Proposed levy surcharge targets training costs for workers over 25

The government plans to charge employers an extra 25% to train workers aged 25 and older, a move designed to prioritize youth in the national apprenticeship system.

Under the proposed changes to the growth and skills levy, firms would continue to cover the full cost of training apprentices under 25 using their annual tax contributions. For older workers, the state would cover only 75% of the training cost, leaving employers to find the remaining 25% through separate funding. This shift departs from previous guidance that allowed businesses to allocate levy money to any trainee regardless of age. The proposal was developed prior to the recent budget and is expected to be included in the government's response to the Milburn Review on youth employment.

Ministers aim to address the fact that more than half of new apprenticeship enrolments currently go to workers over 25. Chancellor John Healey is expected to announce measures to tackle the youth jobs crisis, with approximately 1 million people aged 16 to 24 currently not in education, employment, or training. Andy Burnham has previously outlined plans to reverse a 40% drop in youth apprenticeship starts over the last decade.

Major business organizations have raised concerns about the financial impact of the new rule. Robert Halfon, executive director of policy at Make UK, stated that the change will shift opportunities around rather than create new ones. He urged the chancellor to increase the total number of apprenticeship places instead of reallocating existing funds. John Foster of the CBI warned against treating skills development as a zero-sum game, noting that training older workers helps them update their skills in a workplace changing due to artificial intelligence. Ben Rowland of the Association of Employment and Learning Providers cautioned that abrupt changes could weaken employer support for the system.

Kate Shoesmith of the British Chambers of Commerce suggested that reducing the overall cost of doing business would better promote youth apprenticeships. Firms are currently seeking relief from costs associated with the Middle East conflict and recent increases in employer national insurance contributions. The proposal comes as the Labour government faces scrutiny over its youth skills strategy. Only 160 young people enrolled in the foundation apprenticeship scheme during the first eight months, falling far short of the target for 30,000 starts during the current parliament.

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