- Well-known names say rules limit their use of the funding pool
- Companies with a payroll exceeding £3 million must pay a tax of 0.5% of payroll to the fund.
- Money earmarked to help smaller businesses hire and train more young people
Business leaders have called for a flagship scheme to get young people into work to be reviewed as the system is a “complete waste of money”.
Well-known names such as John Lewis, Tesco and Marks & Spencer say apprenticeship levy rules limit them from using the funding pot, even though they pay millions of pounds.
Companies with a wage bill of more than £3m must pay a tax of 0.5 per cent of their annual payroll into the government fund. The money is intended to help businesses, especially smaller ones, hire and train more young people.
But critics argue that the system doesn’t work because it is too restrictive. For example, companies cannot finance training courses of less than one year in duration. Mark Selby, co-founder of restaurant chain Wahaca, called the tax a “complete waste of money” as the “ridiculous” restrictions mean they pay but can’t use it.
According to the British Retail Consortium, around £130 million of potential investment in jobs is wasted due to these limits. The group says the tax is simply an additional cost at a time when businesses are already dealing with increases in property bills and wages.
‘Loss of money’: Companies with a wage bill of more than £3m must pay a tax of 0.5 per cent of their annual payroll to the government fund
Speaking about the tax this month, Tesco boss Ken Murphy said: “Despite the best of intentions, I don’t think it is delivering for the young people of this country.”
“Companies like ours are in a position to really influence the training, development and careers of young people in this country (but) we need the money to do it.” Each year the Government receives more than £20m from Tesco but gives back just under £3m to use on training programmes, he said.
Ahead of this year’s election, bosses have called on the Conservatives and Labor to put the issue on their priority lists.
AO World chief executive and founder John Roberts said: “The Apprenticeship Levy could be transformative for young people’s futures, but it is currently failing them on every front.” Roberts highlighted that since the levy was launched in 2016, there are 35 per cent fewer apprentices and more than £2bn of potential unspent apprenticeship funding has been returned to the Government.
Along with companies such as Tesco and B&Q, AO has offered to use its tax contributions to improve its own scheme as a trial to improve the system overall.
Ceira Thom, of John Lewis Partnership, said the scheme “could still go further and deliver much more” but needs to be “much more flexible”.
Asda said it can only use 27 per cent of its tax funding. A spokesperson said: “It is time for the Government to review and reform the restrictive apprenticeship funding rules to remove any unnecessary barriers to revenue spending.”
Businesses were disappointed by the lack of action in the March budget. Last month, M&S boss Stuart Machin called on Jeremy Hunt to reform the tax, which he said was bogged down by “overly restrictive requirements and bureaucracy”. Although M&S contributes £5.6m to the fund, it can only use £1.8m.
A Department for Education spokesperson said: “The levy has allowed us to increase investment in apprenticeship training to more than £2.7bn a year by 2024-25.”