Employers will be able to share a quarter of their apprenticeship levy pots with their supply chain, as part of reforms the chancellor of the exchequer is expected to announce in his speech to the Conservative Party conference.

Philip Hammond is facing pressure from the business community who say that the apprenticeship levy is too inflexible.

In June, the government announced that employers would be able to share 10 per cent of their levy funds with their supply chain. In his speech, Mr Hammond is expected to say that this will increase to 25 per cent.

It comes as a Tes investigation revealed that Whitehall has only spent 30 per cent of its own collective apprenticeship levy funds since the reforms were introduced in April 2017.

Fall in starts

Since the levy was introduced, the number of people starting apprenticeships has fallen markedly. The latest figures show that to date 341,700 starts were reported between August 2017 and June 2018 for the 2017-18 academic year, which is down 28 per cent on the 2016-17 total of 472,500 starts. In 2015-16, there were 458,500 starts.

Ahead of the chancellor's conference speech Ann Francke, chief executive of the Chartered Management Institute said making the levy more flexible and less bureaucratic for business struck a much needed-note.

She added: “Let's hope this is the first of many policies which will make it easier for all employers to invest in the people skills we so urgently need to boost British productivity.

“We welcome the increased investment in Stem subjects alongside greater access for SMEs and supply chains. Support for degree apprenticeships to boost social mobility, an emphasis on quality over quantity, and a more employer-friendly approach to how the levy is run will also help make the policy more impactful and effective."

'Threadbare window-dressing'

Labour's shadow FE and skills minister, Gordon Marsden, responded to the chancellor's announcement saying it was "too little, too late" and "threadbare window-dressing".

He added: "May's government is failing tens of thousands of young people who'd benefit from apprenticeships and the employers who would like to take them on. There is no action today, only a consultation and it will do little to address the shambles of DfE ministers missing their target of creating 3 million apprenticeships by 2020 or the plummeting levels of apprenticeship starts.

"Labour, by contrast, would turbocharge the traineeships programme, essential to get young people onto the apprenticeship ladder and abysmally neglected by this government and listen to calls for more control over levy funding at the local level, as outlined in our National Education Service charter.

"We would also use it to incentivise large businesses to help smaller ones in their supply chain – something we have long urged – alongside both our industrial strategy and the national transformation fund to bring about the step changes and social mobility for apprenticeships we need."

Recruitment and employment confederation chief executive Neil Carberry said Mr Hammond's commitment to making the apprenticeship levy more flexible is something the recruitment sector has been campaigning for.

He added: "This will benefit workers by improving training opportunities, as well as helping recruitment businesses who are currently paying the levy but are unable to spend it.”