Read: It’s time to free up the Apprenticeship Levy so employers can transform skills for a post-pandemic workforce

This week is National Apprenticeship Week so the Government’s pledge in last week’s White Paper to make building skills and human capital a key mission in its overall levelling up strategy was welcome news. 

The importance of giving people across the board, especially those from the most disadvantaged backgrounds, the chance to accumulate skills and experience can’t be understated. We know that providing positive destinations for young people – and giving them the right advice and support to understand the opportunities that are out there and how to access them - helps to break down the barriers that still exist in too many of our communities. It’s why Levelling Up Goal 3 “Positive Destinations Post 16+” and Goal 4 “Right Advice and Experience” are crucial. And it’s even more important in the wake of the pandemic, where those communities the furthest away from a level playing field on opportunity were often the hardest hit.

Addressing the skills shortage is one of the most fundamental levelling up challenges we face. As the country grapples with a cost of living crisis which is affecting those on the lowest incomes the most, there are still skilled roles across our economy, often well paid, that are unfilled. That underlines the levelling up challenge on inequality of opportunity. Equipping young people with the skills they need to succeed is vital for the country’s economic and social recovery. It gives them the chance to be part of a new, tech-driven greener economy that requires a workforce with high-tech and digital skills. It also delivers prosperity and well-being back into their communities, alongside allowing businesses to flourish and expand.

When it comes to plugging the skills shortages we face, apprenticeships are an integral part of that levelling up effort. As a chance to earn while you learn, an apprenticeship is a real alternative to further education and a great pathway to a career. The organisations that have been working with the Purpose Coalition understand the importance of a purpose-led business investing in its people to equip them with the right skills, for the benefit of the individual, the company and the communities it serves. Increasingly, they are also making sure that those apprenticeship opportunities are really having the maximum impact on levelling up that they can.

Amazon UK, for example, plans to create 1500 new apprenticeship roles in 2022 in over 50 different schemes across the UK, including Northern Ireland for the first time. As a business it offers the opportunity to retrain and gain new skills to anyone over 18, recognising that keeping skills up to date is vital at any stage of your life. It's investing in skills and careers - even if that next career step of an employee might be to a different company - because it believes developing its employees is the right thing to do, in and of itself.

UK Power Networks is in the top three per cent of apprenticeship providers in the UK and is aiming to go further, extending the programme to include the new roles and careers opened up by the digital and net-zero economic shift. 

Sodexo currently has over 1100 apprentices and has transferred over £1m of its Apprenticeship Levy to SMEs and not for profit organisations within its supply chain, such as the London Ambulance Service. 

The Levelling Up White Paper highlights the positive aspects of apprenticeships and it’s encouraging to hear direct support from the Government for enabling larger employers to transfer their Apprenticeship Levy to SMEs, particularly if those apprenticeships are in disadvantaged areas. 

There’s a real opportunity now to go much further with fresh reform of the Apprenticeship Levy, especially given that major employer groups believe that doing so would enable them to do much more practical skills development. In a recent survey of over 500 HR professionals, fewer than one in five believed that the levy system is working well. While four in five surveyed planned to hire at least one apprentice in the next 12 months, almost half said they’d had to return unspent apprenticeship levy funding to the Treasury. Only half are currently transferring unspent funds within their supply chains and almost a quarter haven’t been able to use any levy funding within their own organisation. CIPD research suggested that £2bn of Apprenticeship Levy funds were returned to the Treasury between May 2019 and March 2021.

The ability to transfer more money to SMEs and to create pooled apprenticeship levy funds for a variety of underserved groups could make a huge difference in tackling the country’s skills shortage. At the moment, the rules restrict transfers principally to supply chains, albeit in a limited way, and to those administered by organisations such as the Mayor of the West Midlands Combined Authority. Allowing clusters of companies in the same sector or region to innovate themselves with the appropriate governance or ‘anchor institution’ companies to take a lead on setting up combined levy funds to address particular common skills shortages would allow a real degree of innovation on the ground. Targeting certain communities or groups, for example female STEM apprentices, would also make a difference. It could help create a race to the top on Levy investment. Incentivising employers to transition people benefiting from the new Kickstart scheme to an apprenticeship also makes sense too.

Reforming the Apprenticeship Levy to become a wider skills levy with an even broader reach than just apprenticeships could unlock a wider skills investment for employers facing very different skills gaps, challenges and needs. It would be possible to place limits on any flexibility, as has happened on supply chain transfers of the levy, to ensure that apprenticeships still remain a principal focus. But in the midst of a skills shortage it would be a missed opportunity for a single pound of apprenticeship levy to remain unused when it could have contributed to raising skills.

The overall message from employers is they want the Apprenticeship Levy to be less complex, more flexible and to allow more innovation. It makes real sense to reform it now so that is truly transformative, and for companies and employers to take the lead on skills development. It’s time for the Government to trust businesses so that employers across the country have the freedom they need to invest in the skills base we all know is so vital.