UK government to take apprenticeship provision into account when awarding large contracts

The change will come into force for bids made in relation to contracts worth more than £10 million from 1 September 2015, according to prime minister David Cameron.

The announcement is part of a package of measures announced by the UK government to drive up both the number and quality of UK apprenticeships. It also published a consultation on the design of the 'apprenticeship levy', which is planned for the largest businesses by 2017; and 59 new sets of sector-specific industry standards.

Procurement law expert Stuart Cairns of Pinsent Masons, the law firm behind Out-Law.com, said that the announcement was welcome evidence of the government beginning to look beyond just price considerations when awarding public contracts.

"As a further sign of an improving economy in the UK, it is great to see that the government is embracing such initiatives once again," he said.

"During the last few years, when budgets were constrained and cost was king, the focus was very much on procuring public sector contracts for as little as possible. This initiative demonstrates a welcomed move away from that approach, and we very much hope that we will see more emphasis placed on the social return we can get on our government investments rather than simply contracting at bargain basement prices," he said.

The government intends to create three million new apprenticeships over the next five years and the new levy, which was announced as part of the Summer Budget, would be one of its main methods of doing so. Cameron said that the proposals would "help strengthen our economy, deliver the skills that employers need and give millions more hardworking people financial security and a brighter future".

Skills minister Nick Boles said that plans to boost the number of apprentices would "act as a much-needed shot in the arm" for UK productivity. UK businesses had "invested too little in developing their employees' skills to meet the demands of a competitive, global market" for too long, he said. The UK government is currently trying to target the country's productivity, which is 30% lower than that of Germany and the US and 17% lower than the G7 average. Productivity is a measure of economic output per hour worked.

From next month, all bids for government contracts worth more than £10m will be "reviewed in line with best practice for the number of apprentices that they expect to support", according to the announcement. Proposals made in any bid would be "assessed and weighted" as part of the procurement process alongside other elements relevant to the contract. Agreed apprenticeship numbers would then be written into the successful bidder's contract, so that numbers can be monitored and action taken if necessary, the government said.

The planned apprenticeship levy would be introduced by April 2017 and would apply to large employers in England, according to the consultation. This is most likely to be determined with reference to the number of employees, but the government is seeking views on the best way to do this. The levy would be calculated on the basis of employee earnings, and payable to HM Revenue and Customs (HMRC) through the employer's PAYE return. The government has not yet decided on the rate or the scope of the levy, which it plans to announce as part of the spending review in the autumn.

Employers would receive digital vouchers based on the amount that they pay into the system in order to fund their own training needs, according to the consultation. It has proposed that smaller employers which will not be subject to the levy use the same voucher system, and will consult further on how these employers would be expected to fund the system in the autumn. As apprenticeships and other skills training programmes are a devolved policy area, it is seeking views on how best to identify the extent to which the levy paid by UK-wide employers relates to their English operations and should therefore be used to purchase vouchers to spend on English apprenticeships.

Over 50 countries including the Netherlands, Denmark and France already use some form of levy to fund apprenticeships, the government said. Employers in the UK engineering and construction industries are also subject to a statutory industry levy. The consultation makes it clear that larger engineering and construction firms would be subject to the new levy "alongside all other larger employers in the UK economy", and the government has suggested that the Construction Industry Training Board and Engineering Construction Industry Training Board may consider scrapping the existing arrangements once the new levy is in force.