Views on Policy Issues – Levies (UK)
What do you think?
Semta represents the view of our employers across government and
the media. If you are an employer in the science,
engineering, or manufacturing technology sectors, we welcome your
views at policy@semta.org.uk
The issue
- The question of voluntary
or statutory company contributions to a central training fund is
one which is regularly raised, particularly in sectors where there
are skill shortages.
- The introduction of
compulsion, in any system which has previously been voluntary,
always runs the risk of reducing previous high levels of voluntary
involvement to the lowest permissible level of compulsory
involvement – a company which previously spent a great deal on
training per employee in a voluntary system may only spend the
minimum under a compulsory system.
- Following a recommendation
in the Leitch Review of Skills, the government is to consider
whether it would be beneficial to introduce new enabling
legislation to make it easier for Sector Skills Councils (SSCs) to
introduce levy schemes where they consider that these would help
improve skills and productivity in their sector, where a clear
majority of employers in the sector support them, and where impact
assessments are positive.
- The UK Commission for
Employment and Skills is planning in its first year of operation to
review employer “collective measures” such as levies and licences
to practice – UKCES will need to reach a view on the wider economic
impact of these policies in terms of stimulating growth and
competitiveness, and effectiveness in terms of raising
skills.
Semta Employers’ View
- Through its Sector Skills
Agreement process, Semta has had dialogue with over 5,000 companies
regarding their skill needs and concerns. There is currently
no consensus among employers in Semta’s footprint
as to whether the introduction of a levy would improve investment
in skills which actually improve productivity and
competitiveness. Across the sub-sectors, and between
companies of different sizes and locations, there is no consensus
that a levy is the solution to their skill shortages. The
reasoning behind the opposed / support divide is explained as
follows:
Reasons for opposition to a levy:
Both
large and small firms are concerned that the issues behind the
original abandonment of the engineering levy (bureaucracy,
‘fairness’, deadweight and ‘training for training’s sake’) would
not be addressed by the introduction of a new levy system.
- Small firms in some sub-sectors are currently very concerned
about day-to-day cash flow management and simply could not spare
the money to fund a levy.
- Large firms are concerned that they would contribute more than
they would benefit from.
- Companies are increasingly concerned about national government
intervention in their training activity (the recent Time to Train
consultation in England drew strong criticism), particularly at
such an economically sensitive time, when employers are more
concerned with creating and maintaining wealth.
Reasons for support for a levy:
- The
engineering industry benefited greatly from the geographical
coverage of providers supported by the levy. Companies have
commented that colleges and providers have reduced engineering
provision since the levy was abolished and it is increasingly
difficult to access provision locally.
- Small firms believe that it would enable larger firms to invest
in the training system and SMEs / supply chain companies would
benefit.
- Large firms believe that their existing training activities could
be ‘offset’ against a levy obligation, enabling them to effectively
invest.
- A few elements of training
which took place under the old levy were particularly valued, such
as the elite graduate training sponsorship
programmes and the network of providers
who were sustained by the reliable funding.
- Levies are generally viewed
as a “step back” in terms of the training
relationship between employers, individuals, training providers,
and the government.
What is Semta doing?
- Semta continues to lobby
against the introduction of an old-style compulsory levy
system.
- Semta will continue to take
the issue of levies under advisement from our employers, and will
only make recommendations regarding their introductions based on
the views of the clear majority of companies.
- Semta continues to lobby
the government and policy-makers against the introduction of
compulsion in terms of training funding without the full support
of, and consultation with,
employers.
What else needs to be done?
-
The government should continue
to explore voluntary forms of training funding, such as Train to
Gain, sector-based Compacts and partnership arrangements between
companies and their employees.
The evidence and facts
-
Levies are run on a system of
voluntary / statutory contributions from employers, which are then
used to finance training. Companies who do the training
themselves can therefore usually claim some / all of their levy
contribution back.
Providers can also bid for funding to train
individuals.
-
Levies are currently in
operation in a few sectors – construction, engineering
construction, and film production. These sectors recognise that the
nature of their work (largely project and contract-based) means
that company-managed training can be difficult. The levy therefore provides
funding for the training of apprentices and other training which
would otherwise be difficult to arrange and manage in a short-term
contract-based business. The film production levy has only
recently become compulsory (having been voluntary previously) and
some concerns have been raised as to its potential negative
impact.[1]
-
The engineering sector in the
UK did once have a levy, which was abolished in the
1980s. Employers in
the sector felt that the system was too bureaucratic, and that the
re-distribution of funding was not always fair. In particular, large companies
felt that they did not see an appropriate return for their level of
contribution to the levy “pot”. There were also concerns about
the appropriateness of the type of training which the levy funded,
and the general service which was provided.
-
Reasons for termination of engineering levy
The engineering sector used to have a levy system, which was
abandoned for a number of reasons:
- The bureaucracy involved meant that employers were unconvinced
that the levy was the most economical way of addressing skill
needs.
- Many companies felt that they ‘put more in’ than they received in
return and the perceived unfairness of redistribution of resources
created problems.
- Employers felt that a compulsory system did not allow them to
respond flexibly to the needs of the business and the
industry. This led to a growing perception of ‘training for
training’s sake’, which did not contribute to the productivity and
competitiveness of companies or the sector.
-
Sector Skills Councils cannot
be levy-setting organisations, where a new levy has been
introduced, the relevant SSC has been involved in the creation of a
separate body for this purpose.
More information
Leitch
Review of Skills - Prosperity for all in the
global economy: world class skills
World
Class Skills - government response to the Leitch
Review (England)
UK Commission for Employment and
Skills - organisation tasked with considering
collective measures across the UK
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Back to Views on Policy Issues
9 November 2008
Sources
[1] Lights, camera - pay up,
Guardian 26 Feb 2006