Employers warn 25% training cost rise for over-25s will not fix youth jobs

Ministers plan to raise the cost of training workers over 25 in England by 25%, and Britain's largest employers say the move will wreck the government's own youth jobs strategy. The Guardian understands the proposal will push firms to train younger people instead by making adult apprenticeships more expensive.

The plan was drawn up before Wednesday's budget. It is expected to form part of the government's response to Alan Milburn's review into youth unemployment, which is due in the autumn. Chancellor John Healey is widely tipped to announce measures aimed at the 1 million 16- to 24-year-olds in Britain who are not in education, employment or training (Neet).

How would the new funding rules work?

At the centre sits the growth and skills levy, the £4bn-a-year tax that funds the national apprenticeship system. Under the proposal, which is yet to be finalised, employers could fund the full cost of an apprentice under 25 using their levy contributions. For a worker over 25, a "co-investment rule" would apply: levy funds would cover only 75% of training costs, and the employer would pay the rest separately.

That reverses years of practice. Employers have long been told they were free to spend their levy funds on training as they saw fit.

Why do employers object?

Robert Halfon, a former Conservative skills minister and now executive director of policy at manufacturing lobby group Make UK, said the plan would not create opportunity. "It will just mean opportunities are shifted around instead of creating new ones," he said.

"We agree that getting young people back into employment and training is a moral and economic imperative. But making it more expensive for employers to train older workers isn't the answer," Halfon added. He called on Healey to "break the cycle" of cutting and reallocating the apprenticeship budget, arguing the system already fails to deliver what businesses and young people need.

John Foster, chief policy and campaigns officer at the CBI, framed the dispute in blunt terms: "We can't make skills a zero-sum game." He said adult training opens entry-level opportunities and helps people update skills mid-career, "particularly as AI reshapes the workplace."

Ben Rowland, chief executive of the Association of Employment and Learning Providers, warned against moving fast. "The key to any further changes to the apprenticeship system is to bring employers on the journey. Anything that is too abrupt or too quick significantly endangers that," he said.

Kate Shoesmith, director of policy and insights at the British Chambers of Commerce, said the better route is cheaper hiring, not dearer training. "The best way to encourage more youth apprenticeships is to make it easier and more affordable for firms to take on young people by reducing the wider costs of doing business, rather than creating new barriers to training," she said.

What is driving the rebalancing push?

Over-25s account for more than half of new apprenticeship enrolments, and ministers want the system tilted back towards the young. Andy Burnham has placed youth jobs at the centre of his agenda, including plans to reverse a 40% drop in youth apprenticeship starts over the past decade.

The record so far is thin. Labour's foundation apprenticeship scheme enrolled just 160 young people in its first eight months, against an ambition of 30,000 starts over the current parliament.

Joe Dromey, general secretary of the Fabian Society, acknowledged the political cost but defended rebalancing. "These will not be easy decisions, and some will be unpopular with businesses. But tackling youth unemployment means making difficult choices about where public funding is spent," he said. He argues the current system skews too heavily towards older, often already highly qualified workers.

What does the government say?

A government spokesperson said: "It's right that we focus on reversing the 40% decline in the number of young people starting an apprenticeship and give them the skills they need to succeed."

The spokesperson pointed to reforms backed by £3.3bn to deliver 50,000 additional apprenticeships for young people, plus a £2,000 hiring payment for SMEs taking on a 16- to 24-year-old apprentice. "The Milburn Review is due in the autumn. We will not pre-empt its findings," the spokesperson said.

Business leaders are also pressing Healey on soaring costs tied to the war in the Middle East, and urge him not to add pressure after Labour's rise in employer national insurance contributions. Wednesday's budget will show whether the chancellor heeds them or holds the line on over-25s.