are aligned with recruitment and retention policies.

If we can get this right, apprenticeships could become a respected and successful tool for boosting productivity and building the future workforce."

Read Veolia HRD Marguerite Ulrich's view here