25% training surcharge for over-25s could shrink youth hiring, employers warn

A proposed 25% surcharge on training workers over the age of 25 could reduce the number of apprenticeship spots available to young people, according to warnings from major British employers. The change is part of a plan to rework the apprenticeship funding system in England, aiming to shift employer behavior toward hiring younger staff.

Under the unconfirmed proposal, employers could use their annual levy payments to cover the full cost of an apprentice under 25. For workers over 25, a co-investment rule would require firms to pay 25% of the training cost out of pocket, with levy funds covering only 75%. This structure is designed to make older apprentices more expensive to train, thereby nudging companies to prioritize younger candidates.

The measure is expected to feature in the government’s response to the Milburn Review, which examines youth unemployment. Approximately 1 million people aged 16 to 24 are currently not in education, employment, or training. Chancellor John Healey is expected to announce related measures in the upcoming budget, focusing on widening opportunities for this demographic.

Business groups have pushed back against the plan, arguing it reallocates existing resources rather than creating new 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 the chancellor to grow the number of places rather than cutting and reallocating the apprenticeship budget.

John Foster of the CBI argued that skills should not be a zero-sum game. He noted that adult training helps people update their skills mid-career and opens entry-level routes, a process increasingly important 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 that promoting youth apprenticeships requires cutting wider business costs. Firms are currently pressing for relief from soaring costs linked to the Middle East war and the recent rise in employer national insurance contributions. A government spokesperson defended the focus on reversing the 40% decline in young apprenticeship starts, citing £3.3bn for 50,000 additional apprenticeships and a £2,000 hiring payment for small and medium-sized firms.

The debate comes as Labour’s youth skills strategy faces scrutiny. Only 160 young people enrolled in the foundation apprenticeship scheme in the first eight months, against a target of 30,000 starts over the current parliament. Joe Dromey of the Fabian Society said the present system leans too heavily toward funding older, highly qualified workers. The government stated the Milburn Review is due in the autumn and that it will not pre-empt its findings.