UK Firms Face 25% Cost Hike to Train Workers Over 25

Employers in Britain will pay a 25% premium to train workers over the age of 25 under a draft proposal released this week. The plan aims to shift apprenticeship slots toward younger candidates as the government attempts to reduce youth unemployment. The change is not yet final but is expected to be part of the official response to the Milburn Review.

Currently, companies use a £4bn annual tax called the growth and skills levy to cover the full cost of an apprentice under 25. Under the new rules, that same levy would only cover 75% of the cost for a worker over 25. The remaining 25% would require separate funding from the employer. This co-investment rule effectively raises the price of training older staff while leaving the cost of training younger staff unchanged.

Ministers argue the system needs rebalancing because workers over 25 account for more than half of all new apprenticeship starts. Andy Burnham has made youth jobs a priority, citing a 40% drop in apprenticeship starts for young people over the last ten years. Chancellor John Healey is expected to announce related measures in Wednesday's budget, where he will address the 1 million people aged 16 to 24 who are currently not in education, employment, or training.

Business groups have pushed back against the cost increase, warning it may distort hiring practices. 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 break the cycle of cutting and reallocating the apprenticeship budget and to grow the total number of places instead.

John Foster of the CBI described skills training as not a zero-sum game. He noted that adult training opens entry-level routes and helps people update their skills mid-career, a need that is growing as artificial intelligence reshapes the workplace. Ben Rowland of the Association of Employment and Learning Providers warned that changes made too quickly could endanger employer support for the system.

Kate Shoesmith of the British Chambers of Commerce said the best way to promote youth apprenticeships was to cut the wider costs of doing business. Firms have been pressing Healey for relief from soaring costs linked to the war in the Middle East and from Labour's recent rise in employer national insurance contributions.

The proposal arrives as Labour's youth skills strategy faces scrutiny. Only 160 young people enrolled in the foundation apprenticeship scheme in its first eight months, against a target of 30,000 starts for the current parliament. Joe Dromey of the Fabian Society said the current system funds older, often highly qualified workers, and that tackling youth unemployment means making difficult choices about public spending.

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