Training costs rise for older workers

Employers in Britain will face a higher cost to train workers over the age of 25 under a proposal that is expected to appear in the government's response to the Milburn Review. The change would require firms to pay a 25% premium for apprenticeship training for older workers. This financial disincentive is designed to nudge companies toward hiring younger candidates. The goal is to address the growing gap in employment for the 16-to-24 age group.

The funding mechanism for apprenticeships in England would shift under this plan. Currently, employers use money from the growth and skills levy to cover the full cost of training any apprentice. The levy generates approximately £4 billion annually for the national system. Under the new rules, levy funds would cover only 75% of the training cost for workers over 25. Employers would need to find the remaining 25% from their own budgets. For workers under 25, the full cost would still be covered by the levy.

Chancellor John Healey is expected to announce these measures as part of a wider package for youth employment. Approximately one million people in this age bracket are currently not in education, employment, or training. Labour has identified this group as a priority. Andy Burnham has highlighted a 40% decline in youth apprenticeship starts over the past decade. He has committed to reversing this trend through targeted policy changes.

Business groups have raised immediate objections to the co-investment rule. Robert Halfon, a former Conservative skills minister and now executive director of policy at Make UK, warned that the change would not create new jobs. He stated that opportunities would simply be shifted around. Halfon urged the chancellor to increase the total number of apprenticeship places rather than reallocating existing funds.

John Foster of the CBI argued against treating skills development as a zero-sum game. He noted that training older workers helps them update their abilities in a changing workplace. Ben Rowland of the Association of Employment and Learning Providers cautioned against abrupt changes. He suggested that rapid shifts could weaken employer support for the apprenticeship system.

Kate Shoesmith of the British Chambers of Commerce proposed a different approach. She said reducing the wider costs of doing business would be more effective. Firms have asked Healey for relief from soaring costs linked to the Middle East conflict. They have also sought protection from the recent increase in employer national insurance contributions.

The proposal comes amid scrutiny of Labour's current youth skills strategy. Only 160 young people enrolled in the foundation apprenticeship scheme in the first eight months. The government aimed for 30,000 starts during the current parliament. Joe Dromey of the Fabian Society stated that the system currently favors funding for older, highly qualified workers. He said tackling youth unemployment requires difficult choices about public spending.

A government spokesperson defended the focus on young apprenticeship starts. Ministers cited £3.3 billion in funding for 50,000 additional apprenticeships. They also pointed to a £2,000 hiring payment for small and medium-sized firms that take on a 16-to-24-year-old. The spokesperson said the government will not pre-empt the findings of the Milburn Review, which is due this autumn.