Households on Universal Credit will be able to claim a bursary worth up to £4,500 a year when a young person in the family starts an apprenticeship, the Department for Work and Pensions and the Department for Education has announced.
The payment is designed to replace benefit income lost when a 16 to 18-year-old leaves full-time education for paid training. The government said it targets what it called “the small number of Universal Credit families for whom the current system disincentivises apprenticeships”, and is expected to reach a few thousand households.
The bursary will be paid from a £30m pot funded through the growth and skills levy, which applies to employers with annual pay bills above £3m. The government said the bursary and free training for under-25s are being funded through the £1bn of additional investment in the levy announced in May. The final amount of the bursary will be confirmed later, it added.
It follows a report from the Social Security Advisory Committee, published on 23 April, which found that the benefits system was producing what it called “perverse effects” on post-16 choices. The committee said benefit losses when a child starts an apprenticeship range from around £17 to more than £330 a week, depending on household circumstances.
The committee found that a single parent with a disabled child could lose up to £340 a week in benefits, against an expected apprenticeship salary of £258 a week. Because apprenticeships are classed as paid employment, parents can lose Child Benefit and elements of Universal Credit, while parents of young people who stay in education continue to receive support.
Dr Stephen Brien, chair of the Social Security Advisory Committee, said: “The social security system is not neutral in the choices young people make at 16. In its current form, it can penalise families when young people take up apprenticeships, even though this is a route that government actively encourages.”
Work and Pensions Secretary Pat McFadden said: “By providing bursaries to those who need them most and fully funding apprenticeship training, we are making sure cost is not the reason someone misses out.”
For employers, the bursary sits alongside measures with firmer dates. From 1 August the government will fully fund apprenticeship training for all eligible under-25s, extending an offer first set out in December’s £725m apprenticeship reform package. From October 2026, smaller firms will receive a £2,000 hiring bonus for taking on an under-25 apprentice. The government said SMEs hiring young apprentices can access up to £8,000 in support, and that National Insurance contributions relief applies to apprentices under 25.
The government said the measures should deliver 50,000 new youth apprenticeships by the end of this Parliament. It is also investing a further £287m to create more than 22,000 additional places across 87 college and post-16 projects in England.
Official figures show more than one million people aged 16 to 24 in England are not in education, employment or training, around one in eight. Alan Milburn’s review of youth inactivity warned that one in six could be Neet within five years without action.
Prime Minister Andy Burnham said he was “on a mission” to reduce Neet numbers. “The trend is rising at the moment, so the first thing I’ve got to do is to stop that rise,” he said.
Helen Whately, the shadow work and pensions secretary, said: “I’m glad Burnham agrees: apprenticeships are a good thing, and we need more of them.” She said the plan was “uncosted” and that it was “spending money already committed elsewhere. So, either it is another unfunded announcement, or Andy Burnham is not being straight with us about his plans.”
Simon Ashworth, deputy chief executive of the Association of Education and Learning Providers, said: “By tackling the household benefit trap, more young people will be able to choose an apprenticeship based on their ambitions rather than their family’s finances.”
Amy Ingham
Amy Ingham is a reporter at Business Matters, covering UK business news with a focus on breaking news, business policy, late payments and insolvency. She joined the magazine in 2026 after completing the NCTJ Diploma in Journalism at Harlow College’s journalism school. Her recent reporting includes British Steel’s nationalisation and its impact on SME suppliers, the decline in late payments by large firms, and Insolvency Service director disqualifications. Reach her at aingham@cbmeg.co.uk.
