Conservative peer and former deputy prime minister Lord Heseltine has called for skills funding to be devolved to local partnerships and has suggested that the Skills Funding Agency (SFA) be scrapped.

In a report published this week on how to stimulate economic growth, Lord Heseltine (pictured) called for Local Enterprise Partnerships (LEPs) to be granted increased powers to ensure that FE provision is more closely tailored to the needs of the local economy. He also criticised the apprenticeship programme’s focus on over-25s already in work, a policy that has been robustly defended by post-16 minister Matthew Hancock and his predecessor John Hayes.

“The current system does not incentivise FE providers to run the courses that deliver the greatest economic benefit,” Lord Heseltine said. “For example, within the apprenticeships programme, the vast majority of the recent expansion has involved apprentices over 25 (who now account for over 40 per cent of the programme) and who are already in work with their employer.

“The evidence, however, suggests that it is investment in younger individuals starting an apprenticeship as a new job which has a greater economic impact.”

Describing his vision of funding reform, Lord Heseltine added: “The budget for vocational training for learners aged 19 and over, and all funding currently set aside for apprenticeships for those aged 16 and over, should be devolved to local areas through the single funding pot ... This therefore calls into question the continuation of the SFA. Each LEP should incorporate skills needs within their local economic plans driven by the needs of local employers and the practical experience of FE colleges.”

Lord Heseltine also argued that local chambers of commerce should play a leading role in “defining and articulating the skills needs of local businesses”, citing the local partnership approach currently in use in Switzerland as a template for reform. “Relatively few small businesses currently offer apprenticeships, but local coordination aimed at stimulating supply and demand for apprenticeships should start to address this,” he said.

The report also calls for adult careers advice to be funded and administered locally by LEPs. “Each LEP, as part of its local economic plan, should consider how careers advice is best provided in its area to meet the needs of both the adult population and the requirement under the Education Act 2011 for careers advice in schools.”

Business secretary Vince Cable welcomed the report. “Lord Heseltine’s findings show where government can improve its performance in delivering better interventions. We will now need time to consider its numerous recommendations and will respond in the coming months,” he said.

A spokeswoman for the SFA declined to comment.