A report published last week by the Higher Education Policy Institute (HEPI) (www.hepi.ac.uk) ‘think tank’ warns that a tax on business payrolls — designed to boost the number of apprenticeships in the UK — may damage employer-sponsored degrees. The report reveals that large companies that have traditionally funded degrees for their employees may shift money from them to pay the Apprenticeship Levy (due to be introduced in April 2017). HEPI figures indicate that one in 10 students is currently sponsored by an employer.

From April next year, employers with a payroll above £3 million will pay a 0.5% levy on their wage bill, providing £3 billion of funding for 3 million apprentices by 2020. Under the plan, a company paying £100,000 to the Government via the levy would receive vouchers worth about £100,000 to pay for training. The Treasury says the levy will help increase the quality of apprenticeships by putting employers in control of buying the training they need.

David Phoenix, vice-chancellor of London South Bank University (www.lsbu.ac.uk) and the author of the report, said: “Ministers must ensure that they complement rather than disrupt existing employer-sponsored degrees”. His university has around 7,000 sponsored students and works with about 1,000 companies.

The report quotes Steve Hill from the Open University (the UK’s biggest provider of employer-sponsored degrees), who said there are 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.

The HEPI report says that employers typically contribute £31,412 towards a sponsored four-year part-time degree, while the Government pays £2,674. Unsponsored three-year degrees cost the Government £14,973 when “the cost of subsidising loans and other grants is factored in”; students pay £12,561.

Nick Hillman, a former government adviser who now runs HEPI, said: “Sponsored degrees are cheaper than regular degrees for tax-payers, while students can emerge with no debt. Unless we are careful, this could drive out ‘tried and tested’ forms of Higher Education that are already backed by employers.”