A freedom of information request revealed that since May 2019, employers in England have been returning unspent levy funds earmarked for new apprentices to the Treasury, with businesses losing out on the equivalent of £1.1bn per year or £95m per month.

The LPC, which to date has helped transfer £10m of unspent Apprenticeship Levy from large employers to support small businesses and create over 1,000 apprenticeships, says that it is not clear how the Treasury is making use of the £3.3bn that it has received from businesses.

The LPC is incubated and based at the Institute for Public Policy Research (IPPR). It is an initiative to create new apprenticeships, which help low-paid Londoners to progress in work, and which enable the capital’s businesses to develop vital skills.

The apprenticeship specialists suggest that this lack of transparency means it is unclear whether the Treasury is using the unspent levy in a way that best supports the places most in need of levelling up, and whether it is helping create more entry-level apprenticeships, after numbers have plummeted in recent years.

To increase transparency, the LPC is calling on the Treasury to publish how many apprenticeships are being created through unspent levy money, where in England that levy is being spent, at what levels and in what sectors – as well as where any surplus funds are being used.

The LPC argued that if the Apprenticeship Levy is to meet its objective of increasing employer investment in training, the Treasury also needs to give employers greater control over how their funds are directed, including by increasing the 25% Apprenticeship Levy transfer cap. The LPC has seen at first hand the challenges the current system poses to businesses in their work helping firms navigate the complex apprenticeship system and transferring their unspent levy to small businesses.

These findings follow previous research by the LPC, which shows that since 2014-15, ‘entry-level’ apprenticeships have fallen by 72% in England, while apprenticeship starts among under-19s have fallen by 59%, depriving those most at risk of in-work poverty and at the beginning of their careers the best start in life.

In the most recent three years that data is available, apprenticeship starts in the North fell most sharply, with apprenticeships falling by 26% in the North-East, 23% in Yorkshire and the Humber, and 21% in the North-West.

Anna Ambrose, director of the LPC, said: “The fact that so much apprenticeship funding is being lost to the Treasury is a symptom of a system that is far too rigid and confusing to navigate for businesses.

“The system should be made more flexible and firms supported to use their levy funding to boost apprenticeship opportunities or transfer their funds to smaller businesses that could benefit from the investment.”

Introduced in 2017, the Apprenticeship Levy requires businesses to set aside 0.5% of their wage bill if they pay over £3m per year. Under Apprenticeship Levy Transfer, levy payers can transfer 25% of their levy pot.

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