Employers warn 25% rise in training costs for over-25s threatens youth jobs plan

Britain’s largest employers have told the government that raising the price of training older workers could undermine its goal to fix the youth jobs crisis.

Ministers are preparing to overhaul the apprenticeship funding scheme in England. The proposal would increase the cost for businesses to train a worker over the age of 25 by 25%. The goal is to encourage firms to hire and train young people instead. This plan was drawn up before Wednesday’s budget and was first reported last week. It is expected to form part of the government response to Alan Milburn’s review on youth unemployment.

Chancellor John Healey is expected to announce measures to boost opportunities for young people. There are 1 million 16- to 24-year-olds in the country who are not in education, employment, or training. Business leaders urged the government to reconsider the plan to make training older workers more expensive. Robert Halfon, executive director of policy at the manufacturing lobby group Make UK, said the move would shift opportunities around instead of creating new ones. Halfon, a former Conservative skills minister, agreed that getting young people back into work is a moral and economic imperative. He argued that making it more expensive for employers to train older workers is not the answer.

Halfon called on Healey to break the cycle of cutting and reallocating the apprenticeship budget. He stated the system is already struggling to deliver what businesses and young people need. He said if the government is serious about good jobs and industry skills, it should grow the number of available apprenticeships rather than restrict training elsewhere.

Andy Burnham has placed youth jobs at the center of his agenda. This includes plans to retool technical education and reverse a 40% drop in youth apprenticeship starts over the past decade. Over-25s currently account for more than half of new apprenticeship enrolments. Ministers want to rebalance the system to support more younger people. Under the latest proposal, employers would fund the full cost of an apprentice under 25 using the growth and skills levy. This is a £4bn-a-year tax used to fund the national system. For older workers, a co-investment rule would apply. Levy funds would cover 75% of the costs, and employers would need to cover the rest separately. Employers have previously been told they could spend levy funds on training as they saw fit.

John Foster, chief policy and campaigns officer at the CBI, said skills cannot be a zero-sum game. He noted that while supporting young people into work is right, adult training plays a vital role in opening entry-level opportunities. He added that it helps people adapt and update skills mid-career, particularly as AI reshapes the workplace. Ben Rowland, chief executive of the Association of Employment and Learning Providers, said any further changes must bring employers on the journey. He warned that anything too abrupt or quick endangers that process.

Business leaders have pressed Healey to use the budget to address soaring costs amid the war in the Middle East. They have urged the chancellor not to add pressure on firms after Labour’s increase in employer national insurance contributions. Kate Shoesmith, director of policy and insights at the British Chambers of Commerce, said employers need greater flexibility to invest in skills at every career stage. She argued the best way to encourage youth apprenticeships is to reduce the wider costs of doing business, rather than creating new barriers to training.

Labour has been told its youth skills strategy risks failure without reform. Only 160 young people were enrolled into its foundation apprenticeship scheme in the first eight months. Ministers aim for 30,000 starts over the current parliament. Joe Dromey, general secretary of the Fabian Society, said the current system is skewed too heavily towards funding older, often highly qualified workers. He said tackling youth unemployment means making difficult choices about where public funding is spent.

A government spokesperson said it is right to focus on reversing the 40% decline in young people starting an apprenticeship. The government has reformed the system backed by £3.3bn to deliver 50,000 additional apprenticeships for young people. It will also support employers with a new hiring payment of £2,000 for SMEs who take on a 16- to 24-year-old apprentice. The Milburn Review is due in the autumn, and the government said it will not pre-empt its findings.