Doubts over impact of apprenticeship levy

  • By Gemma Kappala-R...

Flaws in the apprenticeship levy could affect its ability to increase the number of new apprenticeships created, according to London Councils.

The apprenticeship levy came into force yesterday (6 April 2017), when all employers in England with pay bills greater than £3 million – which includes all 32 London boroughs and the City of London – were charged 0.5 per cent of their annual pay bill.

Employers will be able to access this cash via the new Digital Apprenticeship Service, but will only be able to use the funds to create apprenticeships using approved providers. Government has pledged to top up this funding by 10 per cent. 

Cllr Peter John OBE, Deputy Chair of London Councils and Executive member for Business, Skills and Brexit, said:

“The best apprenticeships can offer life-changing career and training opportunities, especially to young people, but we have significant doubts over whether the apprenticeship levy in its current form can deliver an increase in apprenticeships.

“The levy lacks flexibility and doesn’t give employers the opportunity to use their funds to provide wider support for apprentices. While I’m pleased that the government is considering allowing levy funds to be transferred between employers from next year, the proposal to cap it 10 per cent is too small for those employers, like London boroughs, who have strong track records of generating apprenticeship starts in their supply chains.

“We remain concerned that this lack of flexibility will lead to London employers being unable to spend their allocation, resulting in funds generated in London being reabsorbed by government after two years and spent elsewhere.

“Instead, London government want to see a ring-fenced share of the capital’s apprenticeship levy devolved to help us increase starts at higher levels, build capacity with SMEs and work with employers to identify gaps in apprenticeship standards. We look forward to having the opportunity to make this case as part of future discussions on devolution with government following the recent announcement of the devolution memorandum of understanding.”

London boroughs are also concerned about the continued uncertainty around the future of the extra funding given to employers recruiting in more deprived areas and the removal of an area cost adjustment for employers in the capital. 

For London Councils’ analysis of the impact of the apprenticeship levy, please visit