Councils should be allowed to spend the money returned from the Apprenticeship Levy beyond the two-year deadline, according to the Local Government Association (LGA).
The call comes as new research shows that more than half of employers currently paying the levy want it replaced with a training levy.
A survey by the Chartered Institute of Personnel and Development found 53% of employers would prefer a training levy, compared with just 17% supporting the apprenticeship levy in its current form.
The LGA said the Apprenticeship Levy needs improvements in order to reach its full potential.
Cllr Sir Richard Leese, chair of the LGA’s City Regions Board, said: 'Currently the Apprenticeship Levy costs around £207m a year to local government, with a commitment that the money returned be spent within two years and against standards outlined by the Government.
'However, as the Government is aware, key standards, such as teaching and social care, for local authority workforces will not be accessible until September 2018, so is vital that councils have sufficient time beyond the two years deadline to spend the Levy against these standards to promote apprenticeships at a local level.
'The Government should use the Apprenticeship Levy review to enable local areas to pool contributions, loosen restrictions, which could include a broader range of training, ensure all underspend goes back to local areas where it is raised and fully devolve the apprenticeships system to combined authorities to direct at a local level.'