Chancellor Philip Hammond’s October 2018 Budget And Its Effect On Young People & Employers Of Young People

Did you follow the budget on 29th October this year? Have there been any benefits or setbacks for you as a company as a result of what was announced by Chancellor of the Exchequer, Philip Hammond MP in his budget address?

One important announcement he made was that the era of austerity is finally coming to an end. If this is the case, this can only be good news for employers and young people out there looking for work. Of course, we still have the uncertainty around Brexit to deal with so time will tell if Philip Hammond is right to suggest we can all start to feel more optimistic about the future.

One key announcement in the 29th October budget that will affect many employers and young job seekers alike was the reduction of the Apprenticeship levy for small businesses. Apprenticeships are important for the future of the British economy. They are all about addressing the skills shortages currently affecting the UK by ensuring young people receive the training that will equip them to carry out their roles effectively. There is currently a lack of skilled workers and this is affecting productivity across various sectors. Apprenticeships are designed to bridge these gaps.

Whilst there is much support for Apprenticeships – with many employers and organisations getting behind the Apprenticeship Standards and designing programmes they believe will prepare young people for their respective trades and professions – Apprenticeship providers have been advocating for reforms.

If you are a small or medium enterprise, you might be aware of the reforms that Apprenticeship providers have been advocating. It could be that you support Apprenticeships and are keen to take on young people but the 10% levy SMEs had been asked to pay has either prevented you from doing so or at least made you reluctant to commit.

Many small businesses wanted this 10% to be scrapped and there has been a big drop in the number of starts for Apprenticeships. Campaigners said the drop in number of starts could be improved if small businesses didn’t have the burden of having to pay the 10%. In June of this year, during a Q and A at the AELP conference, Anne Milton, Skills Minister, said she wasn’t sure the 10% levy was the reason for the sluggish number of starts so those groups campaigning for the abolition or reduction in the levy welcomed Philip Hammond’s announcement that the 10% would be reduced to 5%.

Chancellor, Philip Hammond said Apprenticeships must work for employers. If you are a small business looking to invest in young people by offering Apprenticeships in your workplace, this could be great news for you. Small businesses will now pay 5% as part of a £695 million package to support Apprenticeships.

What Is The Apprenticeship Levy?

There are many advantages for employers who decide to take on young Apprentices and we have addressed those in the past. We all want to see a workforce that is adequately trained and productive and many agree that Apprenticeships can prove to be a realm force in ensuring this happens.

But if you do go down the Apprenticeship route, what are the costs to you? You might be aware of the Apprenticeship levy but are not sure how this works. So, here are a few facts and reasons why the AELP (Association of Employment & Learning Providers) advocated the abolition of the 10% fee for small businesses.

  • The Apprenticeship levy is paid by employers who have an annual payroll of 3 million pounds or more. They spend these contributions on Apprenticeship training.
  • Smaller employers can access the funds but, currently, they must pay 10% towards the cost of training. (It is currently unclear when small businesses will no longer need to contribute the 10% since the budget announcement.)
  • Since May 2017, only Apprentices between the ages of 16-18 have been fully funded if the employer has fewer than 50 staff. The AELP (Association of Employment & Learning Providers) says it is this that has dissuaded SMEs from employing Apprentices and they have been campaigning to have the 10% contribution abolished as a result.
  • Apprenticeship starts for March 2018 were down 52% compared to March 2017. A significant drop.
  • SMEs are often based in local communities and employ people locally. The Association of Employment & Learning Providers is happy with Chancellor Philip Hammond’s 5% announcement because they believe it will help SMEs offer Apprenticeships to young people in the local communities where they are based.

Further Budget Boosts For Apprenticeships

The government are committed to Apprenticeships and believe they are essential for bridging the skills gaps that currently exist in various professions and trades in all sectors. As well as the reduction in contributions that small and medium enterprises must pay for taking on Apprentices, Chancellor Philip Hammond also announced a further 5 million pounds for the Institute of Apprenticeships.

