Business groups push back on plan to raise training costs for older workers

Britain's major employers are warning that a new funding rule for apprenticeships could make it more expensive to train older staff, potentially slowing efforts to reduce youth unemployment. The proposal aims to shift apprenticeship spending toward younger workers by altering how the national training fund is used.

Under the current system, employers pay into a growth and skills levy, a tax worth 4 billion pounds a year. Firms have traditionally used this money to cover the full cost of training apprentices of any age. The new plan would change that dynamic. Training a worker under 25 would remain fully covered by levy funds. However, training a worker over 25 would trigger a co-investment rule. In that scenario, levy funds would cover only 75% of the cost, leaving employers to find the remaining 25% from their own resources.

The idea was developed before the recent budget announcement and was first reported last week. It is expected to be part of the government's response to the Milburn Review, which examines why so many young people are out of work. Chancellor John Healey is anticipated to announce measures to expand opportunities for young people during his budget address. Currently, about 1 million people aged 16 to 24 in England are not in education, employment, or training. A primary goal is to reverse a 40% drop in youth apprenticeship starts over the last decade.

Ministers argue the system needs rebalancing. Currently, workers over 25 account for more than half of all new apprenticeship enrollments. Andy Burnham has placed youth jobs at the center of his policy agenda. He seeks to address the stagnation in young people entering the workforce.

Business groups have reacted with skepticism. Robert Halfon, a former Conservative skills minister and now executive director of policy at Make UK, argued that the change will merely shift opportunities around rather than create new ones. He urged the chancellor to break the cycle of reallocating existing budgets and instead increase the total number of available places. John Foster of the CBI stated that skills cannot be treated as a zero-sum game. He noted that adult training is essential for mid-career updates, especially as artificial intelligence reshapes job requirements. Ben Rowland of the Association of Employment and Learning Providers cautioned that abrupt changes could undermine employer confidence.

Kate Shoesmith of the British Chambers of Commerce suggested that reducing the general cost of doing business would be a more effective way to promote youth apprenticeships. Firms have pressed Healey for relief regarding soaring costs linked to the Middle East war and the recent rise in employer national insurance contributions. They are concerned about adding new financial strains to their operations.

The debate highlights growing criticism of Labour's youth skills strategy. Only 160 young people enrolled in the foundation apprenticeship scheme in its first eight months, falling far short of the target for 30,000 starts over the current parliamentary term. Joe Dromey of the Fabian Society said the current system favors older, highly qualified workers. He argued that tackling youth unemployment requires difficult choices about where public money is spent.

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