The Government’s recent announcement of more funding for Train to Gain is a welcome recognition of the importance of skills for the UK economy. Skills are fundamental to boosting individual and national prosperity. And Train to Gain, which offers firms subsidised training for their employees, should be welcomed as an innovative and ambitious scheme.

But is it enough? We think more needs to be done to develop skills where they are most needed, and that failure to do so will lead to increased income inequality - a pressing issue for the Government following an Institute for Fiscal Studies report in June that indicated a growth in the earnings gap.

There are endemic disparities between demand and supply of some skills, and this contributes to income inequality. To use the film industry as an example, an undersupply of level 4 (lower degree level) sound technicians and an oversupply of level 1 (below GCSE level) film grips would lead to greater wage disparity between the two. Those workers who hold the excess skills are also likely to face tougher competition and an increased risk of unemployment.

So how can the Government achieve a balance between demand and supply? Train to Gain is a start, but it needs much more support from employers. By itself, it represents only a part of the solution. There are five simple steps the Government should take.

First, it should allow colleges the freedom to respond to local demand, rather than imposing targets through the Learning and Skills Council.

Second, it should set financial incentives to encourage partnerships between employers, trainers, unions and community groups, helping them to articulate local needs collaboratively.

Third, it should provide greater flexibility of funding to allow people to train to different levels.

Fourth, it must urgently provide support mechanisms for vocational learners - on a par with those offered in higher education.

Finally, it should provide incentives, possibly via the tax system, to encourage the development of local and regional skills forecasting.

All this need not be prohibitively expensive, and could help government to balance demand and supply, as well as help Gordon Brown to deliver on his admirable commitment to eliminate inequality.

Train to Gain by itself cannot achieve those goals, especially with only one in six employers claiming to have used its services. Income inequality is rising and top-down, target-driven skills management cannot reduce it.

The way forward is to make learners, trainers, policymakers and employers work together to determine what is needed.

Matilda Gosling, Senior research and policy manager, City amp; Guilds Centre for Skills Development.