The government narrowly avoided a second consecutive apprenticeship budget overspend in 2025-26 thanks to a mid-year funding boost, figures show. Annual accounts for the Department for Work and Pensions, published today, also reveal ministers expect apprenticeship spending to peak at almost £3.3 billion next year before falling in each of the following two years. It raises questions about how a £725 million pot committed for the growth and skills levy over the rest of this parliament will be spent, considering only around half has been committed so far. Overspend near-miss The government overspent its apprenticeship budget for the first time in the 2024-25 financial year, forcing ministers to inject £345 million and push the total allocation above £3 billion in 2025-26. Last year’s original budget was set at £3.075 billion but was boosted by £43 million mid-year to £3.118 billion to meet higher-than-expected demand. Today’s accounts show the total apprenticeships spend in 2025-26 was £3.095 billion – £20 million higher than the original budget, but £23 million, or 0.7 per cent, lower than the topped-up budget. FE Week revealed in March that the 2026-27 apprenticeships budget had risen further to £3.3 billion. Today’s DWP accounts show the department expects to spend 99.9 per cent – £3.298 billion to be exact – of this year’s budget. Ministers have been under pressure to rein in costs on apprenticeships since the pandemic saw soaring spend on higher-level apprenticeships, mostly taken by older learners, which are more expensive to deliver. The government has already defunded level 7 apprenticeships for people aged 22 and older, and will this year defund 16 other apprenticeships, including popular management standards, that are mostly taken by existing and older workers. The changes form part of a wider reform of the apprenticeship levy into a broader “growth and skills levy”. This has expanded the scope of funded provision, including the rollout of short courses – dubbed “apprenticeship units” – and new foundation apprenticeships in sectors such as hospitality and retail since April. Ministers have an ambition to deliver 50,000 additional apprenticeship starts for young people by March 2029, reversing almost half of the decade-long decline in participation among 16 to 24-year-olds. Apprenticeship starts in that age group have fallen by around 40 per cent over the past decade. Skills minister Jacqui Smith last month commissioned Skills England to provide urgent advice on which apprenticeship standards most used by under-25s are not funded at a “sufficient” level to incentivise take-up among training providers and employers. No new money was announced to fund recent band uplifts, stoking concern that further savings would need to be found within the existing apprenticeships budget, which is fully spent. Spending forecast to fall from 2027-28 DWP’s accounts show that officials expect apprenticeship spending to start dropping after 2026-27. Total planned outturn sits at £3.195 billion in 2027-28 and then £3.161 billion in 2028-29. This fall could be the anticipated effect of restrictions on level 7 and management apprenticeships. If the apprenticeships budget does reduce after next year, it raises questions about the £725 million additional funding committed over the next three years for the growth and skills levy in November’s budget. Taking the baseline for 2025-26 as the outturn figure of £3.095 billion, an additional £203 million will be added to the apprenticeships budget in 2026-27, another £100 million for 2027-28 and £66 million for 2028-29. This leaves £356 million of the £725 million unallocated. FE Week has asked the DWP to explain the apprenticeship spending forecast reduction and for details of how the remainder of the £725 million will be divvied up. Top-slice to grow If apprenticeship spending does fall, then the issue of the Treasury’s top-slice will intensify. Money raised through employer levy contributions isn’t hypothecated in the sense that it doesn’t determine the apprenticeship budget – this is separately set by the Treasury. The top-slice is the amount the Treasury keeps after collecting the funds paid by employers and dishing out budgets for apprenticeships to the DfE and devolved nations. Employer levy contributions are forecast by the Office for Budgetary Responsibility (OBR) to generate £4.5 billion in 2026-27. Of this, around £500 million will be allocated to the devolved nations. Combined with England’s £3.3 billion apprenticeship budget, this leaves an estimated £700 million not returned to the system. Levy contributions are expected to rise to £4.7 billion in 2027-28 and then to £4.8 billion in 2028-29. If the DWP’s apprenticeship spending estimates are accurate, this means the Treasury top-slice will increase to £1 billion and £1.14 billion respectively. Simon Ashworth, Association of Employment and Learning Providers deputy CEO and director of policy, said: “It is welcome that the apprenticeship programme budget has been topped up further to avoid another overspend. However, the department appears to have allocated only around half of the additional £725 million announced in the 2025 spending review. “With the levy itself generating record receipts, it would be a kick in the teeth for employers if this comes to fruition. It would also fly in the face of government priorities to deliver economic growth and tackle the NEET challenge.” He added: “Looking ahead, the figures also raise important questions about funding in future years. “Ministers will shortly enter an even more critical spending review period amid intense pressure on public finances. They must resist the temptation to hold back investment in one of the few programmes that delivers across multiple government priorities. “Given the challenges the country faces, this would be the worst possible time to shy away from maintaining a sustainable, high-quality apprenticeship system.”