Changing Courses: A new vision for employer investment in skills and the apprenticeship levy

In recent years, our education and training system has been buffeted by several seismic events, including the quest to reach ‘Net Zero’ by 2050, Brexit, the COVID-19 pandemic and now the looming prospect of yet another economic downturn. To rise to the challenge posed by each of these events, let alone a combination of them, hundreds of thousands of workers will need to be reskilled or upskilled at a speed and scale potentially never been seen before in this country. Regrettably, England is starting from a position of weakness. The amount spent by employers on training their employees has fallen 28 per cent in real terms since 2005, from £2,139 to £1,530 per year (less than half of the EU average). Even before the pandemic, 39 per cent of employers had provided no training to their staff in the previous 12 months. The introduction of the apprenticeship levy in 2017 was an attempt, at least in part, to stimulate further employer investment in skills and training. Operating like a payroll tax, UK employers with an annual pay bill of over £3 million (approximately 2-3 per cent of employers) must pay the levy at a rate of 0.5 per cent of their wage bill above £3 million. However, despite the rollout of the levy five years ago, the Government’s ‘Spring Statement’ in March 2022 acknowledged that “the amount UK companies spend on training their employees remains relatively low”, and that they intended to “consider whether further intervention is needed to encourage employers to offer the high-quality employee training the UK needs”. Consequently, this report investigates the impact of the apprenticeship levy as well as the wider skills and training system to understand why the UK remains so far behind other countries in terms of employers investing in skills, and what can be done about it.