Oral Answers to Questions — Employment and Learning – in the Northern Ireland Assembly at 2:00 pm on 9th February 2016.

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Photo of Trevor Lunn Trevor Lunn Alliance 2:00 pm, 9th February 2016

2. Mr Lunn asked the Minister for Employment and Learning for an update on the local implications of the proposed apprenticeship levy. (AQO 9581/11-16)

Photo of Stephen Farry Stephen Farry Alliance

The Chancellor of the Exchequer has announced his intention to introduce an apprentice levy for all UK private- and public-sector employers from April 2017. The levy will be set at half of 1% of an employer's total wage bill. All eligible local business and public-sector organisations will pay the levy, and all employers with an annual pay bill of over £3 million per annum are expected to be net contributors. Levy proceeds are to be used specifically to fund apprenticeship training in England. Apprenticeship policy is a devolved matter, so Northern Ireland and the other devolved Administrations will receive a proportionate share of the proceeds.

Although I fully support the development of a wider range of apprenticeships in both the private and public sector, in many ways, the UK Government's proposed apprenticeship levy could be viewed as an additional tax to business not only in Northern Ireland but across the UK. Furthermore, it has the potential to undermine the different apprenticeship strategies in each of the devolved regions and cut across the policymaking prerogatives of each of the Administrations on what is a devolved matter.

Northern Ireland employers will be expected to pay the apprenticeship levy, and I wish to ensure a fair and equitable reimbursement of the moneys raised to Northern Ireland and the other devolved Administrations.

I have held discussions with the Minister of Finance and Personnel, with my counterparts in Scotland and Wales, and with the Department for Business, Innovation and Skills (BIS) Skills Minister to press Northern Ireland's position and to ensure that any moneys due to Northern Ireland as a result of the levy's introduction are available to the new Department for the Economy to underpin the reforms that we are making to Northern Ireland's apprenticeship system and to support the wider skills needs of the economy.

Photo of Trevor Lunn Trevor Lunn Alliance

I thank the Minister for his answers so far. Does he feel that the levy has the potential to undermine our local apprenticeship strategy and, if so, in what way?

Photo of Stephen Farry Stephen Farry Alliance

The strategy was designed by the Treasury as a means of raising additional revenue as part of its efforts to pay down the overall UK deficit. It is also based around the nature of the apprenticeships strategy in England, with very little consideration of the impact on the strategies in Scotland, Wales and Northern Ireland. In England, they are fixated on reaching the target of three million apprentices, and there is a danger that they end up badging any form of in-work training as an apprenticeship. You could have a bizarre situation where people are given certificates as an apprentice without ever knowing that they have been on an apprenticeship-type course. They are in a race around volume, with very little consideration of quality.

In the three devolved regions, we are very focused on building up quality brands around apprenticeships and ensuring that we address the particular needs of our economy. There will be a distortion in that, in Northern Ireland, some of our large companies will pay an amount of money in excess of their capacity to spend the equivalent on training. They will feel that, in essence, they have been taxed, and that will be viewed as anticompetitive. Frankly, it chips away at the positive intervention that we are making on lower-level corporation tax. We will see the potential for distortion for our local businesses and how they will spend their money and distortions in how the Northern Ireland Executive allocate their money. That will undermine our policy intent in what we are trying to do as a devolved Administration.

Photo of Daniel McCrossan Daniel McCrossan Social Democratic and Labour Party

Which industries or sectors have proved most supportive of the levy?

Photo of Stephen Farry Stephen Farry Alliance

I am not aware of any sectors being supportive of the levy. It is, essentially, a tax on business, and it is not necessary. Our system for funding apprenticeships is not so fundamentally broken that we have to move to a levy. The genesis of this lies with the UK Treasury wanting to rebalance the UK's public finances and seeing this as one route by which they can do it. This will have major impacts on different types of business, and those impacts will be greater on some businesses than on others. If you are in a very high added-value business and you are paying, for example, quite high wage bills and have low training needs, the levy will hit you disproportionately. It may affect others to a lesser extent; for example, if you are in a business in a declining sector such as the steel industry in parts of the UK where there is no real ambition to hire new staff, there is not the same onus on training as there would be in other fast-growing sectors. Irrespective of the nature of a business, however, or the nature of that aspect of the economy, businesses will, nonetheless, be taxed on the basis of the overall size of their wage bill. There is deep concern across the board felt by the business organisations and the trade unions, and they are united in their opposition to it.

Photo of Robin Newton Robin Newton DUP

I thank the Minister for his confirmation that there will be a levy in 2017 on the various sectors of industry. Is this not really the first step in going back to the establishment of the sector skills councils or the industrial training boards?

Photo of Stephen Farry Stephen Farry Alliance

I have sympathy with what the Member is saying. At first glance, the notion of a levy seems a much more benign concept than a tax. If we had a levy that was hypothecated towards skills interventions on a stand-alone basis, that would be a good intervention. The difficulty here is that this will be a levy on business that will be paid by businesses in Northern Ireland. At the same time, we will suffer a negative Barnett consequential because there will be a massive cut to the budget for BIS in London, which will filter down to the each of the devolved Administrations. What we are seeing is simply a shift in how training will be funded but in a way that distorts our policy preferences. It will add a significant degree of administration at the same time, which is a leakage of money out of the system that could be better spent at the front line on training.