Apprenticeship Levy: How to Create 21,000 Jobs

The Apprenticeship Levy, introduced by the UK Government in April 2017, was intended as a cornerstone of workforce development policy. Its goal was clear: increase the number of apprentices across the UK, strengthen skills pipelines, and expand access to training.

Eight years on, has it worked? Unfortunately, the evidence suggests otherwise.

What the Levy Is – and Isn’t Achieving

The Apprenticeship Levy is paid by large employers with an annual payroll above £3 million. These organisations must contribute 0.5% of their total wage bill into the scheme, regardless of whether they actually employ apprentices. Contributions are reported monthly through PAYE, creating what was intended to be a stable, ring-fenced source of funding for apprenticeships.

The government’s original ambition was to achieve 3 million new apprenticeship starts by 2020. That target was missed. Instead of driving large-scale job creation, the Levy has mostly been used by employers to fund training for existing staff, often at higher and degree-level apprenticeships (Level 4+). While upskilling the current workforce is valuable—and was part of the government’s original vision—it has not delivered the scale of new opportunities for young people and career starters that was promised.

The Funding Challenge

The Levy was designed as a hypothecated tax: money raised must be spent on apprenticeships. Yet a significant proportion of receipts is not reaching employers or learners at all. Instead, large sums are being returned to the Treasury each year.

According to FE Week, in 2022/23:

• Unallocated Levy receipts: ~£418 million
• DfE apprenticeships budget underspend: £96 million
• Total “surplus”: £514 million

This half a billion pounds was collected for apprenticeships but ultimately reabsorbed into general government spending.

A Different Approach: Funding Wages Directly

If even a portion of this surplus were redirected towards covering apprentice wages, the impact could be transformative. Currently, many employers—especially SMEs—see apprenticeships as financially risky, given the cost of wages on top of training and supervision. Removing this barrier could spark significant growth in opportunities.

To illustrate:

• Assuming an average apprentice wage of £24,000 per year, £514 million could fund 21,417 fully paid apprenticeships annually.
• Using only unallocated receipts: 17,417 apprenticeships
• Using only underspend: 4,000 apprenticeships

These would not be theoretical “starts,” but fully funded, employed apprentices contributing directly to workplaces across the UK.

Unlocking Potential Across Sectors

Imagine the possibilities if employers could take on apprentices with their wages funded by the Levy. We could see new roles created not only in professional services but also on construction sites, in care settings, manufacturing plants, retail shops, and digital industries. Crucially, this would open doors for young people and career changers who currently face significant barriers to entry.

Moving Forward

The Apprenticeship Levy was designed to make large employers co-fund workforce training, help close skills gaps, and provide a sustainable pipeline of talent. The intent was right—but the delivery is falling short. Redirecting unused funds towards wage subsidies would be a bold step that directly aligns with the Levy’s original purpose.

If the Government truly wants to fulfil its promise of expanding apprenticeships, it must rethink how Levy funds are deployed. The potential to create 21,000 new jobs a year is sitting in the Treasury. The question is whether policymakers are prepared to unlock it.