Employers push back on plan to make training over-25s costlier

Britain’s largest business groups have warned the government that raising the price of training older workers could weaken its push to cut youth unemployment.

The warning targets a draft plan to overhaul apprenticeship funding in England. Under the proposal, firms would face a 25% higher cost to train a worker aged 26 or older compared to those under 25. The policy aims to steer employers toward younger candidates by making the levy system less generous for adult trainees.

The idea was developed before Wednesday’s budget speech and first appeared in reporting last week. It is expected to form part of the government’s answer to the Milburn Review, which examines why so many young people remain out of work. Chancellor John Healey is slated to announce measures to broaden opportunities for the 1 million people aged 16 to 24 who are currently not in education, employment, or training.

Under the current system, employers use the growth and skills levy, a £4 billion annual tax, to cover the full cost of apprentices under 25. The new plan would apply a co-investment rule for older workers. Levy funds would pay for only 75% of the training, leaving employers to find the remaining 25% from other sources. Ministers argue this rebalances the system because over-25s currently account for more than half of new apprenticeship starts. Andy Burnham has made youth employment a priority, citing a 40% drop in apprenticeship starts for young people over the last decade.

Business leaders reacted sharply to the proposal. Robert Halfon, executive director of policy at Make UK and a former skills minister, argued the change would merely shift opportunities around rather than create new ones. He told the chancellor to break the cycle of reallocating budgets and instead focus on increasing the total number of places. John Foster of the CBI cautioned against treating skills as a zero-sum game, noting that adult training helps workers update skills as AI changes the workplace. Ben Rowland of the Association of Employment and Learning Providers warned that abrupt changes could erode employer support for the system.

Kate Shoesmith of the British Chambers of Commerce suggested a better path to youth apprenticeships is reducing the overall cost of doing business. Firms have been asking Healey for relief from soaring costs linked to the Middle East conflict and the recent rise in employer national insurance contributions. The debate comes amid criticism of Labour’s current youth skills strategy. Only 160 young people enrolled in the foundation apprenticeship scheme in the first eight months, falling far short of the target for 30,000 starts this parliament. Joe Dromey of the Fabian Society said the system currently favors funding older, highly qualified workers and that addressing youth unemployment requires difficult choices about public spending.

A government spokesperson defended the focus on reversing the decline in young apprenticeship starts. The office pointed to £3.3 billion allocated for 50,000 additional apprenticeships and a £2,000 payment for small and medium-sized firms that hire a 16 to 24-year-old. The spokesperson said the Milburn Review is due in the autumn and that the government will not pre-empt its findings.

The proposal is not yet finalised. If adopted, it would mark a shift in how the levy is spent, requiring employers to budget extra funds for any apprentice over the age of 25. The change would apply to all new apprenticeship contracts registered under the system in England.