Key takeaways
- What was said. Milburn told the FT his review is likely to recommend scrapping the levy and replacing it with something focused on young people. Skills minister Jacqui Smith told the Lords on 17 September "there may well be further changes" and the aim is "to pivot it to young people".
- What is least at risk. Anyone already on programme. Recent funding changes have let existing apprentices complete on the rules they started under, although transition arrangements for any Milburn-led reform have not been published.
- Who is exposed. Employers who use the levy mainly to fund senior, already-qualified staff on Level 6 and 7 programmes. That is the use Milburn keeps naming.
- Who is not. Employers using apprenticeships for under-25s, early-career hires and people moving into new roles. The signals so far, including the co-investment exemption already in force, favour that group.
- What to do. Check what levy expires in the next 12 months, start planned apprentices before the new year, and get any senior-level starts in now. Do not wait for the White Paper to make decisions you can make today.
Every time the levy makes the front pages, the same thing happens in HR and finance teams: planned starts get pushed back "until we know". It is an understandable instinct and, based on how every previous change has actually been implemented, a costly one. So let us separate the three things that are being reported as one.
What has actually been said
Alan Milburn, to the Financial Times, reported 11 September
"I haven't really found an employer who's saying the apprenticeship levy is really working for them, and it's not really working for young people."
Personnel Today reports Milburn said his final review was likely to recommend scrapping the levy, arguing it has become a £4bn-a-year tax on employers that should be replaced by a system more closely focused on young people.
Alan Milburn, to the Mirror, 16 August
"Apprenticeships were built to be a direct route into work for young people. All too often they are used to upskill existing, already qualified employees."
Jacqui Smith, skills minister, House of Lords, 17 September
"There may well be further changes to the growth and skills levy, but we have been clear that we want to pivot it to young people."
Asked by Lord Johnson how the government would replace the roughly £4bn the levy raises if it were abolished, Smith said he knew "you cannot necessarily believe everything that you read in the newspapers". She did not rule it out.
Three things follow. First, this is a recommendation that has not yet been made, to a government that has not yet responded. Second, the direction of every statement is the same: young people. Third, the minister's non-denial is notable but so is the number she was asked about. A government facing higher borrowing costs and defence spending is not going to give up £4bn of employer contributions without replacing it with something, and Milburn himself told the FT that his plans need significant upfront spending before any savings appear.
Nothing that has been said touches an apprentice who is already on programme, or one who starts before new rules take effect. The uncertainty is about what the levy becomes, not whether your current commitments are honoured.
The timeline
Now
Milburn's final report
Due "in a matter of weeks" per the CIPD, which has already responded with a call for a 20,000-place apprenticeship guarantee for 16 to 17 year olds.
28 October
Budget
The 28 October Budget did not announce any levy changes; the government will respond to Milburn before the end of 2026, with a White Paper early in 2027. Budget 2026 (GOV.UK).
After that
Consultation and legislation
Abolishing or replacing a levy set in primary legislation is a Finance Act matter. Realistically, no change to what employers pay before April 2027 at the earliest, and any new system later than that.
Throughout
Existing apprentices complete
On the rules they started under, if current policy holds. Recent changes have protected existing learners; transition rules for any reform are not yet published.
Why the money keeps drifting away from young people
Milburn's diagnosis is not new, and the numbers behind it are not in dispute.
130k → 75k
Under-19 apprenticeship starts, 2014/15 to 2024/25
Milburn interim report, May 2026
57% → 49%
Share of starts going to under-25s over the same decade
Reported by the Mirror, August 2026
1.01m
16 to 24 year olds not in education, employment or training, January to March 2026
ONS, the highest for over 12 years
The levy did what levies do: it gave large employers a pot of money and let them decide how to spend it. Many spent it on the people already in the building, on management programmes and degree-level qualifications for staff who were never going to be NEET. That is a rational use of a pot you would otherwise lose, and it is exactly what the last two years of reform have been chipping away at: the 12-month expiry, the defunding of 16 standards including popular management programmes, the Level 7 funding withdrawal for most learners aged 22 and over, and from this August a 25% co-investment for over-25s when a levy pot runs dry while under-25s stay fully funded.
