New standards body to oversee £11.6bn apprenticeship scheme

A new standards body is to be established with responsibility for ensuring the quality of apprenticeships. The independent body will be led by businesses and paid for by a levy on employers with a payroll of over £3m.

According to the Telegraph, the new regime promises to shake up industrial training in the UK by funding three million new apprenticeships. Chancellor George Osborne claims companies will "get out more than they put in" and that the scheme would "raise the skills of the nation and address one of the enduring weaknesses of the British economy."

The move has drawn criticism for adding strain to companies when they are already making adjustments to prepare for the new higher minimum wage. Businesses with a payroll over £3m will be required to pay a 0.5% levy on employment costs to fund the new apprenticeships.

Around 98% of employers are too small to be caught by the tax, which is expected to raise £11.6bn over the next five years. The scheme will produce 600,000 more apprenticeships than were created under the last parliament, which created 2.4m roles with a special tax.

Carolyn Fairbairn, director-general of the Confederation of British Industry, said: "It is a significant extra payroll tax on business and by widening the net it will now catch more smaller firms. You only need to have 100 to 150 staff on minimum wage, so quite a few small firms will be caught by this."

The Office of Budget Responsibility (OBR) has warned that employers could suppress wage rises to cover the cost of the new levy, undermining the Chancellor's goal to raise salaries. Robert Chote, chairman of the OBR, said: "The apprenticeship levy behaves like a payroll tax, so we assume that the costs are passed on into lower profits and – primarily – lower wages."