The new Growth and Skills Levy and Skills England

The Government has announced the introduction of a new growth and skills levy to replace the current apprenticeship levy. With the implementation date as yet unknown, we consider what is known so far about the new levy alongside the recent announcement on Skills England, and the implications for employers.

What do we know about the new levy?

The growth and skills levy are likely to have a broader goal than the current apprenticeship levy. It’s focused on funding skills development across the board, not just apprenticeships, and it’s geared towards supporting economic growth by addressing a wider range of training needs in the workforce.

Speaking at the recent Labour annual conference, the Prime Minister said the “new apprenticeships will give young people a route in to careers in critical sectors, enabling them to earn a wage whilst developing skills”, adding “We’ve got to give businesses more flexibility to adapt to real training needs.”

As well as identifying that the focus for funding will be for those at the beginning of their careers, the announcement suggests that apprenticeships for the equivalent of a master’s degree will no longer be funded by the levy.

What are the key differences between the Apprenticeship levy and Growth and Skills levy?

With the apprenticeship levy, any money employers pay in can only be used for apprenticeship training and assessments, which must last at least 12 months. The funds are accessed through an online account, and if you don’t spend the money within two years, it expires. It’s strictly for apprenticeship-related training that leads to qualifications.

The growth and skills levy is more flexible. Employers could use the funds for different types of training, such as leadership courses, reskilling staff for new roles, or more specialised industry training. It will allow funding for shorter apprenticeships, giving learners and employers greater flexibility over their training than under the existing system. The aim is to support growth by filling various skill gaps, not just through apprenticeships.

Skills England

In related news, the Government launched Skills England in July to help identify skills needs. It has suggested there is a very real and pressing need for such a review, reporting that between 2017 and 2022 skills shortages in this country doubled to more than half a million, and now account for 36% of job vacancies.

Speaking about the purpose of Skills England, Education Secretary Bridget Phillipson said it will “jumpstart young people’s careers and galvanise local economies. It will bring businesses together with trade unions, mayors, universities, colleges and training providers to give us a complete picture of skills gaps nationwide, boost growth in all corners of the country and give people the opportunity to get on in life”.  In its first report, published on 24 September 2024, Skills England has assessed working skills across the country and future skills needs and gaps. It has analysed the spread of skills across regions and looked at jobs in high demand and skills needed in key sectors.

What’s next?

The Government has said further detail on the new levy will follow “in due course”.  Skills England says it will ‘engage with stakeholders’ in the autumn of 2024, via round tables and webinars, to test and refine its initial assessment of skills needed. It will also consult employers and other stakeholders about what training the growth and skills levy should fund.

As recruitment budgets come under pressure and skills gaps increase, some organisations could find the new levy provides opportunities for creative ways to manage those resource challenges. 

We will of course keep you up to date with developments. In the meantime, if you would like to discuss this topic further or any other HR matter, please contact Simon Martin in our team on 07384 813 076.