The government’s drive to boost apprenticeships through a tax on business payrolls may damage employer-sponsored degrees, education experts have warned.
Some universities fear that large companies that have traditionally funded degrees for employees may divert money from them to pay the apprenticeship levy that will be introduced next April.
A paper published on Thursday by the Higher Education Policy Institute (Hepi), a think-tank, is calling on the government to make provisions so that degree sponsorship does not suffer when the levy is introduced. One in 10 students is currently sponsored by an employer, Hepi says.
“Ministers must ensure they complement rather than disrupt existing employer-sponsored degrees,” said David Phoenix, vice-chancellor of London South Bank University, the author of the report. The university has almost 7,000 sponsored students and works with about 1,000 companies.
From April next year, employers with a payroll above £3m will pay a 0.5 per cent levy on their wage bill, providing £3bn of funding for 3m apprentices by 2020, in effect shifting much of the cost of apprenticeships from the government to the private sector.
The government says the levy will help boost the quality of apprenticeships by putting employers in control of buying the training they need.
Under the plan, a company paying £100,000 to the government via the levy, would receive at least £100,000 of vouchers to pay for apprenticeship training.
But a lack of clarity from officials, who are still working out details of the scheme, has made universities worry that many degrees will not qualify for those vouchers.
Meanwhile, officials fear that some companies could simply rebadge basic training as an apprenticeship. Hepi’s report on Thursday called for “funding parity” between apprenticeships and employer-sponsored degrees.
Steve Hill from the Open University, the UK’s biggest provider of employer-sponsored degrees, said there are also concerns that lags between paying the levy and receiving the vouchers could affect the funding for students already on courses.

“What I don’t want to see is a situation where finance directors have more of a say in training than learning and development directors,” he said.
Employers typically contribute £31,412 towards a sponsored four-year part-time degree while the government pays £2,674, Hepi says. Unsponsored three-year degrees cost the government £14,973 when the cost of subsidising loans and other grants is factored; students pay £12,561.
“They are nearly six times cheaper than regular degrees for taxpayers and students can emerge with no debt,” said Nick Hillman, a former government adviser who now runs Hepi. “Unless we are careful, this could drive out tried-and-tested forms of higher education that are already backed by employers.