Source · Select Committees · Transport Committee
Recommendation 1
1
Acknowledged
UK transport manufacturing sustains communities, providing high-quality jobs and significant economic contribution.
Conclusion
Manufacturing of motor vehicles, buses, aeroplanes, trains, and ships has deep roots in the UK, supported by rich ecosystems of associated businesses and supply chains. Transport manufacturing provides high quality, well-paid work which sustains many communities across the country and makes a significant contribution to the UK economy as well as to its transport services. (Conclusion, Paragraph 21)
Government Response Summary
Acknowledges the importance of transport manufacturing to the UK economy and describes changes to the Growth and Skills Levy and funding for various skills initiatives.
Government Response
Acknowledged
HM Government
Acknowledged
In order to deliver the flexibilities that employers have called for through the Growth and Skills Levy, including the introduction of short courses and expansion of foundation apprenticeships, we need to reform the system so it is more sustainable, transparent, and optimised to meet national skills needs. Even with record investment of £3.3 billion in the 2026–27 financial year, the growth and skills budget is a finite resource. 100% of the Department for Work and Pension’s growth and skills budget was spent last year, with around a third supporting SMEs who don’t pay the levy. As set out at the Autumn Budget, from August 2026, the Department for Work and Pensions will be removing the 10% top-up to levy-paying employer accounts, reducing the expiry window of levy funds from 24 months to 12 months, and changing the Government’s co-investment rate to 75% (from 95%) for levy-paying employers once they have exhausted all their funds. These changes are essential to bring the funding in levy payers’ accounts more in line with the available budget. The funds that levy payers see in their apprenticeship service accounts are not the same as the Department’s annual growth and skills budget or the annual levy that is raised UK wide. Because employers currently accrue funds for two years, and receive a 10% top up from government, there is an illusion of significant excess funding in the system; currently there is around £6.7 billion visible in employer accounts. This is more than double the budget so if all levy paying employers tried to spend all their notional levy funds, we would actually only be able to meet half of that demand and there would be nothing left at all for non-levy payers (essentially small and medium sized enterprises who currently represent nearly 30% of apprenticeship spend).Apprenticeship funding can only be used during the course of an apprenticeship. As capital items will have a lifespan beyond the individual apprenticeship being funded, capital projects are ineligible for apprenticeship funding and there are no current plans to change this. However, apprenticeship provision will benefit from significant capital funding announced in the Infrastructure, Industrial, and Education Estates strategies. This includes a regular allocation to colleges to 2034–35 to support maintenance; delivery of £1.7 billion via the Further Education Capital Transformation Programme to rebuild and refurbish sites in the worst condition; £625 million from 2025–26 to 2028–29 to deliver up to 60,000 additional skills construction workers; and £200 million via the Skills Mission Funds to expand Technical Excellence Colleges across England to priority sectors. Small and medium sized employers (SMEs) within supply chains can directly access funding for apprenticeships training; additionally, they can benefit from levy transfers from levy paying employers. While the apprenticeship levy is UK-wide, apprenticeships and skills policy are devolved matters; this means the Devolved Governments receive Barnett consequentials on apprenticeship spending in England through the Barnett formula. It is for the Devolved Governments to allocate their funding in devolved areas as they see fit, including investment in their own skills programmes, and they are accountable to their respective legislatures for those decisions.