Levy forecasting Nick Linford Director at Lsect 22/09/16 Why not say 'thanks' for the slides at http://uk.virginmoneygiving.com/Lsect-for-HKF 5 July 2016 Levy forecasting 22/09/16 Nick Linford Director at Lsect Sign up for free updates and resources at www.lsect.com For more workshops visit www.lsect.com 1

The apprenticeship levy funding 2016-17 2017-18 2018-19 2019-20 £1.808 £2.010 £2.231 £2.450 As a tax on payroll, the levy income will be dependent on the size of the economy But… What does it have to pay for? How is it likely to be used? Do you think £2.45bn be enough?

What does the £2.45bn need to pay for? The levy top-up (10%) Levied employers funding per apprentice until their levy pot runs out Subsidy for non-levied employers or levied employers when the pot is empty (90% proposed) Remaining funding instalments for apprentices on frameworks and standards that started before 1 May (including the three types of employer incentives that are part of the standards ‘pilot’) £245m £1bn? £700m? £500m?

But the £2.45bn also need to pay for… Fully-fund at the relevant upper limit 16-18 year olds when at an employer with fewer than 50 people Fully-fund at the relevant upper limit 19-24 year olds formally in care or who have a Local Authority Education and Healthcare plan when at an employer with fewer than 50 people £471 for each level 1 and level 2 English and maths qual to meet the minimum for the framework or standard 16-18 employer incentive (£1000 proposed) 16-18 provider incentive (£1000 proposed) 19-24 year olds formally in care or who have a Local Authority Education and Healthcare plan employer incentive (£1000 proposed) 19-24 year olds formally in care or who have a Local Authority Education and Healthcare plan provider incentive (£1000 proposed) Remaining funding instalments for apprentices on frameworks and standards that started before 1 May (including the three types of employer incentives that are part of the standards ‘pilot’) £150 a month per apprentice where they are eligible for additional learning support, “plus additional costs based on evidenced need” Incentives and Eng and Maths could easily cost £500m+

How is it the levy likely to be used? So close to 20,000 employers will have something in their levy pot – but system design depends on many of them not using it Consider, if you were running a big company would you let your HR manager leave levy money unspent? Easiest way to use it is place existing employees on management apprenticeships.

Quiz! 25+ higher management apprenticeship frameworks generate around £3k and starts August 2016 to April 2016 already more than whole of 2015/16 What % of 25+ higher apprenticeships framworks do you think are in management? 83%

The rise of the manager apprentice Now the 3rd most popular apprenticeships

Management standard will be best seller > Upper-limit £9k cap and for all sectors > Developed by Civil Service, Barclays, BBC, HMRC, Boots, CMI etc > CFA say there are 400,000 new managers a year > 400,000 x £9,000 = £3.6bn > Removal of allocations means no ring-fence for 16-18 (so technically all levy could be spent on 25+ managers) > Flood-gates will open on 1 May (no advantage to employer paying during the pilot) > Universities (public and private) could corner the market and utilise online (see Open University plan)

Is ‘employer ownership’ compatible with ‘social justice’? Do you think £2.45bn be enough? Is ‘employer ownership’ compatible with ‘social justice’?