Big businesses that pay the apprenticeship levy should no longer be able to take on degree-level apprentices with their levy funds, the Association of Employment and Learning Providers (AELP) has said.

Instead, the AELP wants the government to change the rules to incentivise small- and medium-sized enterprises (SMEs) to take on younger apprentices on lower-level courses.

Earlier this month, the National Audit Office warned about the long-term sustainability of the levy because of the large number of more expensive, higher-level apprenticeships being started.

Read more: DfE unlikely to meet apprenticeship target, says NAO

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Background: Degree apprenticeships: What you need to know

The AELP proposes that no levy funding should be available for level 6 and 7 apprenticeships, irrespective of whether the employer pays the levy or not. Funding for these degree-level apprenticeships should instead come from the employer and/or the apprentice via a student loan.

AELP chief executive Mark Dawe said despite being an “enthusiastic supporter of degree apprenticeships”, he felt urgent action was needed.

He added: “Unless the government decides that it wants to levy more money from employers, the apprenticeship budget will soon be exhausted and therefore a new way of funding the highest level apprenticeships has to be found.”

SMEs are ‘bedrock of apprenticeships’

A spokesperson for AELP said they believe that the appeal of degree apprenticeships will not diminish if a change is made, because there were already 135,000 employer-funded degree apprenticeships prior to the levy’s introduction. Degree apprentices will also earn a wage, which makes it an attractive alternative to a traditional degree, they added. Instead, they argued, the government should:

• Fully fund level 2 and 3 apprenticeships
• Return to the pre-levy funding band uplift for the apprenticeships of 16- to 24-year-olds
• Set a guaranteed minimum budget for non-levy SME employers of at least £1bn per annum irrespective of whether there is enough unused levy funding to fund this.

Mr Dawe added: “The government seems to have lost sight of the importance of SMEs offering apprenticeships when they have been the bedrock of the programme over the last two decades.

“They are the ones who have consistently been making a positive impact on social mobility and productivity by investing in fantastic apprenticeship opportunities at all levels of the programme, especially for young people.”