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Skills Devolution

 

Paul Carbert's column which appeared in yesterday's Journal

The Government’s recent commitment to increase funding for the NHS has sparked a row over the “Brexit dividend”, money that the UK will supposedly save once we have left the European Union and are no longer making large contributions to the EU budget.

This has been a contentious issue since the referendum in 2016, and in the past week we have seen various pundits and politicians popping up to argue over the size of the windfall and who is going to pay to make up the shortfall.

One thing that has been clear throughout the debate is this: if people believe the Treasury is sitting on a pot of money just waiting to be claimed, there will be no shortage of suggestions as to how it should be spent.

We are starting to see a similar argument in the skills policy world, as the Department for Education recently admitted that just 10% of the funds paid by large employers through the Apprenticeship Levy have been spent in the first year. The funds expire and are reclaimed by the Government after two years, and as the Levy is projected to raise over £2 billion a year, there could be a large underspend by April 2019.

Last week, eight directly-elected regional mayors, including the Tees Valley’s Ben Houchen, made a joint call to devolve control over unspent levy funds to the city regions. The Mayor of London, Sadiq Khan, has gone even further and called for all levy funds paid by businesses in London to be ringfenced and devolved to London as part of a wider skills fund.

There are a number of potential problems with this approach. The levy is paid to HMRC, and large companies that operate across the country may report their levy from one location. As London is home to more large businesses and company headquarters, dividing up the unspent levy in this way would be damaging to the North East.

The Skills Minister, Anne Milton, responded to the regional Mayors by saying that the levy is already fully devolved to employers. This is true up to a point – at the Chamber we have called for greater flexibility to give businesses the choice of how they should spend their levy or transfer it to other local companies, including those in their supply chains.

If the Government heeds the call and gets this right, we may see no underspend at all and funds targeted at training where it is needed most.