Question to the Department for Education:

To ask the Secretary of State for Education, if her Department will make an estimate of the potential impact on (a) the apprenticeship budget and (b) apprenticeship starts of permitting levy-payers to spend (i) 25% and (ii) 50% of their apprenticeship levy accounts on non-apprenticeship training.

In the last two financial years, an average 98% of the English apprenticeships budget was spent. The apprenticeships budget in England is ring-fenced for apprenticeships only and is used to fund training and assessment for all employers, both those who pay the levy and those who do not. It is therefore important that the apprenticeships budget remains ring-fenced for apprenticeships to ensure continued affordability of the programme and to ensure that employers of all sizes, including small and medium sized enterprises (SMEs) that do not pay the levy, can continue to access high-quality apprenticeships training.

If employers were able to use 25% of their levy funds for non-apprenticeships training, the department estimates that this would create an additional cost of up to approximately £700 million per annum. Allowing employers to use up to 50% of their funds for non-apprenticeship training would increase this cost to up to £1.5 billion per annum. Without making additional funding available to support this flexible use of levy funds, the department estimates that this would require a significant reduction in new apprenticeship starts to approximately 140,000 per annum. This is around a 60% decrease on the 350,000 apprenticeship starts reported for the 2021/22 academic year.

The apprenticeship levy was introduced to increase employer investment in high-quality apprenticeships training, and with the intention that large employers’ levy contributions would fund access to apprenticeships for all employers. The Government wants to support SMEs across England to offer more apprenticeship opportunities and so in April we removed the restriction on the number of apprentices SMEs can recruit. The department continues to pay for 95% of the apprentice training costs for SMEs, rising to 100% for the smallest employers recruiting apprentices under the age of 19.

Employers can already choose to spend their levy funds on any of the 680 plus apprenticeship standards available, or to transfer 25% of their funds to support apprenticeships in other businesses. They can also benefit from a range of other government-funded skills programmes, including skills bootcamps, higher technical qualifications and T Level industry placements.