NHS needs to get up to speed with apprenticeship levy

by Steve Brown

05 January 2018

The apprenticeship levy has lots of worthwhile ambitions, but from the health service’s perspective it is hard not to see it simply as an additional cost burden in 2017/18.

This is especially the case now that the Treasury and Department of Health have confirmed that it is to be accounted for as a tax (see HFMA accounting treatment briefing for more details).

The levy was first announced in the 2015 summer Budget as part of plans to train three million new apprentices by 2020. The levy ringfences the funds to support this expansion and places the costs of training firmly on the shoulders of employers, which should be the beneficiaries of having a more trained workforce.

All employers (with an annual pay bill above £3m) have to pay the levy at a rate of 0.5% of their pay bill. These funds – plus a small government top-up – then sit in each organisation’s own digital account and can be drawn down to support the costs of qualifying apprenticeships.

Very early on, the NHS raised concerns that for a large proportion of the NHS workforce, apprenticeship qualifications wouldn’t be sufficient to deliver the requisite skills. Training is already delivered in different ways – particularly to the clinical workforce. The fear was the NHS would be the largest contributor overall to the levy, but then not be able to access the available funding – or at least not without some nimble footwork and the development of new training programmes.

Now a survey of nearly 70 NHS bodies by the HFMA (see Using the apprenticeship levy) suggests these fears have materialised – at least initially. More than half of the sample said they expected to take back out 25% or less of the funds in their digital account in 2017/18. Only 13% - one in eight – expect to use over half of the amount available.

The levy is hardly insignificant– taking an estimated £200m gross from NHS budgets this year. And if the survey figures are reflective of all NHS bodies, then the NHS stands to make a significant net contribution this year – at a time when it is already operating with major deficits.

However there is better news. Clearly NHS providers and other employers have had to try to hit the ground running this year and it may take a year or two before they are maximising their potential to drawdown resources to support apprenticeships. They do have two years in which to use the funds added to their digital accounts – so this year’s shortfall doesn’t yet mean the money is lost.

And by 2019/20, most respondents to the survey expect they will be able to recoup more than 75% of the funds they put in. Some are even confident of drawing down more than 100% (courtesy of established apprenticeship programmes and the government’s digital account top-ups).

They say the trick is good workforce planning and making the use of the levy a specific focus in their plans.  NHS bodies that are also training providers (in most cases registered to provide apprenticeship level training to their own staff) are benefiting from cash income from the digital accounts, but they need to be sure that they are covering their costs.  Others are finding that using existing training providers is a relatively stress-free way of accessing the account as the providers do all of the paperwork.

With such a busy agenda currently, NHS bodies could be forgiven for having their attention elsewhere – apprenticeships and the levy can be sorted another day. But in reality, NHS bodies can’t afford to take their time with this. They need to ensure they have converted existing training programmes to levy-compliant schemes and explored the potential to start new schemes as soon as possible.

The ‘taxing at source’ approach to creating levy funds, means that the levy is money already spent. Maximising the money coming back into the organisation to support new apprenticeships should at least mean the NHS gains a more skilled workforce to help it face its current significant staffing challenges.