Scotland’s largest private-sector employer says UK apprenticeship levy not fit for purpose

In discussion with CBI Scotland director Tracy Black on the Go Business Radio Show with Hunter & Haughey yesterday, Lord Haughey challenged the effectiveness of the apprenticeship levy introduced by the UK Government in 2017 which means all employers pay a tax.

Revealing that his business had reduced its number of apprentices by 60 per cent as a result of the levy, Lord Haughey said: “No-one I have spoken to – trade unions and companies – agrees that it is a good idea. In my own experience, it has caused a massive reduction in the number of meaningful apprenticeships in Scotland.

“My problem with the apprenticeship levy is that the UK Government trumpeted at the time that this is not a tax, the more you put in it will give you 10% back. For someone like me, the levy was £700,000 a year and if we spend that amount, we can get another £70,000 and that sounds like a good idea until you read the small print.

“They will only pay you for the days that the apprentice is in formal education. That could be one day a week or one week a month.”

Ms Black conceded that a review was required. “I completely agree that the whole funding of it and how the money is allocated needs to be reviewed,” she said, “because workplace learning has an absolute role to play if we want to tackle things like productivity in Scotland and apprenticeships are a fantastic route to that.

“In Scotland, we spend about £2.5 billion on education and we’ve got amazing educational establishments here but the reality is we need to look at how we’re spending that money and the return on that investment, and one of the key areas we must be investing in is on-site learning.”

Entrepreneur Sir Tom Hunter said the situation described by Lord Haughey, who is the largest private-sector employer in Scotland, was a prime example of a policy “being written in isolation but on the ground it is not working”.

Asked by Donald Martin, editor of The Herald and The Herald on Sunday and host of the Go Radio Business Show with Hunter & Haughey if government was listing to the key messages from business, Ms Black said it was “absolutely essential” that both the UK and Scottish governments “understand the needs of the economy if they want to deliver on their promises, particularly around education and health, for example”.

Post-Covid challenges, she said, included cash flow. “There has been huge disruption so we need to see consumers feeling confident to get back out and support businesses,” she noted. “But Covid is far from over so it is about keeping vigilant and hopefully we won’t have any more lockdowns – but we don’t know what the future is going to bring.”

Ms Black stressed that while restrictions are in place there must be support, particularly for hospitality and retail. She alluded to the furlough scheme which the CBI had helped develop with others and the UK Government and, in Scotland, the business rates holidays which had really helped some sectors.

“But we know that parts of the economy are still not back to normal,” Ms Black said, highlighting the important of international travel. “We don’t export as much as we should, particularly if you take out whisky, salmon and higher education. We are not spending enough in R&D, and there are certain areas where we have skills shortages and on top of that we have an ageing population so there are some fundamental problems that we need to tackle.”

Suggesting that “less talking and more concrete action” is required to address many of the challenges facing business in Scotland, Ms Black said: “Scotland is very good at that long-term thinking but it is not getting into the delivery so we must ask what we need to do to make it happen.”