What is the Legislation Behind the Apprenticeship Levy?

  • By downloading this resource, you are consenting to opt-in to receive marketing communications from us. You may unsubscribe from our communications at any time. For more information on how we store your data, view our Privacy Policy.

The Apprenticeship Levy has been a feature for large organisations in England since 2017 but remains a divisive topic amongst employers, training providers and policy makers.

In FE circles, the levy frequently sparks nuanced debate, campaigns, and a rich cluster of opinion pieces.

In the 2022 Spring Statement, Chancellor Rishi Sunak hinted at an upcoming government review to ensure the levy incentivises employers to deliver “the right kind of training” and boost productivity. Plans for a review were quickly denied by the Treasury, but the debate persists.

With the Apprenticeship Levy once again emerging as a hot topic, it’s a good time to recap where the levy came from, and what it was designed to achieve.

The Richard Review

In 2012, Doug Richard’s independent report on apprenticeships set the wheels in motion for a range of government reforms.

His recommendations included redefining apprenticeships to place greater importance on the outcome, with clear industry recognised standards for consistency. Richard also proposed incentives for apprenticeship training through government funding. It is this advice that formed the basis of a complete shake-up of the apprenticeship system.

Future of Apprenticeships in England: Government Implementation Plan

In response to the Richard Review, the coalition government launched a consultation and implementation plan in 2013. This plan contained bold pledges to modernise apprenticeships, with practical steps for improvements including higher expectations of English and Maths skills, a new grading system, and an increased emphasis on assessment at the end of an apprenticeship.

The Introduction of Apprenticeship Standards

In 2014, new Apprenticeship Standards were introduced to improve the quality and relevance of apprenticeship training. Standards were developed by groups of industry-leading employers, known as Trailblazers. Standards were designed to be more challenging, detailed, and more aligned to specific job roles than the Apprenticeship Frameworks they replaced.

One of the key features of Apprenticeship Standards is the introduction of End Point Assessment, as recommended by the Richard Review. In 2020, the last remaining Framework Apprenticeships were retired, replaced by the new Standards.

Introduction of the Apprenticeship Levy: Finance Act 2016

While the Apprenticeship Levy was initially announced in 2015, it didn’t become UK law until the Finance Act 2016. When it came it to effect at the start of the 2017 tax year, hopes were high: the Department for Education projected that the levy would raise over £2bn in the first 12 months and committed to 3 million apprenticeship starts in England by 2020.

Updates to the Apprenticeship Levy

Despite these high hopes, uptake of Apprenticeship Levy funding has fallen short of government expectations, and many employers remain reluctant to draw down their available funding for apprenticeships.

To combat this, the government introduced a transfer allowance to help employers share their unused levy funds with other organisations. This was initially set at 10% but was later expanded to 25% in 2019.

Read More: How to Transfer Your Apprenticeship Levy Funds

Why is the Apprenticeship Levy Controversial?

For many organisations, the Apprenticeship Levy has created a valuable fund to tackle skills gaps head on. For others, the Levy is either written off as a tax or forgotten about entirely.

Some business consortiums argue that the levy should be made more flexible, expanding funded activity to apprenticeship wages and short courses; while others are keen to defend the rigour and reputation of apprenticeships, arguing that expanding the scope of levy funding would dilute the apprenticeship brand.

Related Content: Guide to Making the Most of Your Apprenticeship Levy Funds

The Future of the Apprenticeship Levy

Whether the Apprenticeship Levy will be up for review in the years to come remains to be seen. But one thing is for sure – when employers invest their levy funds in apprenticeships, they see a huge return on investment.

To find out more about the roles apprenticeships could play in your organisation, check out our programmes, read our case studies, or get in touch with our team.