Apprentice cost hike proposal targets older workers to boost youth hiring

British employers have warned the government that increasing the cost of training workers over the age of 25 could weaken efforts to reduce youth unemployment. The industry pushback targets a proposal to alter the apprenticeship funding structure in England. The change would require companies to pay a 25% premium to train older staff, a move designed to encourage firms to hire younger candidates.

The proposal was drafted before the budget announcement on Wednesday and was first reported last week. It is expected to form part of the government's response to the Milburn Review, which examines why so many young people remain out of work. Chancellor John Healey is expected to introduce measures to expand opportunities for the 1 million people aged 16 to 24 who are currently not in education, employment, or training.

Under the current system, employers can use their contributions to the growth and skills levy to cover the full cost of an apprentice under 25. The levy generates 4 billion pounds annually to fund the national apprenticeship system. If the new plan proceeds, a co-investment rule would apply to workers over 25. In that scenario, levy funds would cover only 75% of the training cost, leaving employers to find the remaining 25% from other sources. This marks a shift from previous guidance that allowed firms to spend levy money on training as they saw fit.

Ministers argue the change is necessary to rebalance the system toward younger workers. Currently, individuals over 25 account for more than half of all new apprenticeship enrolments. Labour leader Andy Burnham has placed youth jobs at the center of his agenda, citing a 40% decline in youth apprenticeship starts over the past decade.

Business groups have raised concerns that the policy may shift existing jobs rather than create new ones. Robert Halfon, executive director of policy at Make UK, stated the change will likely move opportunities around instead of creating new ones. He urged the chancellor to break the cycle of cutting and reallocating the apprenticeship budget and to focus on increasing the total number of places.

John Foster of the CBI warned against making skills a zero-sum game. He noted that adult training provides entry-level routes and allows people to update skills mid-career, particularly as artificial intelligence reshapes the workplace. Ben Rowland of the Association of Employment and Learning Providers cautioned that abrupt changes could endanger employer support for the system.

Kate Shoesmith of the British Chambers of Commerce suggested the best way to promote youth apprenticeships is to cut the wider costs of doing business. Firms have asked Chancellor Healey to avoid adding to financial strains caused by the Middle East war and the recent rise in employer national insurance contributions.

The debate arises as the Labour government's youth skills strategy faces scrutiny. Only 160 young people enrolled in the foundation apprenticeship scheme in the first eight months, falling short of the ambition for 30,000 starts over the current parliament. Joe Dromey of the Fabian Society argued the system leans too heavily toward funding older, highly qualified workers and that tackling youth unemployment requires difficult choices about public funding.

A government spokesperson said ministers are right to focus on reversing the 40% decline in young apprenticeship starts. The spokesperson pointed to 3.3 billion pounds allocated to deliver 50,000 additional apprenticeships and a 2,000 pound hiring payment for small and medium-sized firms that take on a 16- to 24-year-old. The spokesperson added that the Milburn Review is due in the autumn and that the government will not pre-empt its findings.