Employers Warn Higher Training Costs for Older Workers Could Undermine Youth Jobs Drive

Some of Britain's largest employers have warned the government that making firms pay more to train older workers could undercut its effort to tackle the youth jobs crisis. The concern centres on a proposal to rework apprenticeship funding in England.

The Guardian understands that ministers intend to change the apprenticeship funding system so that training a worker over 25 costs 25% more, nudging companies toward taking on younger people. The idea was drawn up before Wednesday's budget and was first reported last week. It is expected to feature in the government's response to Alan Milburn's review into why so many young people are out of work.

Chancellor John Healey is widely expected to announce measures to widen opportunities for young people. About 1 million people aged 16 to 24 across the country are not in education, employment or training, known as Neet.

Under the plan, which has not been finalised, employers could cover the full cost of an apprentice under 25 using money they pay into the growth and skills levy, a tax worth £4bn a year that funds the national apprenticeship system. For older workers, a "co-investment rule" would apply: levy funds would meet 75% of the cost, and the rest would have to be found separately. Employers have long been told they could spend levy money on training as they saw fit.

Ministers have said they want to rebalance the system toward younger people, noting that over-25s make up more than half of new apprenticeship enrolments. Andy Burnham has put youth jobs at the centre of his agenda, including plans to reverse a 40% fall in youth apprenticeship starts over the past decade.

Business groups were quick to object. Robert Halfon, a former Conservative skills minister and now executive director of policy at Make UK, said 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 apprenticeship budget, and to grow the number of places instead.

John Foster of the CBI said: "We can't make skills a zero-sum game." He argued that adult training opens up entry-level routes and helps people update their skills mid-career, particularly as AI reshapes the workplace. Ben Rowland of the Association of Employment and Learning Providers cautioned that changes that are too abrupt or too quick could endanger employer support.

Kate Shoesmith of the British Chambers of Commerce said the best way to promote youth apprenticeships was to cut the wider costs of doing business. Firms have been pressing Healey for help with soaring costs linked to the war in the Middle East, and have asked him not to add to the strain created by Labour's rise in employer national insurance contributions.

The debate comes as Labour's youth skills strategy faces criticism. Just 160 young people enrolled on its foundation apprenticeship scheme in the first eight months, against an ambition of 30,000 starts over the current parliament. Joe Dromey of the Fabian Society said the present system leans too heavily toward funding older, often highly qualified workers, and 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, pointing to £3.3bn to deliver 50,000 additional apprenticeships and a £2,000 hiring payment for small and medium-sized firms that take on 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."