He said the Government will be looking at increasing fees for basic skills and level two qualification courses to meet a gap in funding.

Giving his ministerial review to the education and skills select committee, he said employers must invest in skills to increase profitability, and individuals will be happy to pay more if the quality of courses is good.

Asked by Liberal Democrat MP Paul Holmes what the fall in demand will be if fees are increased, the minister replied: “There is always a view that if you charge people more they will walk away. My view is that if you provide people with the quality they want they will pay for it.”

Mr Holmes had reminded him that the Association of Colleges had warned at their annual conference last month that “the money isn’t in the system” and colleges were either going to have to cut programmes or increase fees.

Mr Lewis said employers will benefit from workplace-focused education and will be willing to make a greater contribution.

“Investing in skills is not altruistic,” he said. “It is absolutely central to the bottom line of profitability in the modern world. We don’t believe that education and training are sufficiently demand led. We are reforming completely the adult qualification system, based on credits and units, something that employers are demanding.”

But Barry Sheerman, chairman of the committee, expressed scepticism over the proposals. He said: “Employers have always been deeply reluctant to pay for the training of their workforce.”

Mr Lewis also told the committee he believes “we are beginning to attack the negative culture that exists in this country towards vocational education”.

And he said: “I believe that FE has never been in better shape.”