David Willetts is President of the Resolution Foundation and is a member of the House of Lords.

Here are two uncontroversial statements of Conservative policy positions.

• Conservatives oppose burdens on employers.
• Conservatives support apprenticeships.

Getting the balance between this is rather tricky when it comes to a specific charge on employers introduced by the last Conservative Government – the Apprenticeship and Skills levy. The levy is evidence that Conservatives are even willing to put an extra charge on employers if that is to fund apprenticeships.

The levy was a response to a real dilemma.

University graduates on average earn significantly more than non-graduates during their working lives. And despite the growing scepticism about the value of higher education that is still the case. By the age of thirty graduates are still earning on average about £5,000 more than non-graduates. On one estimate that is a gap between about £30,000 compared with £25,000. The gap has narrowed a bit as the minimum wage has pushed up the earnings of non-graduates. But it is still there. Graduates use a portion of that earnings premium from their higher education to pay back for its cost. With the most recent repayment threshold of £25,000 for recent graduates that means about £500 of the £5,000 annual gain from higher education goes in loan repayments.

The exact calibration of that repayment model is of course up for lively political debate.

The interest rate is by far the most unpopular feature of the system and was removed for recent students. But overall this repayment model should be maintained. Expecting graduates to pay back out of their higher earnings is a viable and fair way of funding higher education, far better than expecting the generality of taxpayers to pay or expecting employers to pay through a levy.

The  training and skills levy is needed to pay for apprenticeships. The priority should be younger people and those working for  lower level qualifications which do not get the same kind of pay premium as graduates. The Levy is also a useful way of funding worthwhile training for NEETS even if it falls short of a full apprenticeship. Alan Milburn could and should use the levy to fund some of the initiatives we need to get NEETs into work.  That could well be a means of paying for some of his announcements next week.

The levy needs to be reformed.

It is increasingly focussed on over-25s who are already in employment: instead the priority should be young people. If instead it were reserved for the under-25 year olds that could release £1.5 billion for apprenticeships and other training for young NEETs.

I have written today to Alan Milburn suggesting a further way to release money from the levy.

It is used also used fund degree apprenticeships. This is a useful programme which is proving very popular as it does what it says on the tin and provides a high education combined with employment. However it cost over £600m in 2023-24. And there are such benefits for graduates it is wrong to make employers pay for it. It is not a good use of the levy.

Higher apprenticeships are more socially selective than the same subject studied as a higher education course. Participants are more white, more male, and less likely to be disabled. This is not wrong in itself but suggests they are not a particularly effective tool for spreading opportunity. And degree apprenticeships are so expensive that if the levy funding were diverted to non-degree apprenticeships it would significantly increase the total number of apprenticeships available.

Moreover the pay returns to degree apprenticeships look to be good. There is no reason why people graduating from higher apprenticeships into well-paid jobs should be exempt from the basic principle of graduates paying back for the cost of their higher education.

Moreover, as the funds raised by the levy are limited, the number of degree apprenticeships also has to be limited. If they were funded by fees and loans number constraints could be lifted and more people could participate.

So a shift of funding for degree apprenticeships to graduates would be a double win. It would release funding for more apprenticeships at lower education levels and other training programmes to help NEETs. And it would remove the cap on the number of degree apprenticeships so more young people could do them.

We can do more to help NEETs and use a levy on employers to deliver its greatest impact. We should not be taxing employers through the levy to pay for students to go to higher education.