Labour Party Conference 2023
The Growth and Skills Levy
A St Martin’s Group thought piece for Labour policy makers.
St Martin’s Group was established in 2018 with the aim of helping to create a world-class Apprenticeship system by providing policy makers and officials with forward thinking, practical and data-drive solutions. Our membership is unique in capturing the experience and expertise of leading employers, training providers and awarding bodies and is widely seen as being representative of the sector.
The purpose of this paper is to provide a high-level overview of what an incoming Labour administration should consider when transitioning the Apprenticeship Levy to a Growth and Skills Levy.
The paper covers:
The purpose of the Apprenticeship Levy and the Growth and Skills Levy
The Apprenticeship Levy has suffered from an ongoing debate about its purpose. There is agreement that it must help drive economic growth and productivity but little else. Is it for young people? Older people? Entry-level jobs? Professional roles? New starters? Existing employees?
The St Martin’s Group believes in inclusion, diversity and flexibility. Improving economic productivity can go hand in-hand with increasing social mobility. Lifelong learning is essential. Lower-level training pathways are as important as developing higher-level skills. A Level 2 qualification for someone starting work can be as valuable as a Level 6 Degree Apprenticeship for a young person from a socially disadvantaged background.
A new government has the chance to end this unproductive debate. There is an opportunity to embrace inclusion, diversity and flexibility of provision and recognise that a Growth and Skills Levy should be for all employees. This means accepting a broad-based, lifelong approach to skills development to drive economic growth.
What is working with the Apprenticeship Levy?
Three features of the Apprenticeship Levy have worked well and should be retained:
What needs to change?
Below are three areas where the Apprenticeship Levy has not worked, and we propose system change:
Approved, updated and new qualifications.
As stated above an apprenticeship is not always the most appropriate training for either a new or existing employee, or for the employer. Enabling employers to have greater flexibility over a proportion of a reformed Levy makes sense. The St Martin’s Group believes such a change could have the biggest positive impact on supporting entry-level roles for young people and those with lower educational attainment levels.
The practical implementation of such a policy change will be key. The ESFA provides a list of already approved and regulated public qualifications. Each has an associated funding level. The list contains several thousand qualifications. Most of these programmes are at Level 3 and below. It is debatable whether all should be approved for funding through the Levy. Further work is required here. Options for consideration include allowing the Levy to be used for qualifications that link to areas of acute skills shortages, or directly align to a wider national industrial strategy.
A further important consideration for policy makers seeking to drive productivity growth through a reformed Levy, is the speed of development and revision of new qualifications. Developing new courses and programmes can be painfully slow. Here looking at improved ways of developing and approving qualifications by working with awarding bodies is an important component to implementing a responsive and agile skills system.
Machinery of Government Changes
Labour has committed to create Skills England, and ring fence at least 50% of employers’ Growth and Skills Levy for apprenticeship training. In any change there is a trade-off between a complete overhaul, building on what is working, and discarding what is not. There is a case for retaining and harnessing the parts of the system that are working, rather than a wholesale change of institutions which could slow rather than speed up an in-coming government’s reform agenda. Consultation with parties in the system is essential in supporting this.
There are significant opportunities to take the parts of the Apprenticeship Levy that work and transform those that do not. Embracing the fact that Lifelong Learning requires an inclusive, diverse, broad and flexible approach to skills development is essential. Employers deciding how they spend their Levy has been a real success and a driver of quality and giving them greater flexibility will be welcome. Recognising that apprenticeship starts on their own, are not a measure of our ability to vocationally train a productive workforce, will mark a nuanced but important change of policy thinking. New flexibilities can also ensure that lower-level skills for those of lower educational attainment are not left behind as employers increasingly embrace higher-level Apprenticeships. Supporting SMEs must also be a priority as the system is failing them. In implementing the Growth and Skills Levy, recognise that Apprenticeships are hugely successful in building and growing talent, and be mindful of undoing the parts of the system that are working whilst reforming those that are not.
For further details contact: Emily Austin, Engagement Director, [email protected]