Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, whether he has made an assessment on the potential impact of increasing employer co-investment to 25 per cent on the number of apprentices taken on by levy-paying employers.

As we introduce new products, such as apprenticeship units and foundation apprenticeships, we are also simplifying the Growth and Skills Levy, improving its transparency and making it more efficient.

Currently, levy-paying employer accounts can show large unspent balances (currently totalling around £6.5 billion) which far exceed our annual apprenticeship budget. This has led to an incorrect understanding that there are significant unspent funds available to spend. However, over the last four years, on average, 98% of the English apprenticeships budget has been spent.

The 10% government top-up is one cause of this problem and removing it, alongside reducing the expiry period to 12 months, means we can simplify the system and ensure levy balances are more closely aligned to the annual levy paid by employers. Existing funding will remain within accounts, with the changes applying only to new funds entering accounts.

We are also changing the government’s co-investment rate from 95% to 75% for levy-paying employers once they have exhausted all their funds. Levy-paying employers will still be able to benefit from a very generous government contribution once their funds are exhausted, but it is right that employers who utilise all their levy funds contribute more to apprenticeship training and assessment. This will support greater employer investment in skills overall and ensure funding is available to roll out further flexibility for business and increase opportunities for young people.

We will carefully monitor the impact of these changes once they take effect.