The Treasury says that the changes are aimed at providing flexibility for businesses to encourage the employment of apprentices.
An extra £90m of government funding will be made available to employers to invest a quarter of their apprenticeship funds on people working for businesses in their supply chain.
A further £5m will go to the Institute for Apprenticeships to introduce new standards and updating existing ones so that more courses can be offered. The government will discontinue the old frameworks so that all new apprenticeships will be on the same higher-quality standards by the start of the 2020/21 academic year.
In the coming weeks, the government will set out a process to seek views on the operation of the levy after 2020 to ensure it supports the development of the skilled workforce businesses need for the new economy.
Chancellor Philip Hammond told the Conservative Party conference: “We have heard the concerns about how the apprenticeship levy is working so today we’ve set out a series of measures to allow firms more flexibility in how the levy is spent.
“But we know that we may need to do more to ensure that the levy supports the development of the skilled workforce our economy needs. So in addition to these new flexibilities, we will engage with business on our plans for the long term operation of the levy.”
The Federation of Master Builders (FMB) has been a prominent critic of the government’s youth training policies. FMB chief executive Brian Berry said of the news: “The chancellor has, in part, listened to the concerns of business by making the Apprenticeship Levy more flexible. However, he needs to go much further. Currently 10% of levy vouchers can be passed down through the supply chain from large firms to smaller firms and today, he increased this to 25%. This is important as in construction, it’s the small firms that do the bulk of the training while the large firms don’t tend to directly employ or train tradespeople. Since the Apprenticeship Levy was introduced last year, apprenticeship starts have fallen in the construction trades by more than 10%. Given that the construction industry is already suffering from an acute skills shortage, this is very worrying indeed. If the chancellor is serious about ensuring the levy has the desired effect, and increases meaningful training across all sectors, it should go further and make 100% of the vouchers transferable from large to small companies.”
Confederation of British Industries (CBI) director-general Carolyn Fairbairn said: “Reform of the Apprenticeship Levy, currently failing firms and apprentices alike, is vital. Companies know they are nothing without their people. Apprentices accelerate local growth and have been failed for too long. Businesses will be delighted to hear today’s commitment to change.
“Companies spend £45bn every year on skills training, more than the entire English secondary school budget. But for two years CBI members of all sizes have been clear that the Levy has blunted provision. The 40% drop in apprenticeship starts alone is evidence that this reform is long overdue.
“To their credit the government is listening. Improving the range of high-quality courses available and helping supply chains work together to provide what is needed locally is what business has been calling for. But more is needed. The government must act now to deliver a meaningful review of the levy that demonstrates it will continue to collaborate with companies.”