Apprenticeship Funding: 25% Surcharge Proposed for Workers Over 25

The UK government is preparing to alter the financial structure of the national apprenticeship system to prioritize hiring young people. This adjustment aims to address a persistent gap in youth employment by making it more expensive for companies to train staff over the age of 25. The proposal was drafted before the recent budget and is expected to be included in the government's response to the Milburn Review, which examines why many young people remain out of work.

Under the new rules, employers would pay the full cost of training apprentices under 25 using funds from the growth and skills levy. This tax generates approximately £4 billion annually to support the apprenticeship framework. For workers aged 25 and older, a co-investment rule would apply. In this scenario, levy money would cover 75% of the training expenses, leaving the remaining 25% to be funded separately by the employer. Previously, businesses could allocate levy money to training any apprentice regardless of age.

The shift targets a demographic imbalance in current enrollment. Ministers note that workers over 25 account for more than half of new apprenticeship starts. The government seeks to rebalance this figure to support its youth jobs agenda. Chancellor John Healey is expected to announce related measures to widen opportunities for young people. Currently, about one million individuals aged 16 to 24 in the UK are not in education, employment, or training, a status known as Neet.

Business leaders have raised concerns that the change will not create new opportunities but merely redistribute existing ones. Robert Halfon, a former Conservative skills minister and current executive director of policy at Make UK, stated that the change "will just mean opportunities are shifted around instead of creating new ones." He urged the chancellor to "break the cycle" of reallocating the apprenticeship budget and instead focus on increasing the total number of available places.

John Foster of the CBI argued that skills development should not be treated as a zero-sum game. He emphasized that training adults opens entry-level routes and allows for mid-career skill updates, which is essential as artificial intelligence reshapes the workplace. Ben Rowland of the Association of Employment and Learning Providers warned that abrupt changes could jeopardize employer support for the system. Kate Shoesmith of the British Chambers of Commerce suggested that reducing wider business costs would be a more effective way to promote youth apprenticeships.

Firms have recently pressed the government for relief from soaring costs linked to the Middle East conflict and the rise in employer national insurance contributions. They are wary of adding new financial burdens. The debate occurs while Labour’s youth skills strategy faces scrutiny. Only 160 young people enrolled in the foundation apprenticeship scheme in the first eight months, far below the target of 30,000 starts for the current parliament.

Joe Dromey of the Fabian Society noted that the current system favors older, highly qualified workers. He stated that tackling youth unemployment "means making difficult choices about where public funding is spent." A government spokesperson defended the focus on reversing the 40% decline in young apprenticeship starts over the past decade. The spokesperson pointed to £3.3 billion allocated for 50,000 additional apprenticeships and a £2,000 hiring payment for small and medium-sized firms that employ 16- to 24-year-olds.

The Milburn Review is due in the autumn, and the government stated it will not pre-empt its findings. The proposed funding changes remain in the draft stage and have not yet been finalized. If implemented, the policy would mark a significant structural change to how apprenticeship costs are shared between the state and employers for the first time in years.