Government accused of ‘raiding’ £171m from apprenticeship funding

The Scottish Government has been accused of “raiding” £171 million from apprenticeships funding to plug holes in its own budget.

Data from HMRC shows at least £875 million was raised by Scottish employers from the UK-wide Apprenticeship Levy between 2020 and 2024.

But research commissioned by businessman and prominent Conservative donor Robert Kilgour found during that same time, ministers at Holyrood spent £704 million on graduate, foundation and modern apprenticeships across three quangos: Skills Development Scotland, Scottish Funding Council and Student Awards Agency Scotland (SAAS).

Opposition parties claim this means £170 million has effectively been taken from this fund and diverted elsewhere.

The Scottish Government said it receives a share of UK Government departmental spending rather than a share of the levy and “to claim otherwise would be inaccurate”.

The Apprenticeship Levy is a 0.5% tax paid by employers with an annual payroll of at least £3 million.

It is collected monthly by HMRC and returned to Scotland through the block grant allocated to Holyrood under the Barnett formula.

Asked in a freedom of information (FOI) request how much cash it received under the scheme, the Scottish Government said: “From 2020-21, Scotland receives a Barnett formula share of funding via the block grant in the usual way.

“The Scottish Government does not receive a specific allocation of Apprenticeship Levy revenue.

“As a result, the Scottish Government has no direct control or responsibility for its operation and we have not had a breakdown of levy funding for Scotland since 2020-21. This means that we cannot directly link funds realised from the apprenticeship levy to any funding stream.”

A separate FOI request to HMRC confirmed the figures had risen from £195 million in 2020-21 to £270 million in 2024-25, reaching £875 million overall. The real sum could be higher as HMRC does not include businesses registered in the rest of the UK.

Gregor Poynton, Labour MP for Livingston, said despite SNP manifestos promising to boost annual modern apprenticeship starts to 30,000, the number of young people starting apprenticeships is falling.

He added: “Even worse, we can now see that SNP ministers have raided at least £171 million from the apprenticeship budget over the last five years to plug holes elsewhere. That’s money stolen from young people’s futures.”

Murdo Fraser, Scottish Tory business spokesman, said: “Businesses will rightly be furious that the levy they pay to encourage vital training opportunities appears to have disappeared into the SNP Government’s coffers.

“Spending it on trying to plug their blackhole or to fund their fringe obsessions is a dereliction of duty from the SNP Government.

“This failure to pass on this funding in full will be deeply damaging for our young people, our economic growth and for ensuring our workforce have the skills they need for the future.”

Michelle Ferguson, director of CBI Scotland, said Scottish firms need access to the right funding to ensure they can build a skilled workforce.

“The Apprenticeship Levy is a case in point,” she said. “Businesses are paying in, but they are not seeing the return.

“We need full transparency on how levy revenues raised in Scotland flow through the system.”

Mr Kilgour, founder and chairman of Scottish care home group Renaissance Care, said the levy had cost his company around £750,000 to date “with very little access to training funds for my staff in return”.

He added: “In addition to paying the tax, we also stand the cost of training our staff, and the same is true for many of Scotland’s biggest employers.

“It cannot be right that tens of millions of pounds are being grabbed from hard-pressed businesses every year and not being spent by the SNP where it should.

“We must find a way to make the apprenticeship levy work better for the benefit of both companies and employees.”

A spokesperson for the Scottish Government said: “Scotland does not receive a specific allocation of levy revenue – we receive a share of UK Government departmental spending, which is not the same as revenue collected by HMRC via the levy. To claim otherwise would be inaccurate.

“In 2023-24 direct apprenticeship funding from the Scottish Government for Skills Development Scotland, the Scottish Funding Council and SAAS amounted to approximately £185 million.

“The Scottish Government invests over £2 billion annually in colleges, universities, and the broader skills system, including apprenticeships and vital services liked Scotland’s Careers Service.

“This underscores our commitment to the crucial role these sectors play in both education and the economy.”