Apprenticeship funding will be redirected from providers to employers — but they will have to make a “significant” cash contribution towards training costs for the first time.

Chancellor George Osborne announced in his Autumn Statement a new funding model would use Her Majesty’s Revenue and Customs (HMRC) systems to route funding directly to employers.

The Treasury subsequently announced it would launch a consultation on the technical details of the system early next year.

A compulsory employer cash contribution for a significant proportion of apprentices’ external training costs, excluding English and maths, will also be introduced.

Mr Osborne told the House of Commons: “The government will put business at the centre of the apprenticeship system by enabling employers to receive funding for the training costs of apprentices directly through an HMRC-led system and ensuring that employers contribute.”

A Department for Business, Innovation and Skills spokesperson confirmed taxation was one of the HMRC systems being considered to route apprenticeship funding directly to employers.

The government will also be looking at the option of an “alternative funding route for the smallest businesses”.

The Autumn Statement also talked of an “additional contribution” to the costs of training for 16 to 17-year-olds and consider the approach for 18-year-olds, but did not commit to fully-funding them as now.

The Treasury further announced it would make £40m of new funding available to help deliver an additional 20,000 higher apprenticeships starts in the 2013/14 and 2014/15 academic years.

Phil Orford, chief executive of The Forum of Private Business, welcomed the changes which he said would make providers “deliver the skills employers require”.

However, the announcements drew a strong warning from the chief executive of City & Guilds, Chris Jones, told FE Week: “Although it isn’t the intention, the Autumn Statement puts the apprenticeship system at risk.

“All employers, regardless of size, will feel the effects. The reforms will require additional resource. There will be even more hoops to jump through to establish an apprenticeship. Where is the incentive there?”

Stewart Segal, chief executive of the Association of Employment and Learning Providers, said: “Mandatory contributions will be a barrier to the growth of the programme for those aged over 19, especially young people who are unemployed.”

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