Source · Select Committees · Transport Committee
Recommendation 5
5
Accepted
Extend apprenticeship levy expiry; consult on capital expenditure, UK-wide spending, and SME supply chain mechanisms.
Recommendation
The Government should: • extend the expiry window for unspent levy funding to three years; • consult on allowing levy funding to be used on capital expenditure to support the provision of training and skills development (so long as that is not to the detriment of passing down that levy funding for the benefit of small and medium-sized enterprises in the supply chain); • set out options for mechanisms for larger companies to use or pass down levy funding for the benefit of the small and medium-sized enterprises in their supply chains; and • consult on permitting levy funding to be directly spent anywhere in the UK by manufacturers with operations in other UK nations as well as England. (Recommendation, Paragraph 35 )
Government response summary AI-generated
The Government sets clear expectations for schools and colleges through strengthened statutory guidance, updated in spring 2025, and there is external accountability provided by Ofsted.
Summary of the government's response below — read the verbatim text to verify.
Government Response
Accepted
HM Government · verbatim extract
Accepted
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.
Read the full response on Parliament ↗