Photographer: Chris Ratcliffe/Bloomberg

U.K. Apprenticeship Program Risks Wasting Public Money, IFS Says

  • Analysis adds to criticism of levy set to take effect in April
  • Financial incentives on offer could lead to poor decisions

Government plans to increase the number of apprenticeships in the U.K. risk wasting public money and putting downward pressure on wages, according to the Institute for Fiscal Studies.

Starting in April, employers with an annual pay bill of more than 3 million pounds ($3.8 million) will face a 0.5 percent levy on the total. The estimated 2.8 billion pounds raised will fund 3 million apprenticeship places, with subsidies for companies that take people on.

The plan has drawn criticism from lobby groups representing larger businesses, and the IFS, a non-partisan research group, added its voice in a report published in London on Tuesday. It said the program could devalue apprenticeships by putting numerical targets ahead of the quality of training; encourage firms to relabel existing training as apprenticeships; and reduce the incentive for companies to choose value-for-money training providers.

“We desperately need an effective system for supporting training of young people in the U.K. but the new apprenticeship levy, and associated targets, risk repeating the mistakes of recent decades,” said Neil Amin-Smith, an IFS economist who helped to write the report. “There is a risk that the focus on targets will distort policy and lead to the inefficient use of public money.”

The IFS also cited estimates by the Office for Budget Responsibility that the levy will reduce wages by 0.3 percent by 2020-21. At least 60 percent of employees work for companies that will pay the levy, the institute said.