Nearly 60 per cent of work-based training for young people is inadequate, inspectors said this week.
Only 31 per cent of foundation modern apprentices, and 35 per cent of advanced MAs, complete the whole framework.
David Sherlock, chief inspector of the Adult Learning Inspectorate, said he had to be "severe" in presenting his first annual report.
"It is impossible to gloss over these figures. There are big problems causing serious concern."
A significant cause of poor achievement of MAs was the failure by learners to gain key skills qualifications. Some employers left them to the end of programmes or ditched them altogether.
"I have talked to inspectors who were outraged when they witnessed a learner desperately trying to fill in a form while the provider was just standing by."
He said key skills were a barrier rather than a pathway to success for young people. Their delivery should be reconsidered and put "up front" in programmes provided at skills centres, outside the apprentice framework. They should be funded and taught separately, he said.
Mr Sherlock's report identified 24 providers which were world class. He also said that grades for training in the New Deal had improved steadily since inspections began in 1999, with provision satisfactory or better in 90 per cent of the gateway programmes.
But he was attacked by Aidan Relf, of the Association of Learning Providers. He said Mr Sherlock's negative report was being given just one day after the Learning and Skills Council had launched a multi-million-pound advertising campaign to promote modern apprenticeships. "So what is the joined-up message?"
The association said many of the apprentices did not complete their course because they had moved on to better jobs to complete their training. Others completed their training but were prevented by their employers from carrying out what they perceived as unnecessary and ill-conceived separate tests at the end.
All these people had received high-quality training and were contributing to the economic prosperity of the country. The inspectors' report was a "travesty", they said.
Mr Sherlock rejected the criticism. "I am a chief inspector, I am not in the marketing business. We are here to celebrate the good things when we find them. There is just not enough of it."
The Association of Colleges, however, thought the inspectorate and the Government could have gone further. "We are surprised at this love-in. Sixty per cent of training providers have been found to be inadequate. That's about 300,000 people being seriously failed by the system," said a spokeswoman.
"There was very little over-concern by the minister. If colleges had been in this situation we would have been hammered."
Margaret Hodge, lifelong learning minister, said she expected the LSC to take tough action against inadequate providers. Of 31 which were found to be poor, over half had had their contracts withdrawn.
The CBI described the report as a "wake-up call to the Government and others". Margaret Murray, the CBI's head of learning and skills, said: "UK employers already spend pound;23 billion on training each year, some of it just to get their employees up to basic standard.
"Employers expect the education and training system to deliver young people whom they would be keen to recruit and retain, but parts of the system are failing.
"There are many examples of excellence in the apprenticeship scheme but they need to be much more widespread."