06 June 2016
Article by Anne Thomas, National Assembly for Wales Research Service
The UK Government is introducing an Apprenticeship Levy in April 2017. An early priority for the new Welsh Government will be to determine two main issues:
- How much of the revenue generated by the new UK Apprenticeship Levy will be passed on to Wales?
- Will there be any changes to apprenticeships in Wales, particularly to the funding of Welsh apprenticeships, as a result of the levy?
What is the Apprenticeship Levy?
The Chancellor of the Exchequer and the Department for Business, Innovation and Skills announced plans for a UK Apprenticeship Levy in the Spending review and autumn statement 2015.
Between August and October 2015, there was a public consultation: Apprenticeships Levy: employer owned apprenticeships training. 711 responses were received.
The UK Government published its response to the consultation on 25 November 2015: Apprenticeships Levy: employer owned apprenticeships training: government response (PDF 309KB).
In December 2015, the Department for Business, Innovation and Skills published Apprenticeships (in England): vision for 2020 which outlined its plan to increase the quality and quantity of apprenticeships, ‘achieving 3 million apprenticeships by 2020’ in England.
Key facts about the Apprenticeship Levy
- The Apprenticeship Levy applies to the whole of the UK and therefore will apply in Wales.
- It will apply to both private and public sector employers.
- Large employers will have to contribute 0.5% of their wage bill, based on total employee earnings excluding payments such as benefits in kind.
- The Levy will be payable on pay bills in excess of £3 million a year. It will be payable through Pay As You Earn (PAYE) and will be payable alongside income tax and National Insurance. Large employers will then have a levy allowance of £15,000 per year to offset against the levy that they have paid.
An example of what an employer will pay
An employer with an annual pay bill of £5,000,000:
- levy sum: 0.5% x £5,000,000 = £25,000
- subtracting levy allowance: £25,000 – £15,000 = £10,000 annual levy payment.
- The Department for Business, Innovation and Skills says that less than 2% of UK employers will pay the Levy.
- The implementation date for introducing the Levy is 6 April 2017.
Accessing money paid under the Apprenticeship Levy
In England, once employers have paid the levy to HM Revenue and Customs (from April 2017), they will be able to access funding for apprenticeships through a new digital apprenticeship service account. The amount entering their digital apprenticeship service account will be the amount that they have available to spend on apprenticeship training in England. Employers in England will be able to “top-up” their apprenticeship account.
Skills policy and the delivery of apprenticeships remains a devolved matter in Scotland, Wales and Northern Ireland. Therefore there will be separate and almost certainly different arrangements in Wales, Scotland and Northern Ireland.
How will it work in Wales?
There is still a lot of uncertainty about how the new system will work in Wales.
In January 2016, Julie James, then Deputy Minister for Skills and Technology made an oral statement on apprenticeships policy and answered questions from Assembly Members on the implementation of the Apprenticeship Levy in Wales, saying:
But, at this point in time, we are not clear what the redistribution method will be. We’re not clear whether it will be Barnettised or whether some other mechanism will be used. We’re not clear how it’s being collected. We know the mechanism for collecting it from employers, but we don’t know how it will be distributed and collected inside Government.
The position was no clearer in February. The then Welsh Government issued a Press Release: Concern over Apprenticeship Levy: Devolved ministers highlight serious issues with Westminster plan which said that the relevant ministers in the devolved administrations shared similar concerns on key elements of delivering the levy, including:
- the potential for the levy to undermine devolved apprenticeship policies;
- the best method for fairly apportioning the levy raised across the devolved administrations, including transparency around UK departmental budget;
- content and timelines for the legislation that will introduce the levy into statute; and
- the need to ensure that the changing apprenticeship landscape will be clear to cross border employers and providers.
Labour party manifesto pledge
One of Welsh Labour’s six key pledges in their 2016 manifesto is that they will create 100,000 high quality, all age, apprenticeships in the next term, ‘to ensure that our economy has access to the higher level skills it needs’.
This was confirmed by the First Minister, Carwyn Jones in Plenary on 18 May 2016 when he announced details of the Compact agreement with Plaid Cymru.
Is new legislation needed to introduce the Apprenticeship Levy?
Yes. There is no existing legislation which covers the introduction of the Apprenticeship Levy. Legislation for the collection of the Apprenticeship Levy will be introduced in a UK Finance Bill. The Bill has been carried forward into the 2016-17 parliamentary session and will resume at the Committee stage. Information on the progress of the Bill is available from Parliament’s website: Finance Bill 2015-16 to 2016-17
The Assembly approved a Legislative Consent Motion (LCM) to the UK Enterprise Bill (PDF 190KB) in which the UK Government requested consent to legislate to set up data sharing powers in respect of the Apprenticeship Levy.
When will we find out more?
In April 2016, the Department for Business, Innovation and Skills published guidance on the Apprenticeship Levy in England: Guidance: Apprenticeship Levy: How it will work
However there are no further details for Wales. The guidance says:
The digital apprenticeship service will support the English apprenticeship system. Scotland, Wales and Northern Ireland have their own arrangements for supporting employers to access apprenticeships.
The Department for Business, Innovation and Skills said it will publish further guidance in June 2016.
Next steps for the new Welsh Government
An early priority for the new Welsh Government will be to get agreement on Wales’ share of the Apprenticeship Levy.
Ministers will also need to decide exactly how they will fund the delivery of apprenticeships in Wales and ‘honour [their] commitments to bring forward at least 100,000 new all-age apprenticeships in this term’.