Plan to make firms pay more to train older workers than youth apprentices in England
The UK government is planning to increase the cost for employers to train older workers by 25% compared to youth apprentices, aiming to tackle the youth jobs crisis and rebalance the apprenticeship system.
Intelligence analysis by Gemini 2.5 Flash
Ministers in England are considering an overhaul of the apprenticeship funding scheme, specifically the growth and skills levy, to incentivize businesses to prioritize training for young people. This move comes amidst a significant decline in youth apprenticeship starts and a rise in youth unemployment, with the goal of reversing these trends by making it financially more attractive t…
Imagine a big pot of money that companies pay into to help train people for jobs. Right now, companies can use this money to train anyone, young or old. But the government wants to change the rules so that if a company trains an older person, they have to pay a bit more of their own money, while training a younger person stays fully paid for by the pot. It's like giving a discount for training younger people, hoping more young folks get a chance to learn a skill and find a job, especially since many haven't been able to lately.
Analysis
The proposed changes to England's apprenticeship funding scheme represent a significant policy intervention aimed at reshaping the national labor market, particularly concerning youth employment. The government's intention is to reverse a decade-long decline in youth apprenticeship starts, which has seen numbers almost halve, while over-25s now account for more than half of new apprenticeships. This rebalancing effort seeks to address the growing concern of nearly 1 million young people not in education, employment, or training.
Growth and Skills Levy
The core of the proposed reform lies in modifying the existing growth and skills levy, a £4bn annual tax on large employers designed to fund the national apprenticeship system. Currently, employers with annual wage costs exceeding £3m contribute 0.5% of their pay bill into a digital pot, which they can then draw from to cover training and assessment costs. The planned "co-investment" rule would introduce a differential funding rate: while funds would continue to fully cover eligible training for apprentices aged 16-24, for older apprentices (over 25), the levy would only cover 75% of the cost, requiring employers to pay the remaining 25%. This change is expected to be controversial, as employers have historically been assured flexibility in how they spend their levy funds.
Alan Milburn
The impetus for these reforms is closely tied to Alan Milburn's ongoing review into youth unemployment. Although his final report is delayed until after the budget, the former Labour cabinet minister has emphasized that improving access to apprenticeships is crucial for establishing career pathways for young people. The government's proposed changes are being developed as part of its response to the issues highlighted by Milburn's work, signaling a direct link between his findings and the policy direction. This underscores the political and economic urgency behind tackling the youth jobs crisis, with the Chancellor, John Healey, expected to include related measures in an upcoming tax and spending statement.
September 2027
The proposed measure is reportedly under consideration for a phased launch, potentially beginning from the start of the next academic year in September 2027. This timeline allows for preparation and adaptation by businesses and training providers. The government's strategy also includes other initiatives, such as creating 50,000 additional apprenticeships for young people and introducing a £2,000 hiring payment for SMEs taking on 16-24-year-old apprentices. However, concerns have been raised about the effectiveness of existing schemes, with Labour's flagship foundation apprenticeship scheme enrolling only 160 young people against an ambition of 30,000. Ministers are also wary of increasing the overall levy rate, as suggested by the Fabian Society, due to potential backlash from businesses already facing other cost pressures, thus shifting the focus to reallocating existing funds.
Key points
- The UK government plans to make firms pay 25% more to train workers over 25 compared to youth apprentices.
- The goal is to reverse a 40% decline in youth apprenticeship starts over the past decade and tackle youth unemployment.
- Changes will be made to the £4bn-a-year growth and skills levy, introducing a 'co-investment' rule for older apprentices.
- The policy is part of the government's response to Alan Milburn's review into youth joblessness.
- The measure is under consideration for a phased launch from September 2027.
If successful, this policy could significantly boost youth employment and provide valuable skills to a generation struggling to enter the workforce. It could lead to a more balanced apprenticeship system, ensuring young people have clearer pathways to careers and reducing the number of those not in education, employment, or training.
Employers may resist the new co-investment rule, viewing it as an additional cost and an unwelcome restriction on how they use their levy funds. This could lead to reduced overall apprenticeship numbers or a shift towards shorter, less comprehensive training, potentially undermining the quality of skills development.
