Local councils left with £600m apprenticeship reform burden

Changes to the apprenticeships system will cost councils across the country £600 million a year, according to the Local Government Association (LGA).

Plans to fund three million apprenticeship starts by 2020 through a 0.5 per cent tax levied on companies with a £3 million wage bill were announced last year. In addition, the government has set all public sector organisations a target of ensuring that apprentices make up at least 2.3 per cent of their workforce.

But these measures will place a £600 million burden on local authorities through extra wages and the monthly levy, the LGA has calculated.


A cross to bear

Coming into effect from 6 April 2017, the levy will be charged at a rate of 0.5 per cent of an employer’s paybill and employers will be given an allowance of £15,000 to offset their payment. Ministers said that since it is only applicable to companies with wage bills of more than £3 million, less than 2 per cent of employers would have to pay.

But according to LGA calculations, less than 10 per cent of local councils will be exempt, leaving more than 90 per cent with a total levy cost of £207 million a year.

In addition, the LGA said, local authorities would have to bear the brunt of the public sector apprenticeship targets. They will have the largest contribution to the target of any part of the public sector, by creating 33,000 new apprenticeships every year.

This is eight times more apprentices than councils currently employ, and would impose an additional £400 million wage burden.


Stretched to breaking point

Nick Forbes, chair of the LGA, told Training Journal: “It is clear that our centralised employment and skills system is struggling to create the right apprenticeships that local residents and business need.

“Paying the apprenticeship levy and meeting national apprenticeship targets each year will add further financial pressure onto already stretched local services. It is critical that the money raised from the levy is used in the most effective way.

“This can only be achieved by giving councils the powers to play a leading role in spending it on delivering apprenticeships, driving economic growth and raising productivity.”