by GK Strategy 27th June, 2016
3 min read

Apprenticeships and the Levy – What next?

David Cameron’s faith in apprenticeships, first in coalition and then as leader of a Conservative Government, has been a consistent feature of his economic strategy during his time as Prime Minister. With Cameron’s surprise departure announced in the wake of the British people’s dramatic decision to leave the European Union, there will be speculation regarding the extent to which the Conservative government, under new leadership, will continue to pursue the 2015 manifesto pledge to deliver 3 million apprenticeships by 2020, along with the Apprenticeship Levy designed to fund it.

The direction of travel on the apprenticeship policy will undoubtedly be impacted by the outcome of October’s Conservative Party leadership election. However, it should be noted that with the Apprenticeship Levy, a payroll tax of 0.5% for businesses with a wage bill of over £3million, now in law and preparation for its April 2017 introduction well underway, a shift at this stage would represent a major government u-turn and create a range of practical problems.

In terms of the impact the next prospective leaders will have on apprenticeship policy, the picture is not completely clear. Whilst an unlikely George Osborne leadership would see the continued pursuit of the 3 million targets, a Government led by Boris Johnson or Theresa May would bring with it some uncertainty. It should, however, be stated that Johnson and May, as members of the cabinet, would have all backed the commitment to deliver 3 million apprenticeships, and would, therefore, be likely reluctant to scrap it. Boris Johnson particularly, in his previous role as Mayor of London, also has a track record of putting significant support and funding behind apprenticeships.

At this stage, a more realistic threat to the implementation of the levy and thus the overall commitment to more apprenticeships is an economic downturn. As highlighted by Skills Minister Nick Boles, in the run-up to the referendum, there is a danger that if Brexit was to lead to a recession, to ask businesses to absorb the cost of the levy may not be considered economically or politically viable. The likelihood of this threat will not, however, be immediately clear, as the markets and wider economy take stock of the true impact of Brexit.

In the meantime, with 3 more months, until he formally steps down, the Prime Minister will seek to restore an element of calm and his government will be determined to continue work on implementing the Apprenticeship Levy. Following this, only if the economy forces a full reassessment of policy under new government leadership does a shift in approach look likely at this stage.

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