The Chancellor, John Healey, has delivered his first Budget. Did the Budget of 28 October 2026 change the levy you plan around, or the money you can draw on for apprenticeships and AI?
Budget 2026: the levy, apprenticeships and AI training for employers
By James Cotton · Last updated · Sources checked · 11 min read
Part of our topic guides on Government-Funded Data & AI Training and AI Skills for Business.
By James Cotton, Founder, iO-Sphere
The levy in the Budget document
The document is HM Treasury's Budget 2026, House of Commons paper HC 726, laid on 28 October 2026; paragraph numbers here are the PDF's, since the gov.uk web version prints none and numbers its chapters one higher.
The Growth and Skills Levy (formerly the Apprenticeship Levy) is paid through payroll by employers whose pay bill is above a threshold; it is collected across the UK, and the account a levy payer spends from covers apprentices in England only.
The Budget holds no measure on the levy's rate, threshold, allowance, fund expiry, top-up, co-investment or funding rules, and the word "levy", which occurs 16 times, names another levy each time, such as the Climate Change Levy or the Soft Drinks Industry Levy, except in paragraph 5.22's "non-levy paying employers".
Table 6.1, the Budget's policy decisions, and Table 6.4, earlier measures taking effect from 29 October 2026, carry no apprenticeship levy row. Their only apprenticeship rows are row 22, local apprenticeship services, and row 72, the Spring 2026 youth package. The Policy Costings hold no apprenticeship levy or apprenticeship-funding costing.
The Office for Budget Responsibility (OBR) still carries the receipts in its Economic and fiscal outlook: October 2026, under its own label, "Apprenticeship levy": £4.6 billion in 2026-27, rising to £5.5 billion in 2031-32, across the UK. Its chapter on policy measures holds no apprenticeship measure.
The apprenticeship funding rules for August 2026 to July 2027 cover apprenticeships starting from 1 August 2026 to 31 July 2027, and version 3, published by the Department for Work and Pensions on 29 July 2026, is still current. The levy changes in force from 1 August 2026 came from the previous government's Budget of 26 November 2025, at paragraph 3.115.
The Fiscal Devolution Roadmap published with the Budget contains no apprenticeship, skills-fund or Growth and Skills Levy content, so devolution moves no levy or skills money. The Budget's local money comes as separate measures.
Employer National Insurance
Paragraph 2.29 states "no increase to the headline rates of income tax, National Insurance contributions or VAT", and the Budget holds no measure on the secondary threshold (the pay above which an employer pays National Insurance on an employee), the Employment Allowance (which comes off an eligible employer's bill) or the apprentice upper secondary threshold (the pay up to which an employer pays none on an apprentice under 25).
The rates and thresholds in force therefore stand. The decision table's only National Insurance line, Table 6.1 row 77, is a pre-announced measure that brought the UK-India convention into force from 15 July 2026, for employers moving staff between the two countries.
Two later changes were made by the previous government at its Budget of 26 November 2025, and Table 6.4 still lists them: the secondary threshold held at its level from April 2028 to April 2031, and, from 6 April 2029, a cap on the National Insurance relief for salary-sacrificed pension contributions. Budget 2026 says nothing on either.
The Immigration Skills Charge is a separate charge from the levy, and the Budget changes its tax treatment: from 28 October 2026, an employer's payment of it, or of a Certificate of Sponsorship fee, is not treated as a taxable benefit in kind (6.15).
Budget 2026's measures for employers, by paragraph
The table holds the Budget's apprenticeship, training and AI-skills measures that reach employers or their staff, in paragraph order. Money is shown as each source prints it, beside its paragraph or Table 6.1 row, with Table 6.1's negative spending figures given as positive sums. Where two sums differ for one measure, as paragraph 6.125 and row 22 do for local apprenticeship services, both appear; the Budget does not reconcile them.
