England’s apprenticeship budget was topped up with an extra £43.2 million halfway through this financial year, underscoring mounting financial pressures and intensifying the government’s drive to tighten control of the system.
Treasury documents published as “supplementary estimates” show the 2025-26 apprenticeship budget increased from £3.075 billion to £3.118 billion.
While the £43 million represents just a 1.4 per cent uplift, the mid-year adjustment reinforces warnings that the system is operating on increasingly fine margins. It follows the first-ever overspend of England’s apprenticeship budget in 2024-25.
As FE Week previously revealed, employer anxiety is growing over potential cuts to popular management training routes and progression pathways as ministers scramble to contain costs.
Level 7 apprenticeships have already been defunded for learners aged 22 and over from January. Further hard choices are expected, particularly as ministers expand levy flexibility to fund shorter courses under the rebadged growth and skills levy from April.
Imran Tahir, senior research economist at the Institute for Fiscal Studies, said the government faces “a delicate balancing act” to keep the apprenticeship budget under control.
“In 2024-25 it was overspent for the first time, and it looks like the coming years will be challenging,” he told FE Week.
“The government has taken steps to rein in spending – most notably by restricting higher-level apprenticeships, which tend to be longer and more expensive. However, at the same time, ministers have broadened what levy funding can be used for as part of the growth and skills levy, which is likely to increase demand on the budget.
“Where the budget ultimately settles will matter, as further overspends would either require additional cash or force savings elsewhere.”
Treasury continues to retain sizeable share
The total volume of apprenticeship starts has remained static for the past four years, but the increased budget pressure has been caused by soaring numbers of higher-level apprenticeships that are more expensive to deliver than lower-level programmes.
The apprenticeship levy is forecast to generate £4.4 billion from employer contributions this financial year.
After around £500 million is distributed annually to the devolved nations, and with England’s revised 2025-26 apprenticeship budget now standing at £3.118 billion, the Treasury is effectively retaining an estimated £780 million difference between levy receipts and apprenticeship spending.
England’s allocated apprenticeship budget for 2024-25 was £2.729 billion and was given a cash injection to surpass the £3 billion mark for the first time this year.
The government has refused to share what the total apprenticeship budget for 2026-27 has been set at.
Stephen Evans, chief executive of the Learning and Work Institute, said this year’s increase in the budget for England broadly tracks rising levy revenues but does not fundamentally change the wider picture.
“It’s good that the apprenticeship budget is increasing, though this is broadly in line with growth in the amount the levy raises; the Treasury is still keeping over £700 million of levy funds above what it spends,” he said.
Evans added that recent policy decisions – including limiting level 7 funding to younger learners and scrapping the 10 per cent top-up for levy payers – will reduce the risk of another overspend. But he warned this fiscal move alone would not reverse the decline in opportunities for young people at intermediate level.
“For that we need a growing economy, to limit the rising costs employers are facing, make it easier and provide more support to take on apprentices, and increase the incentives for employers to do this,” he said.
“Otherwise we risk a steady-as-she-goes approach focused on sticking to a budget rather than going for the growth that’s desperately needed when almost one million young people are NEET.”
November’s budget saw the chancellor announce an extra £725 million over the three remaining years of this Parliament to be injected into the apprenticeship system, but £140 million of this will be going to mayors to help connect NEETs to local employers.
Some of the additional cash will also go towards fully funding apprenticeships for under-25s in small and medium-sized businesses.
NIC relief bill surges
Separate Treasury figures show relief on employer national insurance contributions (NICs) for apprentices under 25 is projected to rise sharply – from £370 million in 2024-25 to £570 million in 2025-26.
Experts said they would be surprised if the foregone employer NICs subsidies for under-25 apprentices were counted against the apprenticeship budget as they are sufficiently distinct policy levers.
The Treasury was approached for comment.
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