Levy forecasting

1. Levy forecasting 22/09/16 Nick LinfordDirector at Lsect

2. The apprenticeship levy funding 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?

3. 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?

4. 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+

5. How is it the levy likely to be used? So close to 20,000 employers will havesomething 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 employeeson management apprenticeships.

6. 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%

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

8. 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)

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