Read: Apprenticeships are a key part of economic growth, but it’s time for reform

With perfect timing, coinciding with National Apprenticeship Week, the Government has announced the creation of four new government departments, recalibrating its commitment to a programme of growth and technological advance, driven by innovation and research.

Yet talent and technology go hand in hand. It’s people who drive forward progress on technology. So apprenticeships matter, and that has never been more important in the creation of the high tech, greener economy we want to see. 

I launched the Apprenticeship Levy in 2017, whilst I was Education Secretary. For young people it was part of a broader push to have much better quality education choices post-16 by improving the quality of vocational education, including plans for T-levels. If we’re going to level up Britain, it’s a key step we need to take. For employers the apprenticeship levy was about putting them in the driving seat to shape and invest their apprenticeship levy to produce the skills they needed. I also made sure employers could use funding across their supply chains to extend their levy’s reach.

The levy has successfully driven a real culture change among many employers.  Many of our Purpose Coalition members highlight apprenticeships as one of their key contributions to spreading opportunity in the communities they serve - from the extensive and wide-ranging programmes of Amazon UK and the Co-op Group, with their countrywide reach, to those run by UK Power Networks and aerospace company, Leonardo, at the cutting edge of new technology and innovation. 

The subsequent introduction of degree-level apprenticeships has become an offer of many of our member universities, working with employers in their areas to develop courses which will help them attract new staff, develop existing staff and improve staff retention.  

Yet five years after the launch of the apprenticeship levy, recent research by the Sutton Trust shows that the number of those starting apprenticeships are falling and the dropout rate increasing. There is also increasing evidence that they are less likely to be taken up in the most deprived areas or by the most disadvantaged students. Under-25s, females and those from ethnic minorities have been impacted the most.

Many employers find the levy rules hugely restrictive on how they invest in skills easily and it’s led to over £1bn of the apprenticeship levy being handed back last year alone. This week the Co-op Group released their own report, setting out their challenges in investing the levy as they’d want to and having to hand back £600m to the Treasury.

It's time to take stock and review how to make things better. That’s why many employers, supported by the Purpose Coalition, are pressing for urgent reforms of the system -  for an Apprenticeship Levy 2.0. Some changes could be made immediately – for example, giving employers more flexibility on how the levy is spent so it can also be used for apprentices’ recruitment and salaries rather than solely on courses and fees or on retraining workers for new jobs. The Co-op’s experience points the way to how extra flexibility could create even more opportunities for employers to work collaboratively.

There are other longer-term options which would merit further discussion between employers and government, whether that’s extending the time the levy can be spent, from the current 24 months to, say, 36 months, or seeing the Government begin to engage strategically with employers on how the unspent levy they hand back is invested by ministers to develop more jointly owned skills plans.

It’s also about a culture of collaboration, encouraging local employers to work with local government and mayors to create the opportunities that are right for their local communities. At the Purpose Coalition, we will be working with our partners to advocate change to achieve the real skills revolution we need and to make sure we keep building our talent pipeline, even in difficult economic times. It’s crucial to levelling up our country. A review after the apprenticeship levy’s first five years would be a huge opportunity for positive change and, with our Coalition partners, we will be urging government to bring forward reforms that will make a real difference.