Issue 13

TARTANISING THE APPRENTICESHIP LEVY

By Ruchir Shah, Head of Policy, SCVO

Scottish employers won’t be able to access the training vouchers this is meant to fund in England and the Scottish Government will (likely) have to put in place an alternative system with the equivalent cash they presumably will get from the total pot.

In November last year, Chancellor George Osborne announced plans for a new Apprenticeship Levy. This would be a new tax on all organisations that employ paid staff, set at 0.5% of their PAYE bill and will start in April 2017. The idea would be to pool the proceeds from this tax to invest into apprenticeship schemes that all employers could pitch in to develop their staff. This new tax would affect all employers in Scotland, including charities, and is therefore something SCVO has been exploring closely.

The UK government state that its aim is to shift the responsibility for investing in workers from the State to employers. The Chancellor also plans to target this on larger employers. He has therefore arranged for up to a £15,000 rebate so that only large organisations whose PAYE bill is more than £3m will be net contributors through this tax.

Here's the catch. Scottish employers won’t be able to access the training vouchers this is meant to fund in England and the Scottish Government will (likely) have to put in place an alternative system with the equivalent cash they presumably will get from the total pot.

The levy will also hit charities. Some umbrella bodies in England have expressed concerns that it will mean that charitable funds will be subsidising private sector costs. But it could be argued that investing in the workforce ought to be a shared responsibility for all employers, including large charities, as long as there is access to these funds in Scotland. The levy will affect all organisations that employ staff, including around 4,700 charities and voluntary organisations in Scotland, although we anticipate that the rebate will be automatic. We have calculated that around 80 of our largest Scottish charities will pay a combined estimate of around £2.3m.

It is unclear at this stage how the transfer to Scotland will take place. There are complexities as UK Government won’t know what the total pot will be until they have received the proceeds from this tax! In early discussions with Scottish Government, we understand that the mechanism for this will be worked out next year. Regardless of the total amount available in Scotland however, the money is likely to come through the devolved Scottish Budget, and not be ring-fenced. The Scottish system is not guaranteed to match the voucher system the Chancellor plans to put in place in England. The danger therefore is that this tax gets translated into general spend in Scotland, rather than focused on skilling up the workforce.

On the other hand, rather than simply calling for a similar fund to England, it might make sense to use this opportunity to make sure that Scottish Government re-aligns its apprenticeship programmes, such as Modern Apprenticeships and the next iteration of the Employer Recruitment Incentive, to invest more in workers and prospective workers who are the most distant from the labour market. From SCVO’s perspective, this is after all the people that many in our sector seek to support anyway.

The danger therefore is that this tax gets translated into general spend in Scotland, rather than focused on skilling up the workforce.

The levy could be used to fund a new Scottish approach to employability. We anticipate major cuts to the Work Programme budget prior to its devolution to Scotland (as proposed in the Scotland Bill). But there will also be new policy design space that would come from devolving the powers over employability support. This means we need to rethink our approach to supporting our workforce in Scotland anyway.

One of our big ideas therefore, is that instead of pushing for new ways to get as many people into any jobs as quickly as possible, we need to shift our focus solely from jobs contribution. Yes, jobs may be the most powerful way for people to empower themselves, but people actually contribute best to society in different ways at different times of their lives. The Scottish Government in partnership with charities and others, could lead a new approach to employability which could support people to become more meaningfully ready for jobs when their circumstances change. This would mean spending the new funds on helping people contribute in the most effective way they can. That could be as volunteers, carers, parents, activists, students, social entrepreneurs – it’s not all just about being an employee.

It’s perhaps not what the Chancellor intended, but the apprenticeship levy could actually be a new weapon in the fight against austerity. The opportunity is to use this as grist to the mill for a new approach to supporting people to contribute in society, rather than narrowly focusing on skills of those closest to the labour market. In this case, I am certain many charities, let alone private and public sector organisations will see the levy as an investment rather than a tax.

Ruchir Shah
Is Head of Policy at SCVO.

By Ruchir Shah, Head of Policy, SCVO

Issue 13

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