Training chiefs face a top-level inquiry into the build-up of huge cash reserves as MPs demand to know what will happen to the money.

Senior MPs have questioned education and employment ministers about the cash retained by training and enterprise councils while further education colleges are facing a Pounds 39 million cut.

Paul Keetch, Liberal Democrat employment and training spokesperson and a member of the Employment Select Committee, asked the Government to explain why TECs were sitting on Pounds 278m. Last year the reserves were Pounds 260m.

“It is quite clear that the level of money they need is far less than the amount they have. It is a travesty that TECs are keeping back money that should be spent on training programmes for people across the country.

“They need to be solvent, to observe company law, but they are keeping back far more than they need, as a cushion. We don’t want this money to be used as some kind of war chest to bolster up the new deal for the unemployed and make it look better. The priorities of the TECs should be determined locally by those bodies. This money should be spent on training schemes instead of sitting, doing nothing, in the accounts of TECs.”

Dr Kim Howells, the employment minister, said the money would be used “for the best possible projects, which will strengthen competitiveness and the employment infrastructure in the areas that the TECs serve. I want it to be spent on an array of new projects. We have some interesting ones in mind. ”

Anne Weinstock, chief executive of Rathbone CI, a private training provider, also criticised the build-up of cash. “We cannot have a situation where the most disadvantaged are getting left without training when the TECs have got all this in their reserves.”

In 1996 the then Labour Opposition said it would take money from TEC reserves and use it to start one million individual learning accounts, with the student getting Pounds 150 to kick-start their training.

This still seems to be on the agenda but Ms Weinstock, accepting that learning accounts were a good means of changing the culture, thought that Pounds 150 was inadequate. “All that will buy you is a half-day course. I think they are going for all of the TEC reserves for learning accounts but it may be better to provide training which is more intensive, though for fewer people.”

However, the TEC national council denied TECs were sitting on large reserves. A spokesman said that in July 1995 the 81 TECs held disposable cash reserves of only about Pounds 617,000 per TEC. As private companies they were required to account for capital assets, forward spending commitments and working capital and these were not disposable funding. They also had to use reserves to contribute to training activities in their areas, including joint projects with local authorities, matching European funding, and supporting Business Links.