The Association of Learning Providers has written to Ruth Kelly, the Education Secretary, to protest about the post-16 funding arrangements for 2005-6. It understands that apprenticeships for 16 to 18 year-olds will be frozen - in effect, a 2.5 per cent cut when inflation is taken into account - and says there may be a 6 per cent cut for the over-19s, representing a third of apprentices.

The ALP says this equates to an average budget cut of 2.2 per cent per training body and that further losses of income will be suffered as a result of plans to increase the proportion of subsidies based on results - from 10 to 25 per cent.

An ALP spokesman said: “We want to know why the Government is having difficulties funding something in which the Prime Minister and Chancellor have invested so much political capital. They both talked about it throughout the election, yet we find ourselves in this position.”

The Learning and Skills Council says the ALP is making assumptions about the funding arrangements from what it has gleaned during talks.

The quango says the details of next year’s funding for work-based learning will be published next week.

In a separate dispute, the ALP’s lawyers have threatened the LSC with legal action if the quango refuses to reverse a decision to withdraw some of the funding from apprentices recruited before May.

The ALP says individual training providers could have a case for breach of contract. It says there has been a 50 per cent cut in the funding of existing apprentices.

The LSC denies this and insists all training outfits have been paid the agreed amount.

It argues some firms have provided more training than they were contracted to do, and that savings could be made by reducing this.