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Businesses ‘crying out for help to tackle skills shortage’, says Labour

Labour leader Sir Keir Starmer during a visit to meet apprentices and technicians earlier this year (PA)
Labour leader Sir Keir Starmer during a visit to meet apprentices and technicians earlier this year (PA)

Businesses are “crying out for help to tackle skills shortages”, the shadow education secretary has warned.

Labour has re-stated its pledge to reform the existing apprenticeship levy, a charge on firms which have an annual wages bill of more than £3 million.

In an election campaign announcement fronted by Bridget Phillipson, the party pledged that a new growth and skills levy would give businesses “greater flexibility to invest in training courses that meet their skills needs, turbocharging investment in skills for the future”.

The announcement comes days after Labour was seen courting bosses, asking them to declare their support for the reformed levy, according to Sky News.

On Tuesday, a public letter in support of the party which 120 company chiefs signed caused a row over Labour’s claim to be the “party of business”, after some signatories were allegedly associated with dormant firms.

Ms Phillipson said: “Businesses are crying out for help to tackle skills shortages, so Labour will give them the flexibility needed to create skills training opportunities and drive economic growth through a growth and skills levy.

“Unlike the Tories’ botched apprenticeships levy which has seen training opportunities plummet, Labour will put businesses in the driving seat of creating the opportunities people need to get on in work.

“The choice on 4th July is between a Conservative Party that has given up on upskilling the nation and Labour that will see in a golden age in lifelong learning so that everyone can get on and fire the growth our economy needs.”

According to Government figures, the number of apprenticeship starts dropped between 2021/22 and 2022/23 – from 349,190 to 337,140.

But the latest figures covering August 2023 until January 2024 suggests the number of apprenticeship starts is recovering – up by 2.5% on the same period the previous year.

Labour has pointed to a drop in further education and skills participation, where Department for Education figures show a steady decline between 2017/18 and 2020/21 – from 2.18 million participants to 1.64 million.

Labour leader Sir Keir Starmer (right) talking to members of staff during a visit to Rolls-Royce in Derby
Labour leader Sir Keir Starmer talks to members of staff during a visit to Rolls-Royce in Derby (Stefan Rousseau/PA)

Participation has risen to 1.82 million by 2022/23.

The reformed levy would permit firms to spend up to 50% of their levy contributions on “approved non-apprenticeship training”, with at least 50% reserved for apprenticeships.

The approved qualifications could include modular courses in Labour’s industrial strategy “priority areas” – including digital and green skills – or pre-apprenticeship training, according to the Labour Party.

Onward, a conservative think tank, published a report into the policy earlier this month which suggested the new flexibility “risks causing a further sharp decline in the number of apprenticeship starts”.

The think tank also concluded: “It is clear that the current system and the apprenticeship levy is not working as it should be and is not incentivising opportunity in the places that need it most”.

The Institute for Fiscal Studies (IFS) welcomed measures to increase economic activity among young people, but said employers would still need to get on board.

Imran Tahir, a research economist at the IFS, said: “Proposals – by either party – to increase the number of apprenticeships or to allow firms to use training subsidies more flexibly would not, by themselves, guarantee additional training opportunities will be provided to, and taken up by, young people.

“Ultimately, employers will decide how to use the funding, and presently many are choosing not to take up the funding that is available.”

Education Secretary Gillian Keegan said: “Labour’s ill thought through policy will halve the number of apprenticeships, slash the budget by £1.5 billion, and disadvantage small and medium sized businesses.

“Since 2010, we have built a world-class apprenticeship system from the ground up, delivering over 5.8 million apprenticeships since 2010 and creating pathways to 70% of occupations through apprenticeships.

“Our plan is working. We must stick to it to deliver 100,000 more high-skilled apprenticeships a year fully funded so young people have the opportunities they deserve to secure high-skilled jobs and a brighter future. Labour would take us back to square one.”