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Construction firms facing double levy payments in 2017

In his latest blog, Paddy Patterson of Maverish Ltd and founder of Oxfordshire Apprenticeships discusses recent news that construction firms face the prospect of paying two training levies from April 2017.

When the government announced plans for a universal Apprenticeship Levy, for many the first question was “what does it mean for existing industry levy systems?” We were told the relevant bodies would be consulted with and in the meantime we consigned the question to the pile of other things we wondered about the new Levy. Many felt – myself included – that there would be no way construction firms would accept having to pay two separate training levies and we wondered how the two systems would co-exist, or whether the CITB levy was on its way out. 

So it felt something of a surprise this week when the CITB announced their timetable for consulting with industry on the next update to its Levy Order in 2018, which to cut a long story short sees firms facing the prospect of making two payments when the Apprenticeship Levy is introduced in April 2017. 

CITB-registered construction firms fall in scope to pay their levy when their annual wage bill is £80,000 or above, whereas the Apprenticeship Levy only affects firms with an annual paybill over £3m. This means around 900 businesses will end up with two bills from April 2017.

The double payment arrangement will be place for at least 12 months but the CITB are putting ‘transitional arrangements’ in place to help soften the blow (and lower the cost) for affected firms. They intend to get as much money back to those businesses through “enhanced funding for training they undertake.” They estimate the value of these ‘rebates’ to be around £38m, but no blueprint is on the table of how that will be done. And let us not forget that the CITB have this year reduced the size of their workforce by around a third, and I know this likely means less support for local firms through a recognised area Adviser.

Steve Radley, Director of Policy at CITB, said: “We are currently working with industry to agree the mechanics of the transition arrangements and will announce this in early July.”

It is expected that a number of Oxfordshire firms will be affected by this, and it is yet another ‘quirk’ of the industry that complicates the business of increasing the number of Apprentice starts in the trades. Don’t forget the other side of the CITB Levy system, is a very generous grant system that can be worth over £10,000 per Apprentice to an employer.  Assuming the system remains unchanged during the consultation period, the continuation of the grant system can only be a good thing.

Adam Marsh is Managing Director of Kidlington-based ACE Training who specialise in training construction Apprentices. He feels the new timetable could be positive for the industry: “It seems like they’ve had little option but to keep things as they get their heads around it fully. That said, we were fearful of the impact on Apprenticeship starts that the removal of the CITB levy and grant system may have had, and if the intention is to maintain and even increase the amount of money going back into employers’ pockets for at least another 12 months, then I am sure the industry will welcome it.”

I wouldn’t pretend for a second that this news is anything other than later than we would have wanted, but it is timely as we are due to find out more about funding rates and levy spending rules in the next Skills Funding Agency update this month. This should mean that by the end of the month, the construction industry will have a much clearer idea of how it can try to ensure these latest developments help to improve and not worsen its training and skills problems.