- Household names say rules limit them from using the funding pot
- Firms with a wage bill over £3m must pay a levy of 0.5% of payroll into fund
- Money meant to help smaller companies hire and train more young people
Business leaders have called for a flagship scheme to get young people into work to be overhauled as the system is a ‘complete waste of money’.
Household names including John Lewis, Tesco and Marks & Spencer say rules around the apprenticeship levy limit them from using the funding pot, even though they pay in millions of pounds.
Firms with a wage bill over £3m must pay a levy of 0.5 per cent of their annual payroll into the government fund. The money is meant to help companies, especially smaller ones, hire and train more young people.
But critics argue the system is broken as it is too restrictive. For example, firms cannot fund training courses shorter than a year. Mark Selby, co-founder of restaurant chain Wahaca, branded the levy a ‘complete waste of money’ as the ‘ridiculous’ restraints mean they pay into it but cannot use it.
Around £130m of potential investment in jobs goes to waste due to these limits, according to the British Retail Consortium. The group says the levy is simply an extra cost at a time when firms are already grappling with increases to property bills and wages.
‘Waste of money’: Firms with a wage bill over £3m must pay a levy of 0.5 per cent of their annual payroll into the government fund
Speaking about the levy this month, Tesco boss Ken Murphy said: ‘Despite the best intentions, I don’t think it’s delivering for the youth of this country.
‘Businesses like ours are in a position to really influence the training and development and career of young people in this country [but] we need the money to do so.’ Every year the Government takes more than £20m from Tesco but returns just under £3m for it to use on training schemes, he said.
Ahead of an election this year, bosses have asked the Conservatives and Labour to put the issue on their priority lists.
AO World chief executive and founder John Roberts said: ‘The apprenticeship levy could be transformative for young people’s futures but it’s currently failing them on every metric.’ Roberts highlighted that since the levy launched in 2016, there are 35 per cent fewer apprentices and over £2billion of potential apprentice funding has been returned to the Government unspent.
Alongside firms such as Tesco and B&Q, AO has offered to use its levy contributions to enhance its own scheme as a trial for improving the wider system.
Ceira Thom, of the John Lewis Partnership, said the scheme ‘could still go further and deliver so much more’ but needs to be ‘much more flexible’.
Asda said it can use only 27 per cent of its levy funding. A spokesman said: ‘It is time for the Government to review and reform the restrictive apprenticeship funding rules, to remove any unnecessary obstacles to levy spending.’
Businesses were left disappointed by a lack of action at the Budget in March. Last month M&S boss Stuart Machin called on Jeremy Hunt to reform the levy, which he said was mired by ‘overly restrictive requirements and bureaucracy’. Although M&S pays £5.6m into the fund, it can use only £1.8m.
A Department for Education spokesman said: ‘The levy has enabled us to increase investment in apprenticeships to over £2.7billion a year by 2024-25.’
