How the funding change works

The UK government plans to make employers in England pay more to train an older worker than a youth apprentice, by increasing the cost of training by 25% for a worker over the age of 25. At the same time, employers would face a new "co-investment" rule restricting the funding they can access.

Under the change, levy funds would fully cover eligible training for apprentices aged 16 to 24. For older apprentices, the funds would cover only 75% of the cost and employers would need to pay for the remainder.

Why the government says it is needed

The proposal aims to reverse a 40% drop in youth apprenticeship starts over the past decade. The shift is stark: more than half of new starts are now for over-25s, and under-19 enrolments have almost halved in a decade.

It is being developed as part of the government response to Alan Milburn's review into why many young people are out of work. Milburn, a former Labour cabinet minister, signalled this week that boosting access to apprenticeships would be critical for fixing the first rungs of the career ladder.

The levy and employer reaction

The system is financed by the growth and skills levy, a £4bn a year tax used to fund the national apprenticeship system. Large employers - those with yearly wage costs totalling more than £3m - must pay 0.5% of their total annual pay bill into the levy pot.

One senior policy expert close to the government said employers would resist the move: "Employers are not going to like it," the expert said, recalling the levy's earlier promise that "it's your money, you get to decide".

Timeline and related measures

The measure is believed to be under consideration for a phased launch from the start of the next academic year, in September 2027. Milburn's final report is delayed until after the budget. Meanwhile, the chancellor, John Healey, is preparing to include measures to tackle soaring youth unemployment in his tax and spending statement in under a fortnight.

A Department for Work and Pensions spokesperson said: "We remain determined to address the 40% decline in apprenticeship starts among young people." The department points to creating 50,000 additional apprenticeships for young people, and introducing a new hiring payment of £2,000.

On the review's timing, the department said: "The Milburn review is due in the autumn. We will not pre-empt its findings."