The Government’s reforms to apprenticeships will cost councils at least £600m a year, the Local Government Association has claimed.

In George Osborne’s Spending Review last year he said a new apprenticeship levy, which will help fund employer apprenticeship schemes, would be set at 0.5 per cent of the payrolls of companies.

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Nick Forbes, chair of the LGA, said: “It is clear that our centralised employment and skills system is struggling to create the right apprenticeships that local residents and business need.

“Paying the apprenticeship levy and meeting national apprenticeship targets each year will add further financial pressure onto already stretched local services. It is critical that the money raised from the levy is used in the most effective way.”

He added: “This can only be achieved by giving councils the powers to play a leading role in spending it on delivering apprenticeships, driving economic growth and raising productivity.”

He announced all employers would receive a £15,000 allowance to offset the levy, and businesses with wage bills of less than £3m would not have to pay.

But the LGA calculated paying the levy will cost local authorities £207m a year, while less than 10 per cent of councils will be exempt from the charge.

The Government also set all public sector employers an annual target of ensuring 2.3 per cent of their workforce are apprentices.

However, the LGA argued the policy would leave councils facing the biggest contribution of any part of the public sector, including the NHS, by creating 33,000 new apprenticeships each year.

The figure represents an eight-fold increase and would force councils affected to find an extra £400 million in wages, it said.