| Paragraph | Measure, and who it reaches | Money as printed |
|---|---|---|
| 4.118 and 6.129 | At least 3% of the workforce on large government construction and infrastructure projects to be apprentices ("a target" at 4.118, "will require" at 6.129); contractors on those projects | None printed, and no Table 6.1 row |
| 4.135 and 6.101 | Local AI partnerships, starting with West Yorkshire, South Yorkshire, and York and North Yorkshire; small businesses and workers there | £30 million (4.135); £15 million from 2026-27 to 2029-30 (6.101) |
| 5.22 | The Spring 2026 youth package, confirmed: the Youth Jobs Grant, the Jobs Guarantee extended to ages 22 to 24, and the apprenticeship hiring payment for non-levy employers; employers taking on young people | Table 6.1 row 72, for the whole package: £290 million in 2027-28 and £375 million in 2028-29 |
| 6.125 | Local apprenticeship services expanded from 7 to all 14 Mayoral Strategic Authorities in England; employers and 16 to 24-year-olds there | £100 million across 2027-28 and 2028-29 (6.125); Table 6.1 row 22: £50 million in 2027-28 and £70 million in 2028-29 |
| 6.127 | The Union Learning Fund re-established in England; learning projects that unions put forward | £15 million a year from 2027-28 (6.127); Table 6.1 row 73: £20 million in each of 2027-28 and 2028-29 |
Local apprenticeship services in the mayoral areas
The Budget's one new apprenticeship spending measure is paragraph 6.125: £100 million across 2027-28 and 2028-29 to expand Mayoral Apprenticeship Brokerage Pilots from 7 to 14 Mayoral Strategic Authorities across England, the areas with a directly elected mayor, so that "all current mayors" can give tailored support to young people and employers, "particularly SMEs". The Budget names no department to deliver it.
Its Executive summary and paragraph 5.22 call them "local apprenticeship services". Brokerage, as the Department for Education describes it, is locally tailored support to help employers create apprenticeship opportunities and navigate the apprenticeship system, and to connect young people with apprenticeship vacancies.
On 28 September 2026 the Chancellor, John Healey, announced the expansion to all 14 existing Mayoral Strategic Authorities. The Treasury's story that day said the money "doubles the number of areas", so that mayors "can help provide local apprenticeship services across England from Spring 2027".
The Department for Education's further education update of 7 October 2026, the source of that description, names the young people as those aged 16 to 24, particularly those who are NEET (not in education, employment or training) or at risk of becoming NEET.
It also names the seven first-wave authorities: Greater London Authority, Greater Manchester Combined Authority, Liverpool City Region Combined Authority, South Yorkshire Mayoral Combined Authority, Tees Valley Combined Authority, West Midlands Combined Authority and West of England Mayoral Combined Authority. They are "expected to begin delivery in early 2027", and further areas are "expected to join from spring 2027", so no service is delivering yet.
The pilots were opened under the previous government. The Department for Education's update of 1 July 2026 opened them to Mayoral Strategic Authorities, with the Department for Work and Pensions having allocated up to £140 million for delivery costs, apprenticeship training and assessment.
Apprentices in government contracts
The Budget's procurement paragraphs are national, and they reach only firms that build for the government or bid for its contracts, which is why, for every other employer, what the Budget added is local.
On large government construction and infrastructure projects, paragraph 6.129 says the government "will require at least 3% of the workforces" to be apprentices, and paragraph 4.118 calls it "a target of at least 3%". The Budget gives no definition of "large government projects", no start date, no enforcement route and no owning department, and Table 6.1 has no row for it.
Paragraph 4.117 points to new guidance on social value, the part of a bid judged on its "commitment to creating high-quality jobs, tackling local skills shortages, and supporting young people into work". That guidance was added on 28 October 2026 to the Cabinet Office's PPN 026: The Social Value Model, a Procurement Policy Note first published on 5 August 2026.
It covers central government departments, their executive agencies and non-departmental public bodies (others "may wish to adopt" it), on tenders published from 1 January 2027 of £1 million or more including VAT under the Procurement Act 2023. The social value weighting is at least 10%; from £5 million, at least 20% and a KPI. Its skills outcome lists apprenticeships and work placements among "illustrative examples"; each authority chooses its outcomes.
A new National Procurement Policy Statement, to be laid in Parliament in March 2027, will prioritise "delivery of high-quality jobs, fair pay and skills opportunities, including pathways for young people" (4.115).
The Data Centre Covenant, at paragraph 4.137, asks data centres to "create jobs and invest in paid apprenticeships and training places": all are "encouraged" to meet its tests, and strategic data centres seeking enhanced government support are "required" to.
The AI money
The Budget calls AI "an age-defining general purpose technology" and repeats the OECD's estimate (June 2025) that it could add "between 0.4 and 1.3 percentage points" to annual UK productivity growth over the next decade (4.126). The OBR's central forecast is for AI to add 0.2 percentage points a year to productivity growth by the medium term, and "the scale and timing of any effect is highly uncertain".
At this Budget, the government "has invested over £700 million" in AI (4.128) to strengthen security, resilience and sovereign capability, accelerate productive adoption, launch a Data Centre Covenant and build British capability in AI hardware. The Budget prints no breakdown that sums to that headline, so each line below stands on its own figure.
