Employers warn 25% training surcharge for over-25s may squeeze youth hiring

British employers are warning that a proposal to charge firms 25% more for training workers over the age of 25 could undermine the government's drive to reduce youth unemployment. The plan, which centers on reworking the apprenticeship funding system in England, was drafted before Wednesday's budget and is expected to feature in the government's response to the Milburn review on youth work.

Under the current rules, companies can use money from the growth and skills levy, a tax worth £4bn annually, to cover the full cost of an apprentice under 25. The proposal introduces a co-investment rule for older staff. Levy funds would cover 75% of the training cost for workers over 25, leaving the remaining 25% to be funded separately by the employer. Ministers argue this rebalances the system, noting that people over 25 currently account for more than half of all new apprenticeship enrolments.

Chancellor John Healey is expected to announce measures to widen opportunities for young people. Approximately 1 million people aged 16 to 24 across the country are currently not in education, employment, or training. Prime Minister Andy Burnham has made youth jobs a central part of his agenda, including a goal to reverse a 40% decline in youth apprenticeship starts over the past decade.

Business groups have pushed back against the proposal, arguing it shifts resources without creating new capacity. Robert Halfon, a former Conservative skills minister and now 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 budget and to focus on growing the total number of places.

John Foster of the CBI described the issue as a skills zero-sum game. He argued that adult training is essential for opening entry-level routes and updating mid-career skills, particularly as artificial intelligence reshapes the workplace. Ben Rowland of the Association of Employment and Learning Providers cautioned that changes implemented too abruptly could endanger ongoing employer support for the scheme.

Kate Shoesmith of the British Chambers of Commerce suggested that reducing the wider costs of doing business is the most effective way to promote youth apprenticeships. Firms have been pressing the government for relief from soaring costs linked to the war in the Middle East. They have also asked the chancellor not to add new financial strain to the recent rise in employer national insurance contributions.

The debate arises as Labour's youth skills strategy faces scrutiny over low uptake. Only 160 young people enrolled in the foundation apprenticeship scheme in the first eight months, falling short of the ambition for 30,000 starts over the current parliament. Joe Dromey of the Fabian Society said the present system leans too heavily toward funding older, highly qualified workers. He added that tackling youth unemployment "means making difficult choices about where public funding is spent."

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