The case for a broader training levy

New research from the CIPD has highlighted the substantial long-term fall in the volume of, and level of investment in, work-based training in the UK. The report, Addressing employer under-investment in training – the case for a broader training levy, recommends urgent reform of the apprenticeship levy to help address this.

The reasons behind the decline in training are not entirely well understood. Commentators have pointed to factors such as the expansion of the higher education system, which has reduced the need for employers to train, or increased efficiency in training investment. A less optimistic, but just as likely a contributing factor is the shift towards business models and competitive strategies requiring lower skill levels.

While the reasons aren’t fully known, what is clear is that greater investment in workforce skills is needed, and that relying on employers to voluntarily provide adequate training opportunities has failed.

It was against this background that the Government justified the introduction of the apprenticeship levy, an initiative designed to stop the decline in training, while also increasing the number and quality of apprenticeships.

Yet, levies do not always have the desired effect of increasing employer investment in training, and there is evidence that the current arrangements are not working as intended. The report found that:

• The levy has failed to increase the number of apprenticeships since it’s introduction, with current starts down 14% on pre-levy figures.
• The levy is failing to boost overall investment in training. Less than a third (31%) of levy-paying organisations believe that the levy will increase the amount of training they offer, a fall of 14% since 2017.
• Over a fifth (22%) of levy-paying organisations stated that they had used the funding on training that would have happened anyway, and 14% reported that it had directed funds away from other, more appropriate forms of training.

Whilst more high-quality apprenticeships are certainly needed, they are just one aspect of high-performing workplaces, and other forms of training are equally valuable. That’s why the CIPD are calling on the Government to broaden the apprenticeship levy to a wider training levy, including other forms of accredited training that are aligned to industrial strategy priorities.

Yet, without sustained intervention on the demand side to address issues related to management failings and low-skill business models – it is unlikely that the decline in the volume and investment in training can be slowed, let alone reversed. That’s why the CIPD are also calling for the creation of a regional skills fund, created by top-slicing levy contributions from the largest employers to address local skills and demand-side challenges. This would help boost workforce productivity and increase the overall demand for, and use of, skills in England’s regions.