A review into post-18 education says the government needs to invest £1bn to close the skills gap, while also cutting tuition fees.

The Augar Review, commissioned by the prime minister, called for maintenance grants to be brought back for students from the lowest income families. The review recommends tuition fees be cut from £9250 a year to £7500. It also said the period of time to pay back loans to cover the fees should be increased to 40 years, from the current 30 years.

The CBI has welcomed the report and its recommendations.

Josh Hardie, CBI deputy director-general, said: "The interim report of the Augar Review is an honest and thoughtful look at England's post-18 education system. Universities are a jewel in the crown of the UK's education system - rightly recognised and celebrated around the world for their excellence in teaching and research, capacity to innovate, and ultimately, ability to improve people's lives. The review must not lead to their funding being cut.

"The stark lack of technical and vocational options for people often frustrates employers. Ending the financial and political neglect of the further education sector is therefore long overdue. With further education funding squeezed significantly in recent years, the Government's Spending Review is as an opportunity to make the much-needed investment."

He also praised the call for the return of grants: "The review rightly reflects the call from business to bring back maintenance grants to cover living costs while studying. The evidence is clear that businesses that employ people from a diverse range of backgrounds are more successful. Means-tested maintenance grants will help make sure going to university or college isn't based on the ability to pay."

But he said a cut in tuition fees must not lead to a cut in funding for higher education: "A reduction in the graduate contribution, without a top-up from the Treasury, could bring into question the financial sustainability of many universities, jeopardising quality and the high-skilled talent the UK economy needs and which businesses value.

"Undermining the financial sustainability of universities would be a national tragedy, given the crucial contribution they make to skills and innovation. They are vital to meeting the government's target of spending 2.4 per cent of GDP on research and development."

Although she will no longer be in office, prime minister Theresa May says she will be urging her successor to carry out the reforms proposed in the report.