Is it time to scrap the apprenticeship levy?

The UK apprenticeship levy is failing, the National Federation of Builders declares in a recent report – but it also proposes reforms that could improve the way the scheme works


  • Brian Ward

29 March 2023

meeting of individuals in hard hats by a board with plans

The apprenticeship levy was introduced in April 2017 as part of the UK government's policy to train 3m apprentices by 2020. Yet, despite attempted reforms such as the introduction of a levy transfer, it fell short of this target by almost 1m apprenticeships after three years.

In fact, there was actually a decline in the number of starts over this time, from 509,000 in 2015–16 to 393,000 in 2018–19.

Changes to the levy's operation have allowed businesses to transfer up to 25% of their funds to other businesses in a bid to increase uptake of apprenticeships. However, only 164 companies were pledging funds for transfer as of January; and even then these pledged transfers can only be used for training and assessment costs.

How the levy works

All industries in the UK are subject to the levy, including the public and voluntary sectors, which is charged at a rate equating to 0.5% of a company's annual payroll bill where that exceeds £3m. Roughly 2% of all UK businesses pay the levy. The money is ringfenced for apprenticeships, and if it is unspent after two years it goes back to the exchequer.

Since 2019, more than £3.3bn in funding has been returned to the Exchequer – making the levy a de facto tax, according to the policy paper Leveraging the Levy recently published by the National Federation of Builders (NFB).

In addition, the latest government data (see Table 1) shows that fewer than 60% of apprentices completed their course in the academic year 2020–21.


Achievement rate
















Table 1: National apprenticeship achievement rates for construction, planning and the built environment in England between 2018–19 and 2020–21. Source: Apprenticeships and traineeships, National apprenticeship achievement rates detailed series

Members pinpoint apprenticeship failings

Clearly there are a number of issues with the way apprentice training is implemented. The NFB questioned its levy-paying members using a mixture of focus groups and surveys to better understand the barriers they have identified.

Members felt there was a general lack of high-quality training in accessible locations; that the quality of training provided varied widely; and that there had been too many changes in which courses could attract levy funding. They also noted that there was a general lack of end-point assessment organisations, and that tutors were in short supply.

Perhaps most shockingly, every one of the NFB members questioned felt that apprenticeships were often suboptimal compared to alternatives, but the levy route was followed because there was a need to use the funds already ringfenced. The duration of apprenticeships was also seen as too long and unattractive compared to taking a professional qualification.

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Federation recommends levy improvements

The NFB makes five recommendations in the report.

  1. Widen the levy's scope to cover apprenticeships, skills and learning more generally, and use it to train both new and existing staff.
  2. Reform funding rules to allow more flexibility in what the levy can be spent on, including travel and accommodation costs as well as tools and personal protective equipment.
  3. The level of the levy should reflect businesses' ability to supervise apprentices.
  4. Levy transfer should be improved by, for instance, making unspent funds available to any business to use rather than going back to the Exchequer, reinvesting them in government-sponsored training programmes or employer incentives to increase uptake.
  5. Address double pay by recognising that construction companies are liable for two different levy schemes – namely the apprenticeship and Construction Industry Training Board levies – and either exempt construction companies from one of these or introduce a credit or discount in recognition of their similarity.

The NFB is not the only organisation that wishes to see the levy reformed. In what it describes as a consensus for change, it lists a number of other organisations that have made similar calls for reform, including the British Retail Consortium, the Chartered Institute of Personnel and Development and the Confederation of British Industry, which have all either endorsed the NFB's recommendations or made similar suggestions.

Why did the budget not cover the levy?

Construction Journal asked the NFB to comment on the chancellor's decision not to address the apprenticeship levy in the budget.

NFB Director of Policy James Butcher said: 'Since the introduction of the levy, around £1 in every £4 of its funds have gone unspent – which is a serious waste of money originally destined for training and skills. A recent investigation by the Independent reported that 100,000 fewer under-25s are starting apprenticeships than before the levy was introduced, indicating a widespread failure of the policy.

'It was disappointing that the chancellor did not take the opportunity at the budget to announce any changes to the levy or a consultation on reforming it. But in the context of this budget and our proximity to the next general election it is perhaps not surprising, as there is no legislative time to make significant changes. We must now seek to secure a promise of improvement in the manifestos of the major political parties.

'That said, the apprenticeship levy is made up of primary legislation, secondary legislation and rules, so there is some scope to make smaller tweaks sooner. We're working with colleagues across the sector and will be presenting ideas to Department for Education officials, as well as lobbying the minister. We're also due to meet the shadow secretary of state for education to present our ideas, as the Labour Party has already committed to a wider learning levy in place of this failed policy.'

Brian Ward is the editor of RICS Construction Journal

Contact Brian: Email

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