MPs have criticised the Government's "raiding" of funds for Train to Gain after it emerged that nearly pound;50 million siphoned off for university students will not be returned.
The money was the first of three occasions when unspent cash in the FE budget was used elsewhere, said the Innovation, Universities, Science and Skills select committee.
Phil Willis, the committee chairman, criticised the lack of transparency in funding arrangements, saying the Government's plans had been wrong and the Skills Secretary was now forced into "firefighting" measures because of the recession.
"If you find the budget is significantly underspent you have to ask the question, is the policy right?," he said. "Employers were being offered free money and were not taking up the opportunity. We're now seeing John Denham firefighting, creating some of the flexibilities that should have been there in the first place."
The committee's report on the Department for Innovation, Universities and Skills in 2008 said that pound;116 million had been taken from the underspent Train to Gain budget to cover a shortfall in higher education student grants, as revealed by FE Focus last August.
Ian Watmore, the department permanent secretary, told the committee that this was just a temporary transfer to cover an early start for the Easter term. However, officials have now admitted that pound;49 million will not be returned.
The committee also criticised the obscurity of two further occasions where money was redeployed within FE. A pound;115 million underspend last year was used to pay off early costs for schemes ranging from national skills academies to supporting adult education. The committee said a further pound;350 million was being redeployed this year to cover training for small businesses.
"It appears that a significant part of the provision for further education and skills, and for Train to Gain in particular, in 2007-08 and 2008-09 has not been spent and has been used to meet both temporary and permanent shortfalls in other DIUS programmes," the committee said.
"We would be concerned if a central flagship policy of the Government's skills programme - Train to Gain - were persistently raided."
In the wake of the financial downturn, various measures have been announced that will affect FE budgets. Train to Gain will lose pound;79 million towards a pound;158 million training package for people facing redundancy, while pound;223 million needs to be found for training for the unemployed and new apprenticeships.
Additional funds will also have to be found to pay for trebling the number of career development loans and offering pound;500 for training carers and working mothers in regional pilot schemes.
This week, a pound;2.3 billion rescue plan for the motor vehicle industry was announced, which will include increased funding for employee training under Train to Gain.
A DIUS spokeswoman said concerns over Train to Gain underspending were outdated and the programme's performance was now "strong", while extra flexibility had also been introduced in response to the recession.
"The Government is fully committed to transparency of information," she said. "For every financial year, it is common sense that we balance budgets to get best value for the taxpayers out of resources at our disposal, across the full range of public services we fund."