Firms oppose 25% training surcharge

British employers have warned the government that a proposed 25% cost increase for training workers over 25 may hinder efforts to reduce youth unemployment.

The proposal, expected to be detailed in the government's response to the Milburn review, aims to shift apprenticeship funding toward younger candidates. Under the current system, employers can use the growth and skills levy, a tax worth £4 billion annually, to cover the full cost of training an apprentice under 25. For workers over 25, the new rule would require firms to pay 25% of the cost out of pocket, as levy funds would only cover 75% of the expense.

Ministers argue the change is necessary to rebalance the system. Currently, individuals over 25 account for more than half of new apprenticeship enrolments in England. Chancellor John Healey is expected to announce measures to widen opportunities for young people, a priority given that approximately 1 million people aged 16 to 24 are currently not in education, employment, or training.

Business groups have criticized the plan as a zero-sum game rather than a strategy to expand opportunities. Robert Halfon, executive director of policy at Make UK, stated that the change would likely shift existing opportunities rather than create new ones. He urged the chancellor to increase the total number of apprenticeship places instead of reallocating the existing budget.

John Foster of the CBI warned that adult training remains essential for workers to update their skills, particularly as artificial intelligence reshapes job roles. Ben Rowland of the Association of Employment and Learning Providers cautioned that abrupt changes could undermine employer confidence in the system. Kate Shoesmith of the British Chambers of Commerce suggested that reducing wider business costs would be a more effective way to promote youth hiring.

The debate occurs against a backdrop of criticism regarding Labour's youth skills strategy. Only 160 young people enrolled in the foundation apprenticeship scheme in the first eight months, falling far short of the ambition for 30,000 starts during the current parliament. Joe Dromey of the Fabian Society noted that the current system favors funding for older, highly qualified workers, making difficult choices about public spending necessary.

A government spokesperson defended the focus on reversing a 40% decline in youth apprenticeship starts over the past decade. The spokesperson cited £3.3 billion in funding for 50,000 additional apprenticeships and a £2,000 hiring incentive for small and medium-sized firms taking on 16- to 24-year-olds. The Milburn review is due in the autumn, and the government has stated it will not pre-empt its findings.