Labour’s Growth and Skills Levy: What it means for employers

In its current form, the Apprenticeship Levy is a tax on UK employers, with funds exclusively earmarked for apprenticeships training. Labour’s goal is to broaden its use – creating more opportunities for adults in the UK to gain new skills.

There’s still a lot we don’t know about the Growth and Skills Levy. But, to help employers unpack what a reformed Levy could mean for their business, here’s what we know so far:

The goal to reform the Apprenticeship Levy into the new Growth and Skills Levy sits at the heart of Labour’s mission to boost skills in the UK. As a key manifesto commitment, Labour plans to provide flexible access to adult training in the hope that it will open up opportunities for growth across the workforce.

The intention of the reform is not to reduce the number of apprenticeships, but to increase flexibility. The new Levy would allow businesses to spend some of their Levy contributions on non-apprenticeship training, with a portion still reserved for apprenticeships.

During the Labour conference in September 2024, the Government announced new(opens new window)details on the upcoming reforms(opens new window). These included creating new ‘Foundation Apprenticeships’, targeted at young people, which will be eligible for Levy funding.

To support this change, employers will be asked to fund more of their Level 7 apprenticeships outside of the Levy.

A more flexible approach to the current apprenticeship format was also announced, including trialling shorter apprenticeships, lasting fewer than 12 months.

The Department for Education will release further details on the offer and how it can be accessed at a later date.

In the King’s Speech 2024, the Skills England Bill was announced. This will create a new body, ‘Skills England’.

Skills England will develop a single picture of national and local skills requirements, bringing together businesses, providers, unions, Mayoral Combined Authorities (MCAs) and national government to assess the skills the economy needs.

Skills England will shape the future of the Growth and Skills Levy, holding a list of approved qualifications and training that businesses will be able to spend Levy money on. The list will be developed in collaboration with businesses and experts.

The functions of the Institute for Apprenticeships and Technical Education (IfATE) will also transfer to Skills England, to simplify and improve the skills system and accelerate the process of tackling skills shortages in the UK.

Although it will take some time for Skills England to be established in law, a ‘Shadow Skills England’ has been announced(opens new window), to start work on the assessment of future skills needs, working closely with employers.

Labour’s mission statement refers to the vital need for upskilling and training – alongside apprenticeships – to meet the needs of developing technology in the workplace.

Under the current system, Apprenticeship Levy-paying employers are only using 55.5% of available funds, on average.(opens new window)

By creating more flexibility over how the money is spent, the new Growth and Skills Levy could help some employers utilise a greater proportion of their Levy funds – with training that meets specific business needs and skills gaps. For example, it could provide an opportunity to level-up teams with shorter courses in technical skills, such as AI and data. These are vital areas that will be necessary for future business success and to maintain a competitive edge.

This isn’t just beneficial for employers. Employees also stand to benefit from increased investment in training opportunities – being empowered to learn new skills and feeling valued by their company. For employees, upskilling means opportunities to continuously learn and progress in their roles – which also helps improve retention(opens new window). In fact, we see 94% of individuals remain at their employer beyond their Multiverse apprenticeship.

The Growth and Skills Levy is a commitment from the Labour Party to upskilling employees. Fundamentally, the new policy is unlikely to change how employers should think about their investment in training: through the lens of increasing employees’ access to gain in-demand skills.

With careful implementation, new opportunities could be created for all workers across the economy – delivering ROI for employers and supporting a culture of work-based lifelong learning.

And while we don’t have all the answers just yet, the key to making a reformed Levy successful will be in making sure it's designed with the support and expertise of employers.

Read more about our perspective on the new Levy in our Skills Mission Report.
Want to speak to us about the Levy or other ways to support upskilling in your workplace? Get in touch.

Last updated: 2 October 2024