Thousands of students look set to be turned away from the Government’s flagship online learning courses because of funding cuts.

In an effort to avoid overrunning its budget this year, learndirect is cutting its contracts with training providers by pound;5 million - yet it is still spending hundreds of thousands of pounds on TV sponsorship deals.

In the worst-affected areas, such as London and the north-east of England, training firms could lose a quarter of their promised funding from Ufi, formerly known as the University for Industry.

The organisation runs learn-direct which provides software and online support for students to take courses in IT, business, languages and basic skills, often backed up by classroom work.

Ufi said that learndirect had already exceeded its target of 30,000 people passing skills for life courses, and said there was enough funding to meet its other targets.

It also defended the TV advertisements, saying they are promoting a separate advice service, rather than the e-learning courses.

But Paul Warner, operations manager for the Association of Learning Providers, said: “If people get turned away after coming to a learndirect centre, they may never get the gumption to go back. They could be lost to learning forever. It’s a public relations disaster.”

He said that Ufi habitually contracted training providers to take on more students than it could afford, because many would drop out before the end.

This year, he said, providers had been more successful than expected at keeping students on courses, creating the threat of a 5 per cent overspend in learndirect’s pound;108m budget.

Mr Warner said the money for students already on courses was usually ring-fenced so they would be able to finish their studies. But training providers were already turning away new students.

One training provider, he said, was simply locked out of the learndirect computer network, bringing all its work to a halt.

Ufi said the budget review was essential. “We review budgets every quarter and have done so for the last two years. This is part of proper management and planning of public funding and performance,” a spokeswoman said.

Providers are shocked that learndirect is promoting itself by sponsoring three TV series at the same time as having to turn away students for lack of money.

ITV said the bulk sponsorship deal, which covers the Sunday evening hospital drama The Royal, African-set drama Wild At Heart, and a daytime talkshow, the Jeremy Kyle Show, was worth more than pound;500,000.

MPs on the public accounts committee have already criticised Ufi’s spending on marketing and administration.

They said earlier this month that it should speed up efforts to direct more of its cash towards students.

But Ufi denied that the sponsorship deal cost it pound;500,000. A spokeswoman said the promotions were for the learndirect advice line rather than its e-learning courses.

The spokewoman said: “Ufi has targets from the Learning and Skills Council to focus on reaching adults qualified below level 2 through the Guidance Service.

“Like any business, University for Industry uses communications media which will reach its target audience in order to deliver its objectives.

“The audience profile of these programmes makes them appropriate vehicles for reaching this target group.”

Next year’s budget will cut pound;10m from administration costs by scrapping Ufi’s 26 local “hubs” which distribute funds and commission providers.

Ufi says this builds on an earlier 24 per cent cut in central costs in the previous two years. A further pound;19m is being cut from the overall budget next year.