How the apprenticeship levy will work Julian Gravatt, Assistant Chief Executive 17 May 2016

3 million apprenticeships + the levy “We have already delivered 2.2 million new apprenticeships over the last five years. Over the next five years we will deliver three million more and ensure they deliver the skills employers need” Conservative manifesto, 2015 “While many firms do a brilliant job training their workforces; there are too many large companies who leave the training to others and take a free ride on the system. So we are going to take a radical, and frankly long overdue approach. We are going to introduce an apprenticeship levy on all large firms. Firms that offer apprenticeships can get more back than they put in” Summer budget speech, 2015

3 million apprenticeships + the levy “Apprenticeship spending will double over the decade” 2015 spending review … via a new hypothecated tax

Apprenticeships for large employers (c25,000) Large employer Apprentice Registered Training Organisation HMRC Digital Apprenticeship Service Skills Funding Agency Levy (0.5% of payroll) Payment on confirmation of training (ILR) and employer authorisation Employer directs recipient and price

Apprenticeships for smaller employers (c100,000) Smaller employer Apprentice Registered Training Organisation Digital Apprenticeship Service Skills Funding Agency Payment on confirmation training and employer payment (both via ILR) Less change in for those outside levy but plans to make co-investment compulsory If employers aren’t paying the levy, they pay directly

Apprenticeships and colleges The opportunity and the issues for colleges Colleges: “profile, relationships, town centre facilities, qualified staff” Levy paying employer have purchasing power from 2017 Smaller employers required to co-invest Apprenticeship standards in flux Most college apprentices in health/public services, administration, retail/commercial and engineering Are there opportunities in retail, IT, finance, creative arts or education? CollegesApprenticesFundingSub-contracted ,000£280m22% Adult (19+)220,000£273m41% Total290,000£553m31%

Thinking about sectors Public sector targets 1.7% apprentices (less than 2 in 100) 2.3% the 2020 target (more than 2 in 100) Colleges% of workforce apprentices % of workforce graduates 4 sectors Other services2.8%42% Health, care, public1.9%63% Construction0.6%27% Retail / commercial0.2%26%

Rethinking your apprenticeship relationships Employer Apprentice Subcontractors / wholly owned training company Digital Apprenticeship Service Assessment organisation Institute for Apprenticeships Advisors / Brokers Sector group/ trade association Parents/ Family

Apprenticeships tips for FDs Your own apprenticeship business What’s your market? Sectors, employers, locations? What’s your service? What programmes? How’s it managed? In-house? Distributed? Subcontracted? Working out the changes Impact of the levy, co-investment and the new standards What are your full costs, marginal costs & likely income? How will you sustain a commercially viable service?