Every change since 2024 has moved money from older, already-qualified learners towards younger ones, without ever touching a learner already on programme. Milburn's recommendation, whatever its exact form, is the continuation of that pattern, not a break from it. If you plan on that basis you will be right far more often than wrong.
Who is exposed, and who is not
| If you use apprenticeships for | Exposure | Why |
|---|---|---|
| Apprentices already on programme, any level, any age | None | No change in a decade has removed funding from a learner mid-programme. Nobody has proposed one. |
| Under-25s starting this year | Very low | Already exempt from co-investment. Explicitly the group ministers and Milburn say the system should serve. A start now completes on current rules regardless. |
| Existing staff aged 25+ moving into a new role, Level 3 to 5 | Low to moderate | Funded today; already subject to 25% co-investment if your levy is empty. Any new system is likely to keep some route for this but may make it dearer. Start now and you complete on today's terms. |
| Senior staff on Level 6 and 7 apprenticeships | Real | This is the use Milburn names in every interview. Level 7 is already defunded for over-21s. Level 6 for senior employees is the obvious next target. If it matters to you, start now. |
| Non-levy SMEs | Low | You do not pay the levy, so its abolition does not hit you directly. Under-25s are fully funded up to the funding band maximum. The £2,000 hiring payment for young apprentices is government policy the review is likely to build on, not remove. |
What to do now
Updated 3 November 2026. This post was first written before the 28 October Budget. The Budget did not confirm any levy changes. It says the government will respond to the Milburn review before the end of 2026, with a White Paper early in 2027. We will update this post when that happens. The steps below still apply. Budget 2026 (GOV.UK).
Check what expires
Do: pull your apprenticeship service account and list every levy payment that falls out under the 12-month rule between now and next September.
Why: that money stays in your account only until the clock runs out, whatever Milburn recommends. Unused funds then leave your account and pay for other employers' apprentices instead of yours. Use them now to train your people through TESS.
Bring forward, do not push back
Do: any apprentice you were planning to start "in the new year" starts this autumn. Same person, same programme, earlier date.
Why: a start before any new rules take effect completes on today's rules, which are the most favourable to under-25s the system has had. Delay buys you nothing except the risk of a worse deal.
Get senior-level starts in now
Do: if you have a director or senior manager you meant to put through a Level 6 programme, do it this quarter.
Why: this is the only category where the risk of losing the funding route entirely is real and near.
Rebalance towards early-career and under-25 use
Do: look at your apprenticeship plan for 2027 and ask what proportion goes to people under 25 or new to the role.
Why: whatever replaces the levy will reward that use. Employers who have already shifted will find the new system was designed for them.
Do not treat "wait and see" as the safe option
Do: if your board asks whether to freeze starts, show them the table above.
Why: the only outcome in which waiting helps is one where the new rules are more generous than today's for the learner you have in mind. For under-25s that is close to impossible. For everyone else it is unlikely.
Where this leaves AI apprenticeships
On the right side of every signal.
Our AI & Automation Practitioner Level 4 is taken by early-career hires, by under-25s, and by existing staff moving into roles that did not exist two years ago. That is the profile Milburn describes as what apprenticeships were built for. The funding position has not changed and will not change for anyone who starts before new rules take effect: up to £18,000 from the levy, fully government-funded for under-25s at employers whose pot has run out, and 25% co-investment only for learners aged 25 and over in that situation. Our under-25 funding explainer sets out the mechanics.
If you are a levy payer whose plan for 2027 leans on senior programmes, this is the moment to look at whether some of that budget does more for the business, and survives the review better, developing the people who will actually run your AI and automation.
Send us your levy balance and your 2027 apprenticeship plan. We will tell you what expires, which starts to bring forward, and where you are exposed if Milburn gets what he is asking for. 30 minutes, no obligation, and we will say so if the answer is "you are fine, do nothing".
Book a conversation →The honest summary
- What was said: Milburn is likely to recommend scrapping the levy in its current form; the minister has not denied further changes; the direction is young people; the Budget says the government will respond before the end of 2026, with a White Paper early in 2027.
