Charities need to spend apprenticeship levy money or lose it to other organisations, skills minister Nick Boles told a Charity Finance Group round table last month.
The government announced plans to introduce an apprenticeship levy from April 2017 in the spending review and autumn statement.
The levy will require employers with a wage bill of more than £3m will have to pay a levy of 0.5 per cent through Pay As You Earn. The money raised will be used to fund apprenticeships.
Employers may use the money they contribute through the levy to employ apprentices in their own organisation. If they chose not to do so the money will be distributed elsewhere.
The levy is expected to raise £3bn by 2019/20. However, it has been estimated that around 1,200 charities in the UK will be affected at a cost of £70m.
The CFG has previously suggested ring-fencing unspent levy funds for the sector to then invest in skills development across the sector.
But according to a summary of the meeting produced by the CFG the ministers aid there is “no justification” for “retaining charitable funds for expenditure solely within the charity sector”.
The minister said the “levy is already ring-fenced for each individual charity and it is up to the charity to make sure they spend the funds in their digital accounts”.
If charities choose not to spend the money on apprenticeships it will be used elsewhere.
Anjelica Finnegan, senior policy and public affairs officer at CFG, said in a blog post that the CFG is “still waiting for clarification on how far charities have a choice as to where the funds can be redirected”.
The minister also emphasised that the levy will only cover costs of training, and cannot be used for recruitment, salaries or other non-direct costs, despite recommendation from CFG for that to be the case.
Boles accepted “that there were difficulties around volunteering but could not immediately offer a solution to this challenge”, he also “undertook to give further thought to how volunteers might be accommodated within the scheme”.
He emphasised that employers are responsible for making sure they can spend the levy, and as a result “charities therefore need to invest their own income into developing apprenticeships schemes, covering costs of recruitment, salaries and so on in order to benefit from the levy”.
‘Lack of skills capacity’
The CFG reported, the “minister accepted that there is a lack of skills capacity in the sector and was interested in the proposed idea of having seed funding to invest in sector-wide skills development infrastructure. He called on CFG to work up a proposal on this and he will talk to the Cabinet office.”
The CFG also raised concerns that the timeline for implementation – 12 months - is still too short to allow it to address “the issue of a lack of sector-specific skills infrastructure and training”.
In response to this, Boles sated that charities will have longer than the financial year to spend funds in their digital accounts, and that in his view “this will be enough time for charities to be able to spend the funds in their digital accounts”.
Referencing the broad definition of an apprenticeship – a paid job, of more than one year, supported by training which meets the standards - he said that means charities should be “able to apply the Levy to a broader range of roles and could develop their own standards”.
Boles was not persuaded that a longer timeframe was necessary and confirmed that it will become effective for all from 1 April 2017.
The minister “did not have time in the meeting to address each concern and recommendation” given to him by charity representatives. The CFG will be taking a number of steps following on from this meeting, including developing proposals for use of seed funding for skills infrastructure in the sector and submit these to the minister.
The CFG said it will also, alongside the minister, look into the issue of volunteering, and how it may be accommodated within the principles of the levy.
