Apprenticeship levy will deepen north-south divide, IPPR says

Katie Allen
An apprentice works on the assembly line at the Jaguar Land Rover factory in Solihull. Photograph: Leon Neal/Getty Images

The government’s new £3bn apprenticeship levy threatens to deepen Britain’s north-south divide, according to a new analysis, with London and the south-east benefiting most from the government’s shakeup of staff training.

The Institute for Public Policy Research (IPPR) has warned that the apprenticeship levy, which comes into force next month, will raise less money and have a smaller impact in the areas that need it most. These areas are those that have been hit by deindustrialisation and suffer from low levels of qualifications, low productivity and low pay.

The new levy is designed to increase the number and quality of apprenticeships in the UK, with the government aiming to create 3 million new placements by 2020. It will be paid by employers in England with a payroll of more than £3m and charged at a rate of 0.5% of their annual wage bill. The Treasury has estimated it will raise nearly £3bn a year.

The government has championed its apprenticeship push as creating more opportunities for young people and for those people already in work who need new skills to progress. Justine Greening, the education secretary, has described apprenticeship schemes, where people earn and learn at the same time, as “vital in making this a country that works for everyone”.

But the IPPR said its analysis of official figures suggested a disproportionate amount of investment would be stimulated in London and the south-east, where there was a relatively high number of big employers. Those areas have 38% of the UK’s large businesses that would be targeted by the levy, but higher levels of employment and only 27% of the population, IPPR’s research found.

Clare McNeil, IPPR associate director for work and families, said: “The government has said that it wants to break down the barriers to social mobility faced by young people in this country. It is clear to see that young people outside of London and the south-east face a much harder time finding a first job or training opportunity – particularly those not going on to university.

“It is extraordinary then that the government has not analysed the regional impact of its new apprenticeships policy, which is likely to boost investment in training precisely in those areas where employment is higher, such as in London and the south-east, leaving unemployment hotspots in the north-east or Yorkshire with proportionately less funding.”

The government has sought to underscore how some of its funding will be targeted at young people most in need of help getting on a career path. Under the new system, employers that are too small to pay the levy – around 98% of those in England – will have 90% of the costs of training paid for by the state. Extra support will also be available for employers with fewer than 50 employees who take on 16- to 18-year-old apprentices or young care leavers.

Responding to the IPPR report, the apprenticeships and skills minister, Robert Halfon, said: “I have been clear that everyone should benefit from our reforms to apprenticeships and there is no evidence of a north-south divide. We currently have the highest number of apprentices on record, with 900,000 this parliament and with numbers consistently high across the whole country.

“We truly are investing in the whole of England by doubling funding for apprenticeships to £2.5bn by 2019-20 – twice what was spent in 2010-11 – and giving employers more power than ever before to design training that meets their needs. ”

The IPPR is urging the government to change the apprenticeship levy system to redistribute some of the money collected to areas with the biggest training needs. It also wants a broader levy that would apply to all employers with 50 or more staff in order to raise more money.

“Unless it changes the policy to ensure that investment is distributed more fairly between north and south, it will exacerbate existing regional disparities in opportunity for young people,” McNeil said.

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