Tax breaks for employer training worth about pound;3.7 billion should be placed under more scrutiny to ensure they are not being wasted or exploited as accounting loopholes, the adult education body Niace has said.

In a submission ahead of the Government’s comprehensive spending review, due in October, the charity has argued that the money represents an investment several times larger than Train to Gain and nearly equal to the entire adult skills budget - yet it is barely accounted for.

There are no conditions for granting tax relief, and employers do not have to detail how they spend the money or on whom.

“Tax relief is effectively a public contribution to private employer training expenditure and if pound;3.7 billion of revenue is foregone by the public purse, it is not unreasonable that the onus should be on employers to demonstrate it is being spent to good effect and is not simply exploited as a loophole by accountants,” Niace said.

Employers might be spending the money sensibly, the charity said, but there was no way of telling. Instead, company accounts should reveal what training was purchased, what qualifications achieved, and who in the company benefited - to address the longstanding problem where highly skilled workers are the most likely to receive training.

It also suggested that specific groups could also be targeted for tax cuts for training, just as the Netherlands offers incentives to train older workers, in whom employers might otherwise be reluctant to invest.

And if employers and individuals were both expected increasingly to share the costs of training, they should both be eligible for tax breaks, Niace proposed.

Alan Tuckett, director of Niace, said: “Tax breaks are a positive way of saying if you haven’t got a history of investing, let’s pay some of the expense. The problem with Train to Gain was it created the expectation that skills were the responsibility of the state.

“But tax breaks are not at all targeted. And look at all the rules that providers have to account for every thruppence-ha’penny from the Department for Business, Innovation and Skills and look at the freedom companies get for tax breaks, but in both cases it is money from the taxpayer to support skills.

“There is no doubt that you could use the money to get more benefit than it currently generates.”

The UK Commission for Employment and Skills, however, in its annual review of Britain’s progress towards its 2020 targets, was sceptical about the value of tax breaks.

It said there was little evidence evaluating its impact and similar studies on incentives for research and development found they had to be generous to stimulate action by employers, that different tax rates were needed to target specific groups, and that employers often manipulated the system.

The commission also said that the evidence suggested that tax breaks only tended to be taken up by employers who were already committed to investing, rather than attracting new businesses.