Oil and gas industry skills organisation OPITO has issued a stark warning about the impact on apprenticeships in the energy sector after the Scottish Government today announced it would not be ring-fencing funds allocated via the new UK-wide Apprenticeship Levy.
Jamie Hepburn MSP, Minister for Employability and Training, confirmed during a speech at the Scotland Policy Conferences in Edinburgh this week that the £221million allocation the Scottish Government is set to receive from the UK Government in 2017/18 will not be safe-guarded in its entirety for investment into a flexible skills fund which supports wider workforce development and meets businesses’ growth needs.
From April 2017, all employers in the UK with an annual pay bill over £3million will have to contribute to the levy at a rate of 0.5% of their annual pay bill as a commitment to increasing apprenticeships.
The UK Government estimates that the levy will raise £3billion annually over the first five years following its introduction. As the policy is devolved, the money will be collected by HMRC and then redistributed to the Scottish Government.
With less than 2% of companies across the UK liable for the levy however, OPITO believes the size of companies in oil and gas means the industry is likely to be disproportionately affected by its introduction. The skills body says today’s announcement is a severe blow for employers and may prompt some to review their current apprenticeship offering.
“Businesses are committed to helping to deliver the skills that Scotland needs to succeed in a global economy and recognise the critical role apprenticeships play in generating a sustainable workforce,” said OPITO UK managing director John McDonald.
“We have long argued however that the Levy was an additional tax being imposed on employers at a time when oil and gas companies are already struggling to manage costs and thousands of jobs have been lost across the sector. By refusing to ring-fence the funding, the Scottish Government has given itself an additional pot of cash it can use to plug holes elsewhere in the Scottish budget rather than for its intended purpose of adding legitimate value to skills development in the national workforce.
“The damning message to employers is that they will be paying an additional tax but should not expect to see any additional returns. The very real risk to Scotland’s skills base as a result of this decision is that employers may choose to take their apprenticeships out of Scotland entirely and relocate them south of the border where the funding is protected and they will get a better return on their investment.”
The oil and gas industry has repeatedly asked the Scottish Government for clarity on how companies will be allowed to invest the revenues, the type of training which will be included and whether they will be able to transfer the entirety of their own levy funds to other companies.
“It is our understanding that the model currently in place, which sees funding drawn down through Skills Development Scotland, is likely to remain broadly unchanged next year. With only a few months left before the levy is due to come into effect however, businesses are still without answers to many other critical questions about the its funding structure and how it will be implemented across borders,” added Mr McDonald.
“In addition to the funds being used only to support in-work learning, apprenticeships and training, we are asking the UK Governments to allow employers to transfer 100% of their levy funds to other companies.
“At present there is only a commitment from the UK Government to allow employers in England to transfer up to 10% of the annual value of funds but we believe employers should have full flexibility to spend funds in areas where a skills need is most evident, for example to a company in their supply-chain.”