A survey by the Adult Learning Inspectorate, completed in March but still unpublished, shows that free tuition did not help any college to enrol more adults on level 2 courses. The report, seen by FEFocus, also said colleges were frustrated at having to refuse cheques from employers prepared to pay for training. This is because another government scheme offers free courses through work.
The Department for Education and Skills denied it had tried to influence the timing of the publication of the report. A spokesman said: "This was part of a wide review by ALI of the skills strategy. It was used to identify areas for development. The Learning and Skills Council has incorporated part of this report into its communication plan with the LSC regions."
Free courses were introduced to give adults without five good GCSE grades or a level 2 NVQ the skills essential for a good job.
Adults already in work in some areas can get the same qualifications through the employer training pilots, due to go nationwide as Train to Gain.
Colleges told the inspectors that the free tuition just shifted students around the system and failed to bring in any new ones.
"For colleges already hitting their targets, the level 2 entitlement was of no benefit at all," the inspectors said. "Some felt all it did was reduce costs for employers who would otherwise have been prepared to pay fees."
Colleges also said they thought the choice of eligible courses was arbitrary and students were confused by the criteria. Also, "brokers"
linking colleges with employers often damaged working relationships. These will cost pound;70m under Train to Gain.
The inspectors recommended that the future funding of free courses under Train to Gain and the level 2 entitlement be guaranteed, to allow colleges to plan properly.
Colleges should be given more flexibility to decide how to use subsidies under Train to Gain, rather than having a blanket policy of refusing payment, they said.
They also said the criteria for inclusion in the free entitlement should be clearer, and suggested subsidising level 1 qualifications for adults who were not yet ready for GCSE-level courses.
Alan Dixon, regional director for the Association of Colleges in the North-east, which was one of the areas studied, said the launch of the entitlement almost three years ago had little impact.
He said: "If you wanted a big increase in the number of people taking level 2 qualifications, you needed a well-organised, well-structured campaign."
There were too few incentives for learners because level 2 was not an end in itself but a step to better qualifications, pay and productivity, he said.