Healey to Impose 25% Surcharge on Training Workers Over 25

Chancellor John Healey is set to announce a 25% surcharge on the cost of training workers over the age of 25. The measure aims to shift apprenticeship funding toward younger candidates as part of the government's response to a persistent youth unemployment crisis. The proposal is expected to feature in the upcoming budget and align with findings from Alan Milburn's review into labor market participation.

The new funding rules will change how employers access the growth and skills levy. Currently, firms pay into a tax pool valued at £4 billion annually, which funds the national apprenticeship system. Employers have historically used these funds to cover the full cost of training for any worker, regardless of age. Under the proposed changes, levy money will only cover 75% of the training costs for workers over 25. Employers will be required to find the remaining 25% from separate budget lines. This creates a financial disincentive for hiring older apprentices compared to those under 25.

Ministers argue the adjustment is necessary to rebalance the system. Over-25s currently account for more than half of all new apprenticeship enrolments. This trend has contributed to a 40% decline in youth apprenticeship starts over the past decade. Andy Burnham has made reversing this trend a priority of his agenda. The government seeks to increase the number of young people entering structured training and employment pathways.

Business groups have raised concerns that the surcharge may reduce overall hiring. Robert Halfon, executive director of policy at Make UK, stated that the change will shift opportunities around rather than creating new ones. He urged the chancellor to break the cycle of reallocating existing budget lines and instead focus on growing the total number of available places. Halfon emphasized that firms need more capacity, not just a different distribution of costs.

John Foster of the CBI argued that skills development should not be treated as a zero-sum game. He noted that adult training allows people to update their capabilities mid-career, a need that has grown as artificial intelligence reshapes workplace requirements. Foster warned that restricting training for older workers could limit entry-level routes for younger employees.

Kate Shoesmith of the British Chambers of Commerce suggested that lowering the wider costs of doing business would be a more effective strategy for promoting youth employment. Firms have been pressing the chancellor for relief from soaring costs linked to the war in the Middle East. They have also requested that the government avoid adding new financial strains on top of the recent rise in employer national insurance contributions.

The debate occurs while Labour's existing youth skills strategies face scrutiny. Only 160 young people enrolled in the government's foundation apprenticeship scheme during the first eight months of the year. This figure falls far short of the ambition to achieve 30,000 starts over the current parliamentary term. Joe Dromey of the Fabian Society stated that the current system funds older, highly qualified workers at the expense of younger candidates who need entry points into the workforce.

A government spokesperson defended the focus on reversing the decline in young apprenticeship starts. The spokesperson pointed to a £3.3 billion allocation designed to deliver 50,000 additional apprenticeships. The plan also includes a £2,000 hiring payment for small and medium-sized firms that take on a 16- to 24-year-old. The spokesperson noted that the Milburn Review is due in the autumn and that the government will not pre-empt its findings.