Ministers have been presented with a series of concerns that threaten to "undermine" the government's £1.4bn apprenticeships policy, including claims that public money is paying for the rebadging of existing jobs into apprenticeships at supermarkets, a leaked document seen by the Guardian shows.

Statistics released showed an increase to 442,700 of new apprenticeships in the last year – 163,000 more than the previous year – and David Cameron praised the policy this week.

But George Osborne is understood to have reprimanded Vince Cable, the business secretary, over his stewardship of the programme, which is a major part of the government's plan to tackle youth unemployment.

The document, from Cable's department, written before the apprenticeship figures were published, admits that some apprentices are already existing employees, and that the biggest increase will continue to be among those over 25.

The chancellor is understood to be anxious about the low number of 16- to 18-year-olds among the increased numbers of apprentices, and that the largest increase is in low-skilled placements.

The document admits: "Older learners [are] a key reason why a much larger number of starts could be achieved in Academic Year 2010/11."

Only 11,000 of this year's new places have gone to 16- to 18-year-olds – less than 7% of the total. The number of new apprentices under 25 accounted for just 16% of the figures for this year.

The leaked document also accurately predicted that the sharpest increase in apprentices would be at intermediate level 2 – lower than the level 3 which Cameron cited at prime minister's questions on Wednesday and which involves the apprentice learning a craft.

Cameron told MPs: "We want to make sure apprenticeship schemes are aimed at young people who need work and also aimed at the higher level – people going on to get degree-equivalent qualifications, so it is not seen as a second best."

But in a meeting of cabinet ministers last week, Osborne ordered Cable to overhaul the programme before his autumn statement on 29 November. The chancellor is keen to continue to give the programme prominence but is concerned that the policy may be compromised. "He thought it was a rare piece of good news, but it's turning out to be a con," said an ally.

The government believes apprenticeships can alleviate the crisis in youth unemployment. In their symbolic joint press conference after the elections in May – meant to illustrate common purpose after the bruising election campaign – Cameron and Nick Clegg described an increase in the number of apprentices as their remedy for the almost 1 million young people out of work.

Criticised for scrapping initiatives including the education maintenance allowance that the Lib Dems fought to keep, Cameron and Clegg now push apprenticeships as their solution to youth unemployment, to remedy the skills shortage of the workforce as well as rebalance the economy.

To that end the chancellor gave the policy a real terms increase in the comprehensive spending review in 2010, ploughing in new money that will be £250m a year by the end of this parliament. According to the Department for Business website, the budget for apprenticeships will increase to more than £1.4bn in 2011-2012.

But in discussions over the past fortnight senior officials have described politicians' claims about the high apprentice numbers as "dishonest" as they do not reflect the actual demographics of those involved.

The government document acknowledges that problems of quality had been raised. in diminishing of quality has had been raised with them. "Growth review consultees have registered concerns about the quality of some apprenticeships, focusing in particular on the intermediate level dominated expansion, the value of some shorter apprenticeships and the increasing number of existing (older) employees in the programme." It reports that the department has been warned "not to undermine the apprenticeship brand".

One critic is reported as telling officials: "To badge some of the lower end training as apprenticeships misleads learners and employers as to its value."

But while the document defends the inclusion of existing employees and older learners, it says: "If we remain committed to calling less substantial training activities an 'apprenticeship', it is important to be aware of the impact this may have on public perceptions of the brand.

The report adds: "Anecdotal feedback suggests some employers are already deeply concerned that there are courses being delivered under the 'Apprenticeship' banner which more resemble provision [of previous government, criticised by Lib Dems and Tories] and have signalled that they may distance themselves from the programme were this trend were to continue." A Department for Business spokesperson said: "Clearly this is something we want to stay on top of. John [Hayes, the minister responsible for apprenticeships] has today written to the National Apprenticeship Service to ask them to scrutinise the quality and make sure we maintain the skills level."

In an interview with BBC Radio 4 last month, Norman Pickavance, head of Morrison's human resources, said 10% of their 135,000 apprentice population are under 24. In June, the further education magazine FE Week reported that Morrisons started more than 18,000 25+ level 2 retail apprenticeships in 2010-11 and nearly all were taken up by existing employees.

Julian Bailey of Morrisons told the magazine: "We think apprenticeships are important for new and existing staff as a way of developing and enhancing skills."

While the supermarkets are not paid for those members of staff turned into apprenticeships, third party providers are paid by the government to persuade businesses to do so.