Firms Face 25% Training Cost Hike

Employers in England would pay 25% more to train workers aged 25 and older under a proposal circulating within the government. The plan aims to shift apprenticeship spending toward younger candidates to address a youth employment crisis.

Ministers intend to rework the apprenticeship funding system before Wednesday's budget. The change was drafted before the budget announcement and was first reported last week. It is expected to be included in the government's response to the review by Alan Milburn on youth unemployment.

Chancellor John Healey is expected to announce measures to expand opportunities for young people. Approximately 1 million people aged 16 to 24 are currently not in education, employment, or training. This group is known as Neet.

Under the unfinalized plan, employers could use their share of the growth and skills levy to cover the full cost of an apprentice under 25. The levy is a tax worth £4 billion annually that funds the national apprenticeship system. For workers over 25, a co-investment rule would apply. Levy funds would cover 75% of the cost, and employers would need to find the remaining 25% separately.

Business groups have raised objections to the proposal. Robert Halfon, executive director of policy at Make UK and a former Conservative skills minister, stated the change would shift opportunities rather than create new ones. He urged the chancellor to increase the total number of apprenticeship places instead of reallocating the existing budget.

John Foster of the CBI argued that skills training should not be a zero-sum game. He noted that adult training supports mid-career updates and entry-level routes, especially as artificial intelligence reshapes work. Ben Rowland of the Association of Employment and Learning Providers warned that abrupt changes could weaken employer support.

Kate Shoesmith of the British Chambers of Commerce suggested that reducing wider business costs is the best way to promote youth apprenticeships. Firms have asked Healey for relief from soaring costs linked to the war in the Middle East and the recent rise in employer national insurance contributions.

The debate occurs as Labour's youth skills strategy faces scrutiny. Only 160 young people enrolled in the foundation apprenticeship scheme in the first eight months. The goal was 30,000 starts over the current parliament. A government spokesperson said ministers are reversing the 40% decline in young apprenticeship starts. 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 taking on 16 to 24-year-olds. The Milburn Review is due in the autumn, and the government said it will not pre-empt its findings.