Delegates at a conference held in London organised by the national organisation for adult learning, NIACE, heard that the present 21-hour rule produced "bizarre and absurd outcomes which are inconsistent with the Government's policies for skills development".
Baroness Farrington, the newly-elevated Labour peer and former education chair of Lancashire County Council, said the scheme "sent dreadful messages" to people who had achieved a modest degree of success, and were then told to drop their course because they had been offered a part-time job as a cleaner.
The appeal for reform followed the Chancellor's budget announcements on Tuesday which listed a number of measures aimed at getting the long-term unemployed back to work, but which failed to mention this regulation.
Lady Farrington said it was time to stop the "nonsense of telling people that what they are learning on the 21-hour scheme is trivial and to defend them instead, as we would do if students on an Oxbridge course were told to do the same". She accused the Government of double standards on education.
The 21-hour rule is a concession to unemployed claimants of income support and of unemployment benefit, which allows them to study up to 21 hours a week part-time while they are seeking work.
For many, the courses are a starting point to re-embark on education and training after a lapse of many years. For others, they are a means of updating skills or learning new ones.
NIACE argues in a briefing paper presented to the conference that the Government's plans to introduce the Jobseekers' Allowance in this Parliamentary session to replace the two benefits will present an ideal opportunity to "grasp the nettle" and reform this rule.
According to Tony Uden, associate director of NIACE, the rule has "become an unnecessary battleground between education and training providers, individual unemployed people and their advocates, and Department of Social Security and employment service officials".
Mr Uden, the author of the paper, said the rule was worrying because it was not a "policy-driven attempt to allow people to explore their potential as learners to re-equip themselves for a changing labour market, but only a concession operated at the discretion of the local DSS office whose approach varied from one area to another. Moreover, confusion reigned as to which course constituted full or part-time status, particularly as colleges now offered flexible, modular studies as part of current good practice.
John Howell, chief executive of South London Training and Enterprise Council, said the cost of poor basic skills to British industry was a "staggering Pounds 4.8 billion a year".
"We have a major national problem of under-achievement. We have failed the average learner and grossly neglected those who need additional support. Such is the pace and change of work that a year out means you can become hopelessly out of date.
"It is surely perverse that we are ready to deny benefit to those who wish to use periods of unemployment to study and improve their qualifications.
"I believe it to be the case that in some countries you are penalised if you don't study for more than 20 hours a week. Now that makes economic sense, " he added.