The sub-committee on education, skills and the economy, formed from the education and business select committees,  has put out a report which claims the levy, plus the government’s started target of three million 'starts' by the end of the Parliament, are focused purely on raising participation levels, when they should be designed to improve long term employment prospects.

The committee states: ‘The apprenticeship levy is a blunt tool in which contributions are unlikely to bear any relation to the skills needs of individual employers and their sector more generally. It is not sufficiently focussed on areas of the economy, and of the country, where training is most needed.’

MPs want the government to review its plans, and in particular whether a single rate is the best approach, and explore ways of restructuring the levy on a sectoral and regional basis.

The committee heard evidence from employers who will pay the new levy and noted that ‘even generally supportive companies such as Deloitte suggested that the design of the levy may ‘create significant winners and losers.’

Representatives of sectors such as charity retail, pharmaceuticals and the creative arts said they would lose out under the new system, as despite having little need to employ apprentices, and few appropriate roles for them to fill, they would still be required to contribute.

Others said their projected levy contribution is higher than they are currently spending on off-the-job training and assessment, leaving them less to spend on other aspects of their apprentices’ training.

The committee found ‘a lack of clarity’ about the long-term funding arrangements for non-levy-paying employers, and how this may or may not relate to levy yield and how much training levy-paying employers choose to provide.

It states: ‘We are not convinced that introducing price competition into the apprenticeship system will have the effect the government intends. It is unclear whether there will be enough information available to employers to choose between providers. If this proves to be the case, there will either be little competition or, more damagingly, competition based purely on price which could drive down quality.’

The report also said that given the government’s commitment to using the apprenticeship system aid social mobility, ‘we are surprised that its initial funding proposals looked likely to do the opposite.’

The committee said the government should place far greater emphasis on outcomes, judging success of apprenticeships by, for example, whether individual apprentices secure employment.

Neil Carmichael, chair of the education committee and co-chair of the sub-committee on education, skills and the economy, said: ‘Apprenticeships are vital if we are to close the skills gap, which could grow wider post-Brexit. We must train our young people for jobs that the economy needs, but the government has failed to show how its three million target and levy will help achieve this.

‘Ministers must recognise that apprenticeships are a means to an end and not an end in themselves. They need to place greater emphasis on outcomes, focussing on areas of the economy where training is most needed, and ensuring quantity does not trump quality.’

George Osborne introduced the levy in his 2015 autumn statement to fund three million apprenticeships by 2020 in an attempt to raise skill levels and combat low productivity. It will be charged at 0.5% of the annual wage bill for businesses with payroll costs of more than £3m.

The apprenticeships report is here.