The Learning and Skills Council national office has also instructed its 47 local branches to be more flexible when interpreting guidance on franchising arrangements whereby colleges buy in services from outside companies. Currently, independent training providers must bid through colleges for much of their work. They say this gives them less cash as colleges top-slice budgets.

Guidance from the LSC in March suggested local councils allow a maximum 5 per cent of college income to go on franchising. But the councils took this as an edict, causing a furore among training providers and colleges which were spending up to 12 per cent.

Clarification of the guidance is contained in a tough letter to LSC regional directors from Rob Wye, director of the LSC chair and chief executive’s group. In it he lists five actions local LSCs will need to take. These include the requirement to “explore scope for large-scale partners to be directly funded” and to “review partnership arrangements in the context of their contribution to LSC priorities”.

On franchising, Mr Wye says that while spending should “normally” be no greater than 5 per cent of college income, this is not a maximum. “There are examples of a rigid 5 per cent being imposed in 2004-5, even if this has meant removing good quality provision that contributes to our targets.”

Mr Wye stresses the importance of giving “adequate funding levels to sub-contractors to ensure quality provision.

“The LSC has a duty to prevent uncontrolled and undesirable franchising, but at the same time, much of this activity meets the needs of learners that might not otherwise engage in education and training.”

He also warns colleges against withholding cash from franchised companies.

In some cases, the amount of money top-sliced by colleges “is out of proportion to the level of service provided”.

Graham Hoyle, chief executive of the Association of Learning Providers, said: “This is a very good example of the LSC listening, as long as local councils implement it properly.”