Government proposes 25% training surcharge for workers over 25

Ministers are preparing to charge companies an extra 25% to train employees older than 25, a move intended to free up apprenticeship spots for younger workers. The proposal is part of a wider push to address the youth unemployment crisis, where approximately 1 million people aged 16 to 24 are currently not in education, employment, or training.

Under the draft plan, employers would be able to cover the full cost of training an apprentice under 25 using their existing contributions to the growth and skills levy, a tax that generates £4 billion annually. For workers over 25, the rules would change. A co-investment requirement would mean the levy covers only 75% of the training cost, forcing firms to find the remaining quarter from other budgets. This represents a shift from previous guidance, which allowed businesses to spend levy funds on any training they chose.

Business leaders have raised concerns that the new cost structure may not create new jobs, only redistribute them. Robert Halfon, executive director of policy at Make UK, told The Guardian the change will likely mean opportunities are shifted around instead of creating new ones. He urged Chancellor John Healey to break the cycle of cutting and reallocating the apprenticeship budget and to focus on growing the total number of places available.

John Foster of the CBI argued against treating skills as a zero-sum game. He noted that training for older workers helps people update their skills mid-career and opens entry-level routes, a need that grows as artificial intelligence reshapes the workplace. Ben Rowland of the Association of Employment and Learning Providers warned that changes implemented too abruptly could endanger employer support for the system.

Kate Shoesmith of the British Chambers of Commerce suggested that the most effective way to promote youth apprenticeships is to reduce the broader costs of doing business. Companies have been asking Healey for relief from soaring costs linked to the war in the Middle East and have requested that he not add to the pressure already created by Labour's increase in employer national insurance contributions.

The proposal comes as the government's current youth skills strategy faces scrutiny. The foundation apprenticeship scheme enrolled just 160 young people in its first eight months, falling far short of the ambition for 30,000 starts during the current parliament. Joe Dromey of the Fabian Society said the present system leans too heavily toward funding older, highly qualified workers, and that tackling youth unemployment requires difficult choices about where public money is spent.

Over-25s currently make up more than half of new apprenticeship enrolments in England. Ministers aim to rebalance this ratio toward younger people. Andy Burnham has placed youth jobs at the center of his agenda, citing a 40% fall in youth apprenticeship starts over the past decade. The plan is expected to feature in the government's response to the review by Alan Milburn, who is investigating why so many young people are out of work.

A government spokesperson stated that ministers are right to focus on reversing the decline in young apprenticeship starts. The department pointed to £3.3 billion allocated to deliver 50,000 additional apprenticeships and a £2,000 hiring payment for small and medium-sized firms that take on a 16- to 24-year-old. The spokesperson added that the government will not pre-empt the findings of the Milburn Review, which is due in the autumn.