Colleges which have pioneered a string of high-profile national training contracts expressed relief at news of the Government franchising working group report, obtained by The TES.

Mr Paice ordered the urgent review of franchised courses, under which colleges contract out work to employers or other groups, at the height of the crisis over expansion funding.

But the working group of principals, training and enterprise council leaders and senior officials has largely backed deals between colleges and third parties - even those run hundreds of miles away from their parent campus.

The group’s interim report says: “It would be wrong to oppose the principle of franchising. There are risks associated with lack of quality control and the substitution of public funding for provision which would have occurred without such subsidy. The main responsibility for employer-led training must be borne by employers themselves, but nonetheless there is a case in principle for some degree of public subsidy.

“And it is inappropriate to limit the role of FE colleges to their local areas.” The interim report, a full study will be produced for ministers by July, is a significant victory for franchising colleges, which have engineered massive growth through partnerships with employers and community groups.

But the question of the level of funding for franchise deals is still unanswered, although many colleges accept that a special reduced rate will be set.

Leading franchisers welcomed the report. Mike Bourke, principal of Waltham Forest College and chairman of the FE21 group of colleges, said: “It’s very encouraging. There is all this new technology like video-conferencing to conduct work over large distances and it’s helpful if that is not being written off. ”

And David Eade, principal of Barnsley College, another leading franchiser,said: “It really vindicates what colleges have been doing. This seems be a very sensible approach to the subject.”

Lewisham College registrar Julian Gravatt, author of a controversional paper raising serious doubts about franchises, also welcomed the report. “It seems like it has reached some sensible conclusions,” he said.

Mr Paice reassured colleges during a training debate organised by the Training and Employment Network, insisting “there’s no question that we should be trying to stop franchising”.

He clashed with his Labour shadow, Stephen Byers, and Liberal Democrat education spokesman Don Foster during one of the first heavyweight confrontations of the election campaign. Mr Byers outlined Labour’s plans for a Welfare to Work scheme, co-ordinated by a new Cabinet minister, to include new training entitlements for young people and the long-term unemployed and tax breaks for employers.

Lecturers’ union NATFHE expressed concern at cuts in the estimated yield of the proposed windfall tax, which will fund the programme. But Labour sources insisted it would be adequate to fund the #163;3 billion scheme.

Don Foster promised a levy on companies which do not carry out training, guaranteed periods of adult training or education and a citizens’ service scheme offering one- or two-year periods of community service.

But Mr Paice stood by the Conservatives’ record, promising places for post-vocational training would treble to 30,000 next month, hailing the “huge success” of training and enterprise councils and promising better opportunities for young people through the new Learning Credits scheme.