Following the announcements made in the Spending Review we now have some much needed detail about the government’s new approach to reaching its apprenticeship targets.

While there is some clarity on the matter, there are still a number of key issues that remain unclear.

For the construction industry, the key questions are will the Apprenticeships Levy deliver more apprenticeship starts and will they be of a high quality and relevant to industry’s needs.

As an organisation with 50 years’ experience of running a levy, we previously identified a number of yardsticks for the apprenticeship levy.

These included whether the money it raises is ring-fenced to support high quality training, whether employers feel a sense of ownership and whether it helps firms of different sizes to work together to invest in apprenticeships.  

Today’s announcement looks to have ticked the first two boxes but we still need to hear a fair bit more on the last point.

Starting first with the Apprenticeship Levy, the £15,000 allowance to offset against the levy payment means that only 2% of UK employers will contribute to it, according to the Chancellor.

Given the long-tail of small employers within construction, we estimate that just over 700 firms out of 325,000 in the industry will be liable – just 0.2%. 

With firms only paying the 0.5% on paybills of £3 million and more, the average rate paid by many firms will be significantly lower than the 0.5% marginal rate.    

Importantly, the new Institute for Apprenticeships, which will be independent of government and led by employers, will regulate the quality of apprenticeships.

The Treasury’s commitment that ‘funding caps will be significantly higher for programmes which have high costs and are of high quality’ will also support employers in sectors such as construction where the average cost of an apprenticeship is £26,000, compared to health and social care where it costs less than a quarter of that.

For smaller firms not paying the levy, there are also important issues to resolve. These include the support available for smaller companies and whether firms paying the apprenticeships levy will be able to pass their digital vouchers on to other firms in their supply chains.

These are critical issues, given that some 60% of construction apprenticeships are delivered by firms with less than 50 employees.

With the government also announcing ambitious targets to build more homes, we need an approach that helps the major home builders and their supply chains to work to build a more skilled workforce.     

The Apprenticeship Levy also poses challenges for organisations like CITB that already run one. The most important is whether the existing levies are still needed and whether employers will be prepared to pay them.

Our consultations with employers found most of them answering yes on both counts. However, with employers now working out what they must pay to the government, we will be consulting industry and gauge attitudes towards making the Apprenticeships Levy and existing construction levy work in tandem.

The construction industry is complex and has a number of clearly identified needs – we need a skilled workforce to deliver the Chancellor’s targets in housebuilding, roads and energy infrastructure.

The Apprenticeships Levy is a reality and we need to make it work to deliver this.