AN APPRENTICESHIP levy on businesses introduced by the government to encourage employers to take on trainees has backfired and is undermining apprentice training schemes, a new report warned today.

The Chartered Institute of Personnel and Development (CIPD) and the Youth Futures Foundation report says the scheme gives employers an incentive to “rebadge” existing staff training as “apprenticeships” so they can claim money to pay for them.

They conducted a survey of more than 2,000 organisations about the levy and found “worrying unintended consequences,” including employers using existing training schemes to draw money.

It also said the scheme undermined and “eroded the pathway” to existing apprenticeship schemes.

The Apprenticeship Levy was introduced by the government in 2017. Employers with a pay bill of £3 million or more pay 0.5 per cent tax, which is placed into a fund from which employers can draw to pay for apprenticeships.

Peter Cheese, chief executive of the CIPD, said: “The evidence in this report shows clearly that young people most need and benefit from apprenticeships, and that the erosion of this pathway has had a negative impact on social mobility for the most disadvantaged.”

He called for “an apprenticeship guarantee” which would “help reclaim apprenticeships primarily for young people and reverse the decline in opportunities for them.”

The Youth Futures Foundation works “to support young people from marginalised backgrounds into good jobs.”

Chief executive Barry Fletcher said: “International evidence shows apprenticeships are an important and impactful way to support young people prepare for and access jobs, yet apprenticeship participation has fallen significantly for young people, especially those most marginalised in recent years.”

Union organisation the TUC called for reform of the scheme and said: “Funds raised by the apprenticeship levy are being underspent or misused.”

TUC general secretary Paul Nowak said: “Every worker should have the chance to raise their skills, progress their career and improve their situation. 

“The scheme needs reform to allow more flexibility so that it benefits more workers, has greater quality control, and targets those who need it most.

“Training pays for itself. Revitalising our skills system should be a core part of a new UK industrial strategy. 

“That’s how we can get the economy growing again so that we are all better off.”