Aug 12, 2016

U.K. defies firms' pleas not to impose new tax, despite Brexit worries

'The apprenticeship levy will help create millions of opportunities for individuals and employers': Minister
By William James

LONDON (Reuters) - Britain confirmed on Friday it would press ahead with plans to impose a levy on large employers from early next year to help pay for training workers, prompting dismay from business groups who want the tax delayed to soften the impact of Brexit.

The decision comes as Britain faces the looming prospect of a recession following June's vote to leave the European Union, with uncertainty over the country's new relationship with the bloc expected to cause firms to defer investment and consumers to slow spending.

To try and ward off the threat of a contraction in the world's fifth-largest economy, the Bank of England last week launched a monetary stimulus package and the government has already indicated it will relax plans to cut public spending.

But ministers said the levy, aimed at addressing a chronic skills shortage by imposing a 0.5 per cent payroll tax on allemployers with an annual wage bill above three million pounds ($3.8 million), will go ahead as planned in April 2017.

"Our businesses can only grow and compete on the world stage if they have the right people, with the right skills," said skills minister Robert Halfon. "The apprenticeship levy will help create millions of opportunities for individuals and employers."

Halfon also signalled the levy's importance as part of Prime Minister Theresa May's plan to win over working class voters, traditionally hard to reach for the centre-right Conservative Party, by promoting post-Brexit manufacturing growth.

"Apprenticeships give young people — especially those from disadvantaged backgrounds — a ladder of ‎opportunity," Halfon said.


The decision was met with disappointment from business groups who had called for a delay to allow them to fully assess the impact of Brexit on their operations.

"With so many of our members reviewing plans on both investment and recruitment - which is what apprenticeships are - actually a delay would have given them a bit more time to understand the true impact of Brexit," said Verity O’Keefe, a senior policy adviser at the EEF manufacturers' association.

Employers also criticised the structure of the levy, which allows firms to claim back the money paid to the government to spend on approved training schemes, saying it was too narrow in scope and could end up reducing investment in training.

"It is irresponsible for the government, particularly in a time of economic uncertainty in the aftermath of the referendum, to simply press ahead with a policy that is not fit for purpose," said Ben Willmott, Head of Public Policy at the Chartered Institute of Personnel and Development.