‘Not the end of the road’ for apprenticeship funding restrictions, minister suggests

Skills minister Jacqui Smith has refused to rule out further restrictions that shift apprenticeship funding to young people, warning it is “not the end of the road” for reform following the recent defunding round.

Speaking to FE Week after announcing a review of apprenticeship funding bands, Smith stressed the government’s determination to “pivot” the system towards younger apprentices but stopped short of guaranteeing that future reforms would not include additional age restrictions or defunding of standards.

The Department for Work and Pensions yesterday asked Skills England to review funding bands for apprenticeships that support government priorities, with a view to increasing rates where provision for younger people is considered more expensive or risky to deliver.

However, ministers have not allocated any new money to pay for potential uplifts, prompting concern over whether employers and providers could face further cuts elsewhere in the programme.

Smith said any funding band increases would come from within the apprenticeship budget, currently set at £3.3 billion, which has been fully spent in recent years.

“We have already made some decisions that have shifted resources around,” she told FE Week, citing the decision to remove levy funding for level 7 apprenticeships for over-22s and the defunding of 16 apprenticeship standards, including popular management courses, used largely by older employees well established in their careers.

And a long-awaited level 2 administration assistant apprenticeship set to launch in August will only be available to learners aged under 25.

“The overarching objective here is to shift the apprenticeship system back towards younger people,” Smith said, noting that starts for under-25s dropped by 40 per cent over the past decade, while over one million young people are now not in education, employment or training.

No plans ‘at the moment’

Pressed on whether some apprenticeship funding bands in non-priority areas would be decreased to make way for rate uplifts, Smith insisted ministers are “not proposing at the moment to reduce funding levels for any apprenticeships”.

Asked directly whether there would be more defunding exercises similar to the recent removal of 16 apprenticeships, she replied: “Not at this moment, no.”

Smith also denied that further age restrictions are currently planned.

“We have made decisions that have restricted availability of some apprenticeship standards for over 25s … we’re not proposing seeing any more at the moment,” she said.

But after the interview and her speech at today’s Association of Employment and Learning Providers’ (AELP) national conference, Smith signalled that ministers are not finished with reforms.

“I don’t think we can continue in a way where we are coming back every year and saying we’re going to defund some standards,” she said during an audience Q&A.

But she added: “I’m not saying there won’t be further reform.

“I don’t think this is the end of the road in terms of reforms that we might want to put in place to help that shift to young people.”

The comments come amid fears that ministers will need to find further savings within the apprenticeship budget if they want to increase funding rates without securing significant additional Treasury support.

Alongside a package of cash incentives for employers to hire young apprentices, ministers have also recently rolled out foundation apprenticeships and apprenticeship units – enabling employers to use their levy funds for non-apprenticeship training for the first time.

Ministers have also set a precedent by handing £140 million of the apprenticeship budget to mayors to fund an apprentice brokerage pilot, which appears to be the first time that apprenticeship levy funds have been used to fund initiatives outside of training and incentives.

Bust budget

The government increased the apprenticeship budget by £180 million between 2025-26 and 2026-27, taking total spending to £3.3 billion.

It followed the first-ever overspend of the apprenticeship budget in 2024-25, which forced the government to inject £345 million and pushed total spending beyond £3 billion in 2025-26.

Smith could not say whether the apprenticeship budget would be increased further in future years.

“It’s hard for me to say what we’ll be able to persuade the Treasury to do,” she said.

However, she argued apprenticeships would remain a priority regardless of who succeeds Keir Starmer as Labour leader.

“Young people in particular, the opportunities offered by apprenticeships, is not an area that this government, under whichever leadership, is going to be de-prioritising in the future.”

Providers expected to ‘pivot’ to youth

Smith said the funding band review is needed because employers and providers have consistently told ministers that younger apprentices cost more to train and present greater delivery risks.

She hopes increased funding rates will incentivise providers to turn their delivery focus to those standards mostly taken by young people.

“One reason for doing this is because employers and training providers tell us that it is more expensive and more risky to train young people, so that needs to be reflected in the funding bands,” she said during the AELP Q&A.

“If we want providers to be willing to lean into that pivot that we’ve been quite clear that we’re making in the system to young people, one of the ways that we can signal that is by increasing those funding bands.”

Co-investment proof announcement

Smith also used her AELP speech today to announce that the government will no longer require training providers to prove that they have collected co-investment from employers before completion payments are paid.

Simon Ashworth, AELP deputy CEO and director of policy said: “Decoupling the link between collecting all the co-investment and releasing the completion payment to providers, is welcome news.

“The current situation unfairly penalises providers operating on tight margins, so this change should help their cash flow. It will also see a reduction in bureaucracy and administrative burden, alongside an uptick in achievement rates.”