UK apprenticeship tax is a £3.5bn mistake, say business leaders | Learnings

Retailers, hospitality businesses, the tech industry and recruiters have called for urgent reform of the apprenticeship tax, calling it a “£3.5billion mistake”.

In a letter sent to ministers, the British Retail Consortium (BRC), UKHospitality, techUK and the Recruitment & Employment Confederation (REC) said the government was ‘withholding investment’ in essential training which could boost productivity, fuel growth economy and raise wages.

Helen Dickinson, chief executive of the British Retail Consortium, which represents most major retailers, said: ‘The government must urgently correct this £3.5billion mistake or it risks leaving the Kingdom’s anemic productivity. United further behind its international counterparts.

“Retailers want to invest more in training a more skilled, more productive and better paid workforce. They want to create more opportunities for people across the country. They want to contribute more to growth. But the broken learning system is a chain and chain around their efforts.

Under the current system, companies are pouring hundreds of millions of pounds into a pot, which can only be spent on very specific types of training. For example, companies cannot use the money to fund courses lasting less than one year. They say this has saved them from spending £3.5billion of set aside funds.

Introduced in April 2017, the apprenticeship tax obliges large organizations to devote 0.5% of their payroll to apprenticeship.

However, many employers say they are unable to use the funds – which are levied by the Treasury if not used within two years. A report by the Resolution Foundation has warned of an explosion in the number of expensive, high-level apprenticeships for those already in employment that could ‘crowd out’ young people.

Professional bodies want the government to expand the apprenticeship tax into a broader skills tax that can be spent on a wider range of accredited courses, including shorter, more focused courses.

Kate Nicholls, chief executive of UKHospitality, said an overhaul of the system would help bring those who had become economically inactive, including the over-50s, back to work to fill skills gaps.

“Hotel businesses are keen to invest more in skills development, training and development of their workforce, especially when vacancies are so high. There is an urgent need to reform the apprenticeship tax to offer more flexibility to companies, particularly in the use of financing.

Julian David, Managing Director of techUK, said: “There is a real need to continue to support young people and new entrants to the labor market using apprenticeships, but also to support those in the workforce. existing work to progress and acquire the skills they need for the future of work. The key to this will be to reform the apprenticeship tax to make it flexible and fit for purpose.

Education Minister Robert Halfon said the government had “transformed the country’s skills supply” since 2010.

“So far, we have supported over 5 million apprenticeship starts across over 650 high quality standards, ensuring whatever your career goals are, they can be achieved through an apprenticeship, and we will continue to increase funding to £2.7bn by 2024-25. . We are rolling out and expanding T-tiers, Institutes of Technology and Skills Boot Camps – all backed by £3.8billion,” Halfon said.

“This Conservative government is on the side of business. That’s why all of our skills development programs have been designed with employers to meet the needs of business and industry.