Employers warn new apprenticeship fees will shift youth jobs to older workers

Britain's largest employers have told the government that raising the price of training older workers will weaken its push to fix youth unemployment. The warning targets a draft plan to change how apprenticeship funding works in England. Under the proposal, companies would pay 25% more to train any worker over the age of 25.

The change aims to steer firms toward hiring younger staff. Currently, employers can use money from the growth and skills levy to cover the full cost of an apprentice under 25. That tax raises £4bn a year to fund the national system. For workers over 25, the new rule would only cover 75% of the cost. Employers would have to find the remaining 25% from their own budgets.

Ministers believe the shift is necessary to rebalance the system. Older adults currently make up more than half of all new apprenticeship starts. The government wants to reverse a 40% drop in youth apprenticeship starts over the last decade. About 1 million people aged 16 to 24 are currently not in education, employment, or training.

Business leaders say the new fee structure creates a zero-sum game. Robert Halfon, executive director of policy at Make UK, said the change would only move opportunities around without creating new ones. John Foster of the CBI argued that cutting adult training hurts entry-level routes and mid-career skill updates. He noted that artificial intelligence is reshaping workplaces, making continuous training essential.

Kate Shoesmith of the British Chambers of Commerce suggested a different approach. She said the best way to promote youth apprenticeships is to lower the overall costs of doing business. Firms have already asked Chancellor John Healey for help with rising costs from the Middle East conflict and higher employer national insurance contributions.

The debate highlights the struggle to meet current targets. Only 160 young people enrolled in the government's foundation apprenticeship scheme in the first eight months. The plan aimed for 30,000 starts during the current parliament. Joe Dromey of the Fabian Society said the system spends too much on highly qualified older workers. He argued that fixing youth unemployment requires hard choices about where public money goes.

A government spokesperson defended the focus on reversing the decline in young apprenticeship starts. Officials pointed to £3.3bn allocated for 50,000 additional apprenticeships. They also cited a £2,000 hiring payment for small and medium-sized firms that hire someone aged 16 to 24. The spokesperson said the government will not pre-empt the findings of the Milburn Review, which is due in the autumn.