- Employers could be required to pay 25 per cent of training costs for apprentices aged 25 and over.
- The proposed change is intended to reverse a 40 per cent decline in youth apprenticeship starts over the past decade.
- Ministers are considering a phased introduction from September 2027, although the plan has not been finalised.
Employers in England could face higher training costs for older apprentices under government plans to steer more businesses towards hiring and training young people, as ministers try to tackle the youth jobs crisis.
The proposed overhaul of the growth and skills levy would require employers to cover 25 per cent of eligible training costs for apprentices aged 25 and over, while funding would remain available for apprentices aged 16 to 24. The change is being considered as part of the government's response to a review into why so many young people are out of work.
The measure could be introduced in phases from September 2027, although ministers have not confirmed the details. The proposal comes after a 40 per cent decline in youth apprenticeship starts over the past decade, with more than half of new starts now involving people aged over 25.
The funding change is intended to make youth apprenticeships more attractive to businesses. But it could also prove contentious, as employers have previously been told they could decide how to use their levy funds for training.
“Employers are not going to like it,” said a senior policy expert close to the government. “They were told ‘it's your money, you get to decide’. But the system is not working at the moment.”
A shift in apprenticeship funding
The growth and skills levy, which funds the apprenticeship system in England, raises about £4bn a year. Large employers with annual wage bills above £3m pay 0.5 per cent of their total payroll into a digital account that can be used to cover eligible training and assessment costs.
Earlier this year, Labour introduced changes to the apprenticeship system to give employers more flexibility over the types of training they could fund, including foundation apprenticeships and shorter courses.
Under the proposal now being considered, levy funds would continue to cover eligible training costs for apprentices aged 16 to 24. For older apprentices, employers would need to pay the remaining quarter of the cost themselves.
The plans are being developed as the government prepares its response to Alan Milburn's review into youth unemployment. The former Labour cabinet minister's final report has been delayed until after the budget, but he has signalled that improving access to apprenticeships will be central to helping young people enter the workforce.
The pressure is growing as the number of young people not in education, employment or training approaches 1 million. Ministers have also faced questions over the take-up of the new foundation apprenticeship scheme, which recorded 160 starts in its first eight months against an ambition of 30,000 over the course of the parliament.
Employers and funding under pressure
The proposed changes come as ministers weigh how to encourage youth hiring without adding significantly to the cost of employing people or increasing pressure on public finances.
The Fabian Society has called for the growth and skills levy to rise from 0.5 per cent to 0.7 per cent, which it estimates could raise an additional £2.5bn for training. Ministers, however, are understood to be wary of imposing further costs on businesses after the backlash over employer national insurance contributions.
The government has already announced 50,000 additional apprenticeships for young people and a £2,000 hiring payment for small and medium-sized businesses taking on apprentices aged 16 to 24.
A Department for Work and Pensions spokesperson reportedly said: “We remain determined to address the 40 per cent decline in apprenticeship starts among young people and give them the skills they need to succeed.
“We are already pivoting the system towards the next generation, including by creating 50,000 additional apprenticeships for young people, and introducing a new hiring payment of £2,000 for SMEs who take on a 16-24-year-old apprentice.
“The Milburn review is due in the autumn. We will not pre-empt its findings.”
The proposal would shift some training costs from the levy-funded system to employers, while giving younger apprentices continued access to funding. Whether businesses respond by taking on more young workers or by reducing training for older staff will depend on the final rules and how employers adapt.