This 5 million pounds will be used to update existing Apprenticeships and to also introduce new ones so that those wanting to go down the Apprenticeship route have more choice of training options. If you already employ Apprentices or you are an employer who has contributed towards the creation of new Standards, you may already be aware that the old Apprenticeship Frameworks will be discontinued by 2020-21.

Many of these Frameworks have already been updated to Apprenticeship Standards and those that haven’t been, will be updated in due course. New Apprenticeship Standards have also been created by teams of employers and professional organisations – these plug the gaps that employers felt existed in training.

The current government is still committed to providing 3 million new Apprenticeships by the year 2020.

A Pay Rise For Apprentices And Young People In Other Employment

Whilst there are many employers out there who opt to pay their Apprentices more than the minimum recommended wage, a minimum rate increase announced in the budget could encourage more young people to consider taking the Apprenticeship route. Young people in other forms of employment will also benefit from other increases in the National Minimum Wage and National Living Wage.

These wage increases will come into effect from 6th April 2019 and are broken down as follows. National Minimum wage increase for those between the ages of 16 and 24 years old:

  • Young people between the ages of 16 and 17 years old: From £4.20 to £4.35.
  • Young people between the ages of 18 and 20 years old: From £5.90 to £6.15.
  • Young people between the ages of 21 and 24 years old: From £7.38 to £7.70.

A National Living Wage increase for working people aged 25 and over. This will increase from £7.83 to £8.21.

For Apprentices, there is a bonus for young Apprentices under the age of 19 or who are in the first year of their Apprenticeship.Their minimum hourly pay rate will increase by 20 pence, from £3.70 to £3.90. The Low Pay Commission estimates that up to 36 000 Apprentices will benefit from this increase.

Benefits For Employers And Young People In The Northwest of England

It’s not just Apprenticeships where young people are set to benefit from this year’s budget announcements. The chancellor has also announced £20 million pounds worth of new Skills Pilots.

These Skills Pilots, said Chancellor Philip Hammond, are another way of making sure British workers are equipped with the skills they need to thrive and prosper, as well as backing businesses to invest and grow.

Specifically, funding for the Skills Pilots will be:

  • A £3 million scheme to help employers in Greater Manchester and surrounding areas to address local digital skills gaps through short training courses.
  • A £10 million pilot in Greater Manchester to test what forms of government support are most effective in increasing training levels for the self-employed. The Federation of Small Businesses will be a part of this pilot scheme.
  • A £7 million match funding pilot alongside employers to provide on-the-job training to young people who are currently not in employment, education or training in the Greater Manchester areas. It is hoped that this will help young people move onto more sustainable career paths with employers.

Further Benefits For School Leavers, Students And Graduates

How else will young people benefit from the October budget? The chancellor also announced:

  • A raise in the personal tax allowance. From April 2019, the personal tax allowance will be raised to £12,500 from the current £11,850.
  • The Higher Rate Threshold will be lifted to £50,000 from £46,351.
  • A benefit for young people looking to buy their first property: First time buyers looking to buy property valued up to £300,000 (and shared ownership properties valued up to £500,000) will not need to pay any stamp duty. This is a retrospective measure so first time buyers who have bought a property since the previous Budget will benefit from this announcement.
  • Money is often tight for young people so, for leisure purposes, the freeze on fuel duty for another year on beers, wines and spirits will be be a welcome announcement. As will the announcement that there will be no rise in air Passenger Duty for short haul flights.

What About Brexit?

At the beginning of this article, highlighting areas of the Budget that could affect young people in employment, I mentioned the uncertainty of Brexit. Chancellor Philip Hammond has said, depending on what happens with the Brexit deal, there could be a whole new Budget in Spring 2019. Watch this space.

Do you want to recruit young people to your company or organisation? Whether you would like to employ students on a part time basis, Apprentices or graduates, place your job posting with E4S to gain access to thousands of young people seeking all types of employment.