Apprenticeship Fees: Employers warn 25% hike for over-25s could stall youth hiring

The UK government is preparing to adjust the apprenticeship funding model in England, a move that business leaders warn could complicate efforts to reduce youth unemployment. The proposal aims to shift the financial burden of training toward younger workers to address the gap in entry-level opportunities.

Ministers plan to increase the cost of training workers over the age of 25 by 25%. The goal is to incentivize companies to prioritize younger employees, who currently make up less than half of new apprenticeship enrollments. This change is expected to be part of the government's response to a review by Alan Milburn into youth unemployment.

Chancellor John Healey is expected to announce measures to support the 1 million people aged 16 to 24 who are not in education, employment, or training. The current system allows employers to use their levy contributions to cover the full cost of training for those under 25. For older workers, the new rule would require employers to cover 25% of the training costs separately, a shift from the previous policy where levy funds could be spent freely.

Robert Halfon, executive director of policy at Make UK, argued that the change would not create new jobs but simply shift existing opportunities. He stated that making it more expensive to train older workers is not the solution to the youth employment crisis. Halfon urged the government to increase the total number of apprenticeships rather than restricting training for adults.

John Foster, chief policy officer at the CBI, described the approach as a zero-sum game. He noted that adult training is essential for helping workers adapt to changes in the workplace, particularly as artificial intelligence reshapes industries. He warned that focusing solely on young people could neglect the need for mid-career skill updates.

The Association of Employment and Learning Providers chief executive Ben Rowland emphasized the need to involve employers in the process. He cautioned that abrupt changes could endanger the relationship between the government and the private sector. Other business groups have also pressed for flexibility, citing the need to manage soaring costs during the Middle East conflict and the recent increase in employer national insurance contributions.

The government maintains that it is acting to reverse a 40% decline in youth apprenticeship starts over the past decade. A spokesperson said the reform is backed by £3.3 billion to deliver 50,000 additional apprenticeships for young people. The plan also includes a £2,000 hiring payment for small and medium enterprises that take on an apprentice aged 16 to 24.

Critics within the Fabian Society acknowledged that the current system favors older, often highly qualified workers. They argued that difficult choices about public funding are necessary to tackle youth unemployment. The government stated it would not pre-empt the findings of the Milburn Review, which is due in the autumn.