CBI Deputy Director-General Josh Hardie has said that the Government must urgently reform the Apprenticeship Levy if it is going to deliver great training and jobs.

Speaking at the FE Week Annual Apprenticeships Conference in Birmingham, Josh called for more flexibility in how Levy funds can be spent on apprenticeships, so firms can work together to deliver high-quality training in their area or sector.

Josh acknowledged that the Government has started building an effective English skills system through the introduction of T-levels and the National Retraining Partnership. But he urged the Government to continue with its reforms to apprenticeship standards and better progression for apprentices to higher paying jobs.

He also said that the Institute for Apprenticeships needs to be empowered to ensure that the volume of quality training provision in the market rises.

On the current design of the Apprenticeship Levy, Josh said:

“CBI members tell us that skills shortages are the biggest risk to UK growth and competitiveness. So it’s essential that apprenticeships lead to high-skilled, high-paid jobs that are competitive in the 21st Century.

“The Apprenticeship Levy could be a vital part of the skills system. By rewarding those who do their bit and taxing those who do not, encouraging more investment. If this were in the pipeline, the CBI and its members would champion it to the rooftops.

“But unfortunately, right now, the Levy doesn’t do that. Businesses want a system that delivers for people and our economy in the long term - with a focus on quality, not numbers.”

On the current challenges of the Levy, Josh saud:

“There’s been a 41% drop in apprenticeship starts over the past year. That’s a 41% drop in opportunities for young people and those who want to progress in the workplace. It shows that the Levy in its current form isn’t fit for purpose.

“Recently, a big investor in R&D told me they pay the Levy and want to get more apprentices on board. They’re based in the Oxford-Cambridge corridor – so you’d think they’d be spoilt for choice when it comes to local training. But they aren’t, it’s all retail apprenticeships. And the Levy doesn’t allow them to fund a local business initiative to change that.

“Another member, a large insurer, runs a very successful and expanding apprenticeship scheme. Alongside it, they also run internships, traineeships and work placements – all well-established programmes developing talent, but none of it Levy-compliant. The Levy isn’t flexible enough to pay for any of that extra learning. It’s simply not working as it stands.”

On what the Government can do, Josh will say:

“Last week’s Spring Statement saw £80 million announced to help small businesses recruit apprentices. Sounds great. But pouring good money into a bad system is like trying to bail out a sinking ship without plugging the leak.

“We needed meaningful change. What we got was another missed opportunity - more wasted time when the clock is ticking. And as long as this continues, it will only discourage firms from engaging with formal training programmes.

“It doesn’t have to be like this. The Levy’s design faults are serious, but not insurmountable. To its credit, the Government has started to listen and to act on the advice of its critical friends through the introduction of T-levels and the National Retraining Partnership. Business loves these developments because they can help shape their results.”

On a solution to fix the problems of the Apprenticeship Levy, Josh will said:

“Ministers should immediately loosen the rules on what happens to the Levy cash itself – next month’s 10% transfer rule simply isn’t enough.

“Companies should be able to draw down far more from the Levy pot – over 50% - and use it to work with others to create centres of excellence for training.

“Providers should also lead from the front and make sure that they’re offering high-quality apprenticeships that suit local businesses – reacting to employer demand, not going back to an old system.

“Next, the Government must redouble its commitment to quality provision, pushing ahead with the Apprenticeship Reform Programme.

“And finally, the Institute for Apprenticeships (IFA) needs proper teeth as an independent skills regulator. We need a system where business and people able to influence changes and a real focus on the commercial understanding that people and companies are customers, and providers are suppliers.”