Clare McNeil, IPPR Associate Director for Work and Families

London and the South East will benefit most from the government’s new apprenticeship levy on large businesses to be introduced on 1 April. However those areas described by the Prime Minister as ‘left behind’ by globalisation will receive proportionately less investment for vital training opportunities, according to the IPPR think tank.

The apprenticeship levy is intended to boost investment in training across the country, yet the government has admitted it has not carried out its own assessment of the regional impact of the levy. Analysis of the annual business survey shows that the levy will stimulate training most in London and the South East. These regions have 38 per cent of the UK’s large businesses, which will be targeted by the levy, but higher levels of employment and only 27 per cent of the population. London and the South East already have among the highest qualified populations in the country, with 50 and 40 per cent respectively of their populations educated to level four and beyond, compared with 30 per cent for example in the North East and Yorkshire and Humber.  

The findings dispute the claims of the Education Secretary, Justine Greening MP, whose department is responsible for the policy, that it will help break down the barriers to social mobility faced by young people today. The government intends for the Apprenticeship Levy to support three million apprenticeships by 2020. But unless it changes the policy to ensure that investment is distributed more fairly between north and south, it will exacerbate existing regional disparities in opportunity for young people:

  • The proportion of young people in each region who are NEET (not in education, employment or training) is far higher in the North East (18.6%) Yorks and Humber (17.5%) compared to London (13.4%) and the South East (10.7%)
  • The UK's youth unemployment ‘hotspots’ are all outside of London and the South East - with Bradford, Middlesbrough, Swansea and Wolverhampton all having youth unemployment rates in excess of 25%
  • The North East has the highest youth unemployment rate amongst UK regions (18.3%) compared to the lowest rate of 11.2% in the East of England

The new apprenticeship levy will raise less money, and stimulate training less, in the areas that need it most - the regions hit hardest by de-industrialisation, which suffer from low levels of qualification, low productivity and low pay. These areas also recorded among the highest vote shares for Brexit. But with public funding for adult skills cut by 40 per cent since 2010/11 and employer investment in training in decline, there is no sign of the extra investment promised to increase economic opportunity in ‘left behind areas’.

The government’s apprenticeship levy will come into force from April. But the £2.6 billion it will raise in England in 2017/18 will fail to restore employer investment to the levels seen a decade ago, and as funding raised will be spent through employer vouchers it will not support local devolution. IPPR is calling for a new ‘Skills Levy’ to be introduced to increase employer investment in the areas that need it most and to turbo-charge skills devolution. The Skills Levy would raise over £5 billion – twice the amount raised by the apprenticeship levy. It would be:

Broader, applying to all employers with 50 or more staff;

  • Larger, set at one per cent of payroll for the largest employers (250 or more employees) - twice the current level;
  • Fairer, with a £1.1bn 'Regional Skills Fund' to boost investment in left behind areas, as a result of top slicing investment from the largest employers

Clare McNeil, IPPR Associate Director for Work and Families, said:

“The government has said that it wants to break down the barriers to social mobility faced by young people in this country. It is clear to see that young people outside of London and the South East, face a much harder time finding a first job or training opportunity - particularly those not going on to university.

“It is extraordinary then that the government has not analysed the regional impact of its new apprenticeships policy, which is likely to boost investment in training precisely in those areas where employment is higher, such as in London and the South East, leaving unemployment hotspots in the North East or Yorkshire with proportionately less funding.

“These areas are also those most likely to be hardest hit by the uncertainty facing the UK over Brexit, and the increasing impact of technological change on jobs. The Education Secretary must think again on this policy if the government is not to put even greater numbers of young people at a disadvantage simply because of where they live.”

About IPPR: Our independent research is wide ranging, it covers the economy, work, skills, transport, democracy, the environment, education, energy, migration and healthcare among many other areas.

1. This analysis comes from a new IPPR report, 'Skills 2030: Why the adult skills system is failing to build an economy that works for everyone'.

2. JPMorgan Chase has supported this work as part of its New Skills at Work programme. This joint IPPR–JPMorgan Chase initiative is bringing together and mobilising the best policymakers, business leaders, academics and civil society organisations across Europe to develop new solutions for the workforce challenges of the future.

3. IPPR aims to influence policy in the present and reinvent progressive politics in the future, and is dedicated to the better country that Britain can be through progressive policy and politics. With nearly 60 staff across four offices throughout the UK, IPPR is Britain’s only national think tank with a truly national presence.

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