'The UK is currently facing a chronic skills gap and investing in apprenticeships will help in addressing the issue'

‘We need to end the unfair tax on young people’s ambition and scrap the insultingly low apprentice wage by giving equal access to minimum wage and to reform the apprentice levy into a broader, more flexible skills and training levy’.

Our country is currently facing a chronic shortage of both people and skills across many different sectors of the economy. Software, finance and engineering are most severely impacted by workforce constraints – sectors which together contribute over one-third of GDP. Difficulties in retaining and attracting talent in these sectors therefore have a direct impact on growth prospects.

Upskilling is crucial. It is estimated that 20% of the workforce in the UK will be significantly under skilled for their jobs by 2030, this is equivalent to 6.5 million people. 

It is also essential to ensure our young people are equipped with the right skills to meet the demands of a modern economy. For this, the government must increase the availability and attractiveness of apprenticeships.

There are many social and economic benefits of apprenticeships. For instance, in 2022, 740,400 people across the country did apprenticeships which contributed around £3.4 billion to the UK economy. Apprenticeships allow young people to reach their full potential by developing skills in their chosen field along with broadening the horizons for their career prospects. Additionally, 69% of employers have said that employing apprentices improves staff retention, so long as they are supported by an effective apprenticeship system.

The current apprenticeship levy was introduced by the Conservative Government in 2017 in a drive to support 3 million apprenticeships by 2020. The levy is a tax rate of 0.5% on companies who spend more than £3 million on wages annually. This money is then topped up by government funds which are kept in a digital account for the employer to use for training their apprentices. 

However, this levy has proven to be unsuccessful and ineffective. Since its introduction, the number of apprenticeship starts has fallen precipitously. For instance, manufacturing and engineering apprenticeship starts have fallen by 40% since the introduction of the levy in 2017. Additionally, the government failed to reach its goal of 3 million apprentices by 2020, reaching only 1.4 million apprentices in that time. 

Not only has the number of apprentices fallen, but the 2017 Conservative policy has also proved utterly wasteful. Very little of the money set aside for on-the-job training is utilised, as employers find that the rules on how apprenticeships funds must be used and organised don’t end up suiting the company’s workforce. This includes the number of hours spent in classroom training in contrast to in the office training.

Funds that aren’t used by employers to carry out apprenticeship training within 24 months get passed straight back to the Treasury. Last year, employers lost more than £3.3 billion in unspent apprenticeship levy funds. This waste results in businesses viewing the levy as a significant financial burden for which they are unable to receive any reward. 

Liberal Democrats seek to help employers navigate through the apprenticeship levy to ensure that they get the most out of it. Under current levy requirements training courses have to last a minimum of 1 year and a maximum of 5 years, depending on the level. Many employers and trainees find this time period to be too long as it doesn’t fit into employers business plans nor the trainees career trajectory. Therefore, Liberal Democrats would seek to introduce a skills and training levy. A Levy which would provide a greater variety of courses and allow for the funds to be spent on both traditional apprenticeship courses but also much shorter courses for upskilling current staff members.

We also need to make apprenticeships more attractive. Therefore, Liberal Democrats would align the apprentice wage with the minimum wage to introduce better incentives for school leavers to pursue a skilled career in areas such as business, IT and manufacturing.The current apprentice wage is £5.28 an hour. This is  almost half of the national minimum wage and far too little for a school leaver to live off without additional financial support. This wage is a huge injustice and is the wrong incentive if we want to build a stronger more skilled workforce. 

We need to seize the opportunity of apprenticeship levy reform to support economic growth and to better support all sectors of the economy, not just those that traditionally offer apprenticeships such as manufacturing. The apprenticeship levy must be overhauled to better suit a range of industries from the creative industries ecosystem of freelancers, to small businesses and professional services.The new skills and training levy will also help us in our transition into a greener and more sustainable economy. 

On our journey to combat climate change and achieve net zero by 2045, the Government needs to introduce a huge programme to equip the modern workforce with the necessary skills to decarbonise energy, industry and transport. The Green General Skill index identifies different groups of skills that are essential in the transition to a green economy: Engineering and technical skills, such as eco-buildings, renewable energy design and energy-saving research. There are also operation management skills related to change in organisational structure required to support green activities. Therefore as we progress into a greener more sustainable economy, it is vital to introduce apprenticeships that teach the necessary green skills and equip the modern workforce for what the future holds. 

The UK is currently facing a chronic skills gap and investing in apprenticeships will help in addressing the issue. We need to introduce more concise and relevant training courses with an emphasis on green, digital, engineering and manufacturing skills to ensure that we are equipping our workforce with the skills needed to adapt to a modern economy. 

We cannot afford to allow our country’s potential to go untapped and that is why the UK government must act now to fix our broken apprenticeship system. 

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