The government’s plan to introduce an all-industry apprenticeship levy – possibly spelling the end of the CITB levy as we know it – has taken the industry by surprise. With a BIS consultation on the new levy launched last week, Construction Manager looks at what’s happening.
What is the BIS consultation about?
It’s seeking views on the new all-industry apprenticeship levy, for instance on which companies should pay, and how the new levy should be accessed. For instance, if a levy-paying company doesn’t have any apprentices, but might do so in the future, how long should it keep its rights to funding before the money is redistributed to other employers, including those too small to pay the levy?
The document also presents two BIS proposals on the future of the CITB levy and the Engineering Construction Industry Training Board levy, but the questions themselves don’t solicit views on this: instead, BIS says that the CITB and ECITB will be carrying out their own consultations.
So how will that happen?
The CITB says there have already been meetings with major employers and trade federations in the industry, and it also plans round-table sessions in the coming weeks. As with other respondents to the consultation, it has to submit feedback to BIS by 2 October.
“We’re focusing on talking to employers to explain why the government is proposing this, and the differences between the apprenticeship levy and the CITB levy,” CITB director of policy and startegic planning Steve Radley told Construction Manager. “Our role is very much about providing information.”
What exactly is being proposed?
Two options. First, BIS foresees that "large" industry employers could pay levies under both systems. Construction apprenticeship training for large employers would be funded via the new levy, leaving the remainder of the CITB levy to cover other training programmes, for instance the National Construction College; the £40m structural fund for short and long-term training initiatives; apprenticeships for smaller employers and CITB’s work on standards, qualifications and the industry’s “image”.
The second option raised is that the CITB levy is discontinued entirely, although BIS says that the implications of this for the industry’s long-term health and resilience would have to be carefully considered.
Quite radical – and it all seems to have come out of nowhere?
Yes, most people have been taken by surprise. But it’s an attempt to deliver the Conservative manifesto commitment to provide 3 million apprenticeships over a five-year term of government – which would be 30% more than were provided in the previous five years.
Essentially, to make the sums add up, employers have to contribute more. The government has been influenced by a July 2015 report from think-tank the Social Market Foundation by Professor Alison Wolf. France, Denmark and Austria run apparently successful levy systems.
If there was a system where construction companies pay both levies, how might that work?
According to Steve Radley, CITB director of policy, 37% of levy funds are drawn down by employers as apprenticeship grants (roughly £2,000 per construction apprentice per year). But in 2013, the CITB raised around £170m from the levy, suggesting that around £100m in levy funds could remain at the disposal of the CITB for other training and capacity-building initiatives if the industry opts for a two levy system. In addition, the CITB raised about £100m in income in 2014 from other commercial activities.
How will the cost of the new BIS levy compare to the CITB levy?
According to the consultation, the new levy will “be calculated on the basis of employee earnings” and collected via PAYE returns to HMRC. The actual rate is not being consulted on, the government says it will publish this in the Autumn Statement.
But the CITB’s Radley believes that “large” construction employers employing over 250 people would pay roughly the same under the new system as they currently pay in CITB levy. “That would be a reasonable working assumption,” he says. Currently, for employers in scope, the CITB collects 0.5% of the payroll bill employees and 1.5% of payments made under labour-only agreements,
What timescales are we talking about?
It’s believed the government wants to establish the new system before the end of this parliament, in 2020. The CITB’s parliamentary mandate to raise the existing levy runs until March 2018.
