My last full length blog was a deep dive into the weird world of student loans financing, a mess so big that it will take years to unwind.
Two people separately approached me and raised the issue of the Apprenticeship levy. You know who you are.
For those who don’t follow education policy the levy was introduced by George Osborne in his 2015 budget to raise funds for expansion of apprenticeships. All businesses with a payroll over £3m pay at a rate of 0.5%. In case you hadn’t spotted it’s another pay roll tax.
The funds raised go into an account for the employer which they can access to pay for apprenticeship training. The money stays in the account for 2 years after which it goes back to the Treasury.
The training which can be funded from the account is tightly controlled. This is a consequence of previous scandals where Government funds for training were alleged to have been spent fraudulently. You may remember David Cameron appointing Emma Harrison from A4E as his Tsar for something that even I can’t remember.
The massive problem is that the rules are so strict that it is almost impossible for businesses to access it. A year in the Treasury has raised over £2.5bn, but had spent only £180m on training. The rest of it is still sat with the Government. As a consequence the Government is getting a benefit when it does the public accounts of over £2.5bn a year, which makes the progress in reducing the deficit look better than it really is.
Eventually companies will get better at accessing the cash, but it looks as if the system is designed to make it impossible for all the money to be spent.
This might sound like a scam, but the Tories aren’t the only ones doing odd things like this. The Labour Party has a rather eye catching policy to force companies with more than 250 employees to create an employee share ownership scheme. Employees would get up to £500 a year each as a dividend, with the rest going to the Treasury. This sounds great but for lots of companies the majority of the dividend will go HMG not the workers. It is essentially another pay roll tax. Some of the modelling done by the FT shows 90% of the money going to the Government rather than the workers.
I don’t mind Governments raising more money to supplement the tax take. We need to find ways of increasing the flow of money into the Treasury if we want to have things like the NHS. But maybe there is a more honest way of doing it rather than schemes like this, which rig the rules in the Treasury’s favour.
We can’t condemn Companies for working the system on tax if HMG does the same thing.