New growth and skills levy will replace much-criticised apprenticeship levy 

The government has announced a new growth and skills levy to replace the existing, and much criticised apprenticeship levy. The new levy will include new foundation apprenticeships.

The new levy will also allow funding for shorter apprenticeships, giving learners and employers greater flexibility over their training than under the existing system – where apprenticeships must run for at least 12 months.

The training eligible for funding under the new levy will develop over time, informed by Skills England’s assessment of priority skills needs. 

The Department for Education says it will set out further details in due course.

To fund this, employers are being asked to rebalance their funding for apprenticeships, asking them to invest in younger workers. This will also involve businesses funding more of their level 7 apprenticeships – equivalent to a master’s degree and often accessed by older or already well qualified employees – outside of the levy.

The first report from Skills England, the government’s new body for the skills system, has also been published. It provides an initial assessment of the nation’s working skills, as well as future skills needs and gaps which employers are struggling with across the country.

The report found that employer investment in training has been in steady decline over the past decade, with training expenditure at its lowest level since records began in 2011, with investment per employee down by 19 per cent in real terms.

It also shows that, across the UK, almost one in 10, or more than 2.5 million roles are in critical demand, with more than 90 per cent being in roles that require training or education. 

Key findings include:

UK employers report that over a third of UK vacancies in 2022 were due to skills-shortages, a relatively big increase from the period 2013 to 2017, where skills-shortage vacancies remained stable at around 22%.

For employers, the qualifications landscape can be opaque; skills supply may be mismatched against demand; and there are insufficient mechanisms for encouraging employers to invest in skills.

For learners, the pathways into skilled careers are not always sufficiently clear, and the current skills system and employer investment in skills are not always equipping learners with the essential literacy, numeracy and digital skills they need to succeed.

The government launched Skills England in July to help identify skills needs. It wants Skills England to play a crucial role in determining which types of training will be eligible for the expanded growth and skills levy and will set out shortly how they will work with stakeholders to inform their advice to DfE. 

The need for jobs and skills varies across industries, with the health and social care sector experiencing the highest demand, followed by education, manufacturing, and science and technology.