Chancellor Healey proposes 25% surcharge for training workers over 25

Chancellor John Healey is set to announce a 25% surcharge on the cost of training workers aged 25 and over in England. The measure would require employers to cover 25% of the training cost out of pocket, while government levy funds would cover the remaining 75%. This change aims to shift apprenticeship funding toward younger workers.

The proposal was developed ahead of the budget released on Wednesday. It is expected to form part of the government’s response to the review led by Alan Milburn, which examines why so many young people are out of work. Currently, about 1 million people aged 16 to 24 across the country are not in education, employment, or training.

Under the existing system, employers can use funds from the growth and skills levy to cover the full cost of an apprentice under 25. The levy is a tax worth £4 billion a year that supports the national apprenticeship system. For older workers, the new co-investment rule would apply, ending the previous ability to spend levy money as firms saw fit.

Ministers note that workers over 25 make up more than half of new apprenticeship enrolments. Andy Burnham has prioritized youth jobs on his agenda, including a plan to reverse a 40% fall in youth apprenticeship starts over the past decade. The government stated that focusing on this decline is the right course of action.

Business groups have pushed back on the plan. Robert Halfon, 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 grow the number of places rather than reallocating the budget.

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

Kate Shoesmith of the British Chambers of Commerce said the best way to promote youth apprenticeships is to cut the wider costs of doing business. Firms have asked Healey not to add to the strain caused by rising employer national insurance contributions and soaring costs linked to the war in the Middle East.

A government spokesperson pointed to £3.3 billion allocated 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 Milburn Review is due in the autumn, and the government said it will not pre-empt its findings.