- What is safe: everyone on programme, and everyone who starts before new rules take effect.
- What is exposed: levy spend on senior, already-qualified staff at Level 6 and 7.
- What to do: spend what expires, bring starts forward, get senior starts in now, and rebalance 2027 towards under-25s and early-career use.
Frequently asked questions.
Is the apprenticeship levy being scrapped?
Not yet, and nothing has been decided. Alan Milburn, who is leading the government's review of young people not in education, employment or training, has said his final report is likely to recommend scrapping the levy in its current form and replacing it with a system more focused on young people. His final report has not yet been published. Skills minister Jacqui Smith told the House of Lords on 17 September that there may well be further changes to the growth and skills levy but that the government's stated aim is to pivot it towards young people. The 28 October 2026 Budget says the government will respond to the Milburn review before the end of 2026, with a White Paper early in 2027 and legislation later that year.
If the levy changes, will my current apprentices lose their funding?
Not on current policy. Recent changes, including the 12-month expiry, the co-investment increase and the defunding of 16 standards, protected learners already on programme: they complete on the rules they started under, and the funding rules generally apply the rules in force when an apprenticeship starts. Nothing from Milburn or ministers suggests that would change, but transition arrangements for any reform have not been published, so treat this as the current position rather than a guarantee.
Should we wait for the government's response before starting apprentices?
For most employers, there is no reason to delay a suitable start. Waiting gives you certainty about rules that might not change for a year or more, at the cost of a start you could have made now. Current policy generally funds an apprenticeship on the rules in force when it starts, and today's rules are generous for under-25s: fully government-funded, up to the funding band maximum, even when a levy pot is empty. Transition arrangements for any reform have not been published, though, so do not bring starts forward only on an assumed guarantee. If your business has levy funds expiring under the 12-month rule, waiting also means losing them.
What is the government signalling about the direction of change?
Consistently towards young people. Under-25s are already exempt from the 25% co-investment that applies to older learners when levy funds run out. Ministers say they want to pivot the levy to young people. Milburn's own words are that apprenticeships were built to be a direct route into work for young people and are too often used to upskill existing, already qualified employees. Whatever emerges, employers who use apprenticeships for early-career hires and under-25s are on the right side of it. Employers who rely on the levy to fund senior staff on Level 6 and 7 programmes are the ones with real exposure.
What should an employer do now?
Three things. Check your levy balance and what expires in the next 12 months, because unused funds are lost regardless of what Milburn recommends. Start any apprentice you were planning for this year now rather than in the new year, so they complete on current rules. And if you have senior staff you were going to put through a Level 6 or 7 apprenticeship, get them started, because that is the part of the system most likely to be curtailed.
Does this affect the AI apprenticeships TESS delivers?
Current policy generally protects anyone who starts before a change takes effect, although transition arrangements for any reform have not been published. Our Level 4 AI and Automation Practitioner is an early-career and career-change programme, taken by many under-25s and by existing staff moving into new roles, which is the profile ministers say they want to prioritise. Our funding position has not changed: up to £18,000 from the levy, fully government-funded for under-25s, up to the funding band maximum, at employers whose levy has run out, and 25% co-investment only for learners aged 25 and over in that situation.
Sources: Jacqui Smith and Lords Willetts and Johnson, House of Lords, Education and Skills Reform, 17 September 2026, as reported by FE Week; Milburn's FT interview as reported by Personnel Today, 11 September 2026; Milburn's comments on levy use and the under-19 and under-25 figures as reported by the Mirror, 16 August 2026; Young People and Work: interim report, May 2026; CIPD apprenticeship guarantee call as reported by Personnel Today, 24 September 2026; FE Week's levy investigation, 17 September 2026. The statement that the final report is likely to recommend abolition is Milburn's reported view, not a published recommendation. Our reading of what is and is not at risk is our own judgement based on how previous changes were implemented, not a statement of government policy. TESS Group delivers levy-funded apprenticeships and has a commercial interest in employers continuing to start them.