Paragraph 4.135 holds the one AI measure for skills in local businesses: "£30 million to pilot local partnerships", starting with West Yorkshire Combined Authority, South Yorkshire Mayoral Combined Authority, and York and North Yorkshire Combined Authority. Building on Barnsley, which it calls "the UK's first Tech Town", they will work across local councils to "help small businesses grow, equip people with the right skills, and transform local public services".
The Treasury's announcement of 24 October 2026, a news story, described "local AI partnerships with Mayoral Strategic Authorities" that bring councils, businesses, universities, colleges and other partners together to "provide workers with AI skills". That wording is the announcement's; paragraph 4.135 names the three Yorkshire authorities and does not say Mayoral Strategic Authorities.
Paragraph 4.135 also gives an additional £23 million to the AI Economics Institute, "the world's first government-backed research institution dedicated to analysing the economic impacts of AI" in the government's own description, to examine how AI is affecting productivity, growth, jobs and living standards.
Separately, the 24 October announcement promised "£10 million per year to lead the UK's work in understanding how AI will reshape jobs and industry"; the Budget document prints no such line, and the announcement names no receiving body.
AI security ("around £500 million", 4.129), Sovereign AI investment, GovAI and a Civil Service AI transformation fund, a cross-government AI Pathfinder Fund, an Edinburgh chip design academy, a Manchester centre for cyber and AI security expertise and an AI Challenge Prize for public-service challenges pay for security, government, specialist capacity and investment in AI companies; none is a fund an employer draws on to train its own staff.
The Union Learning Fund, and AI training elsewhere
The one national training fund in the Budget is at paragraph 6.127: the government "will re-establish the Union Learning Fund in England", with £15 million a year from 2027-28 for projects put forward by unions "to support learning and training among workers, supporting upskilling to the changing needs of the economy". The Budget gives no delivering department, application route or start month.
The link to AI comes from the Treasury and the Chancellor. Announcing the fund on 28 September 2026, the Treasury's story said it "will help British workers harness AI rather than be outrun by it", and that employees "will not need to be union members to benefit"; in the Budget speech, the Chancellor set it beside a new AI Challenge Prize.
The story said the fund will help people "access training through their employers and existing skills programmes", with support ranging "from essential English, maths and digital skills, to training for jobs in growing industries", and that it "previously generated 180,000 learning opportunities every year".
Beyond the Yorkshire partnerships and union learning, an employer funds AI training through the routes it had before 28 October. One is a funded apprenticeship: AI runs through our whole apprenticeship line, Levels 3 to 5, and with weekly coaching online, an apprenticeship with us can be taken anywhere in England. The other is its own budget, which can buy our team training for whole teams outside the levy.
This year's actions, by situation
- If you are planning apprenticeship starts up to 31 July 2027, plan the levy spend on version 3 of the funding rules; budgets beyond 2028-29, skills included, wait for the spending review in 2027 (paragraph 2.3).
- If you are in one of the seven first-wave mayoral areas, a local apprenticeship service is expected from early 2027; in the other mayoral areas, from spring 2027.
- If you are hiring a young person, check which confirmed scheme suits the hire: the Youth Jobs Grant, the Jobs Guarantee or the apprenticeship hiring payment.
- If you bid for central government contracts, tenders of £1 million or more published from 1 January 2027 weight social value, where apprenticeships can score; on large government construction or infrastructure projects, an apprentice requirement of at least 3% (6.129) is coming, with no start date.
- If you are planning AI training in West Yorkshire, South Yorkshire, or York and North Yorkshire, look to the local AI partnership.
- If your staff need essential English, maths or digital skills, union learning projects funded from 2027-28 can reach them whether or not they belong to a union.
Frequently asked questions
Is the £100 million for local apprenticeship services levy money?
The Chancellor, John Healey, said in his Budget speech that it is "funded from savings in welfare fraud and error". The Budget document names no funding source for paragraph 6.125, and the Treasury's story of 28 September 2026 said the brokerage expansion and the Union Learning Fund are "fully funded by savings found by the Department for Work & Pensions".
Did the Budget change apprenticeship funding bands?
The phrase "funding band" does not occur in the Budget, which says nothing about bands. A funding band is the most that apprenticeship funding pays towards a standard's training and assessment. Under the previous government, the then skills minister sent a letter to Skills England about funding band reviews on 22 June 2026. Skills England publishes each standard's band, and that is where to check one.
Will it fit your cohort?
Tell us your cohort size and what your people need to be doing by next year, and we will say whether we are the right shape, including when we are not.