Employers push back on plan to make older apprenticeship training costlier

Major British employers have raised concerns that a new funding rule for apprenticeships will increase costs for training staff over the age of 25.

The proposal, which has not been finalized, seeks to alter how the growth and skills levy works. Under the current system, employers can use their entire levy contribution to fund apprentice training. The new plan would allow firms to cover 100% of the cost for apprentices under 25. For workers aged 25 and older, a co-investment rule would apply. Levy funds would cover 75% of the expense, leaving employers to find the remaining 25% from other sources.

Ministers developed this idea before this week's budget announcement. It is expected to appear in the government's response to the Milburn Review, which examines why many young people remain out of work. Chancellor John Healey is widely expected to announce measures to expand opportunities for young people. Approximately 1 million people between the ages of 16 and 24 across the country are currently not in education, employment, or training. Over-25s currently make up more than half of all new apprenticeship enrollments. Andy Burnham has made youth jobs a priority, including a plan to reverse a 40% drop in youth apprenticeship starts over the last decade.

Business groups reacted quickly to the news. Robert Halfon, executive director of policy at Make UK, argued that the change would simply shift opportunities rather than create new ones. He urged the chancellor to increase the total number of places rather than reallocate existing funds. John Foster of the CBI stated that skills should not be treated as a zero-sum game. He noted that adult training helps people update their skills mid-career, a need that grows as artificial intelligence reshapes the workplace. Ben Rowland of the Association of Employment and Learning Providers warned that abrupt changes could weaken employer support for the system.

Kate Shoesmith of the British Chambers of Commerce suggested that reducing general business costs is the best way to promote youth apprenticeships. Firms have asked Healey for help with rising costs linked to the war in the Middle East. They also requested that the government not add to the financial strain caused by the recent increase in employer national insurance contributions.

The debate arrives as Labour's youth skills strategy faces scrutiny. Only 160 young people enrolled in the foundation apprenticeship scheme during the first eight months. This figure falls far short of the ambition for 30,000 starts during the current parliament. Joe Dromey of the Fabian Society said the current system favors older, highly qualified workers. He argued that addressing youth unemployment requires difficult choices about public funding.

A government spokesperson said ministers are focused on reversing the 40% decline in young apprenticeship starts. The spokesperson pointed to £3.3bn allocated for 50,000 additional apprenticeships. The plan also includes a £2,000 hiring payment for small and medium-sized firms that take on a 16- to 24-year-old. The spokesperson noted that the Milburn Review is due in the autumn and that the government will not pre-empt its findings.