Business leaders are calling for an overhaul of the flagship program to get young people into work
- Names of households say that rules limit their use of the financing pot
- Businesses with a payroll of more than £3 million must pay a levy of 0.5% of the payroll into the fund
- Money intended to help smaller companies hire and train more young people
Business leaders have called for a major overhaul of the flagship scheme to get young people into work, saying the system is a ‘complete waste of money’.
Well-known names including John Lewis, Tesco and Marks & Spencer say rules around the apprenticeship levy are preventing them from using the funding pot, even if they pay in millions of pounds.
Businesses with a payroll of more than £3 million must pay a levy of 0.5 percent of their annual payroll into the government fund. The money is intended to help companies, especially smaller ones, hire and train more young people.
But critics argue the system is broken because it is too restrictive. For example, companies cannot finance training courses of less than one year. Mark Selby, co-founder of restaurant chain Wahaca, branded the levy a ‘complete waste of money’ as the ‘ridiculous’ restrictions mean they pay into it but cannot use it.
According to the British Retail Consortium, around £130 million of potential investment in jobs will be lost as a result of these restrictions. The group says the levy is simply an additional cost at a time when businesses are already struggling with increases in property bills and wages.
‘Waste of money’: Businesses with payroll over £3m must pay a levy of 0.5 per cent of their annual payroll to the government fund
Speaking about the levy this month, Tesco boss Ken Murphy said: ‘Despite the best intentions, I don’t think this will deliver anything for the youth of this country.
“Companies like ours are in a position to really influence the education, development and careers of young people in this country (but) we need the money to do that.” Every year the Government takes more than £20m from Tesco but gives back just under £3m to use for training programmes, he said.
Ahead of this year’s election, bosses have asked the Conservatives and Labor to put the issue on their priority list.
CEO and founder of AO World, John Roberts, said: ‘The Apprenticeship Levy could be transformative for the future of young people, but it is currently falling short on every level.’ Roberts highlighted that since the levy was introduced in 2016, there have been 35 per cent fewer apprentices and more than £2 billion of potential apprenticeship funding has been returned to the Government unused.
Along with companies such as Tesco and B&Q, AO has offered to use its levy contributions to improve its own scheme, as a trial for improving the wider system.
Ceira Thom, from the John Lewis Partnership, said the plan could “go even further and deliver so much more” but must be “much more flexible”.
Asda said it can only use 27 percent of its levy funding. A spokesperson said: ‘It is time for the Government to review and reform the restrictive rules on apprenticeship funding to remove any unnecessary barriers to charging.’
Businesses were disappointed by the lack of action on the March budget. Last month, M&S boss Stuart Machin called on Jeremy Hunt to reform the levy, which he said was mired in ‘overly restrictive requirements and bureaucracy’. Although M&S pays £5.6 million into the fund, it can only use £1.8 million.
A Department for Education spokesperson said: ‘The levy has enabled us to increase investment in apprenticeships to over £2.7 billion per year by 2024-25.’