The £3 billion-a-year apprenticeship levy on larger firms should be extended to cover employer-sponsored degrees, or universities risk losing students as companies respond to the levy by cutting degree spending, according to the author of a Higher Education Policy Institute report.

The report, published on 21 April and written by Dave Phoenix, vice-chancellor of London South Bank University, says that employer-sponsored degrees offer “excellent value for money to taxpayers, who pay much less of the cost [than for traditional degrees], and students, who can emerge with no debt”.

Employer-sponsored degrees “should become more central to the future provision of higher education”, given “positive implications for both higher education funding and for universities meeting the more explicit needs of industry, not to mention HM Treasury”, as well as in flexible technical education for individuals, it says.

Higher and degree apprenticeships “receive subsidies denied to employer-sponsored degrees” and the new apprenticeship levy should be extended to these courses, it recommends.

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The levy comes into effect in April 2017 at a rate of 0.5 per cent of an employer’s pay bill and will apply to firms with salary costs above £3 million, raising an estimated £3 billion a year by 2019-20 to fund new apprenticeships.

‘Better for taxpayer and students’

The Hepi report describes employer-sponsored degrees as the original “earn while you learn” courses, where employees undertake study on a part-time basis (usually one day a week). It says that there are currently 235,000 such students – equating to 10 per cent of all students at UK universities.

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Professor Phoenix, who is chair of Million+, told ̽����Ƶ there was a risk that employers could cut back on degree spending in light of the extra money they will be required to allocate for the levy.

This would mean “we end up not with an increase [of numbers of employees in education], but simply a move of activity into a differently named qualification without any real benefit for the individual, the employer, at the heart of it”, he said.

This could also deepen the existing collapse in part-time student numbers, which have been hit following the introduction of £9,000 fees, and “in terms of the people following a part-time route, you could actually see a drop in numbers if the focus goes straight across to apprenticeships”, he added.

The report says “reversing the recent decline in part-time student numbers is likely to be one result” of extending the apprenticeship levy to employer-sponsored degrees.

It also notes criticisms of some apprenticeship provision, including from Ofsted chief Sir Michael Wilshaw, who said in 2015 that “employers and providers involved in poor quality, low-level apprenticeships are wasting public funds”.

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In relation to apprenticeships, the report warns that it is “important for the future of individuals and communities that we provide access to higher-level technical education, not simply training, to ensure the development of lifelong learning”.

On funding, the report notes research carried out by London Economics showing that for employer-sponsored degrees, the taxpayer contributes more than £10,000 less over the duration of a course, while students “benefit to the tune of £6,552 each”.

It adds: “The political debate over the funding of higher education in Britain must move beyond the sterility of student fees to encompass the balance of funding between the beneficiaries.”

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Andy Westwood, associate vice-president for public affairs at the University of Manchester and professor of politics and policy at the University of Winchester, who was a member of the 2006 Leitch Review on Skills, said there was “a strong argument” about employer-sponsored degrees “offering better productivity returns because some of the learning will be on the job...Underemployment and poor skills utilisation are two significant problems in the current graduate labour market.”

Neil Carberry, director for employment and skills at the CBI, said: “To help people succeed in the future, we need to invest in skills, and more and more of these will be at higher levels.

“Employer-sponsored degrees can help meet business needs and are one example of the strong and innovative collaboration which takes place between the UK’s world-leading, diverse university sector and businesses of all sizes and sectors.

“As this report identifies, to help address skills gaps effectively businesses need the maximum flexibility as to how they can spend the apprenticeship levy – so that it supports meaningful training which leads to great careers.”

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john.morgan@tesglobal.com