Firms to Pay 25% More for Training Workers Over 25

The UK government is preparing a rule that would increase the cost of training apprentices over the age of 25 by 25 percent.

The proposal, drafted before the budget announcement this week, seeks to redirect public funds toward younger workers. It is expected to be a key component of the government's response to the Milburn Review on youth unemployment. Currently, approximately 1 million people aged 16 to 24 are not in education, employment, or training. The government aims to reverse a 40 percent drop in youth apprenticeship starts recorded over the last decade.

Under the existing system, employers use a tax called the growth and skills levy to fund training. This levy generates £4 billion annually. For workers under 25, firms could currently use the full levy amount to cover training costs. The new plan would introduce a co-investment rule for those over 25. Levy funds would cover 75 percent of the cost, requiring employers to find the remaining 25 percent separately. Ministers argue this rebalancing is necessary because workers over 25 currently account for more than half of all new apprenticeship enrolments.

Business groups have pushed back against the change, warning it may not create new jobs but merely shift existing ones. Robert Halfon, executive director of policy at Make UK, stated the change "will just mean opportunities are shifted around instead of creating new ones." He urged Chancellor John Healey to expand the total number of apprenticeship places rather than reallocating the current budget. John Foster of the CBI added that skills development should not be a zero-sum game, noting that adult training helps workers adapt to changes driven by artificial intelligence.

Critics also pointed to the slow uptake of current government initiatives. The foundation apprenticeship scheme enrolled only 160 young people in the first eight months, far below the target of 30,000 starts over the current parliament. Kate Shoesmith of the British Chambers of Commerce argued that reducing the wider costs of doing business is a more effective way to promote youth hiring. Firms are already dealing with rising costs from the war in the Middle East and an increase in employer national insurance contributions.

A government spokesperson defended the focus on reversing the decline in young apprenticeship starts. The spokesperson cited £3.3 billion in funding for 50,000 additional apprenticeships and a £2,000 hiring payment for small and medium-sized firms that employ a 16- to 24-year-old. The Milburn Review is due in the autumn, and the government stated it will not pre-empt its findings.