A wholly market-led approach to the funding of further education would ensure providers met employer needs and delivered better value for money, a paper by the Confederation of British Industry (CBI) said this week.
Courses that have no "economically valuable output" should have their public funding cut by half, and providers must accept possible cuts in their funding in order to deliver the training demanded by employers at a price they can afford, according to the CBI paper Reforming skills funding: delivering productive results.
The paper says that the current funding model is so bound by bureaucracy that it leaves colleges and other learning providers unable to meet employer demands effectively. It states that employers see bureaucratic hurdles as a potential deterrent to working with providers.
An employer should be able to have a "single conversation" with a provider about their skills and training needs, the paper says. The provider should then put a package of funding together to meet these needs.
While it may be possible to reform the funding system to make it more responsive, the paper says "we should be prepared to go further" and scrap it altogether. The current system, which is based on trying to predict demand centrally, should be replaced by a "fully market-led approach".
"Under this system, providers would no longer receive a bloc allocation but would simply draw down funding when individual employers enrolled staff on courses," the paper says.
"This would ensure funding genuinely followed employer choice and that providers had to compete for funding based on quality of service."
Richard Wainer, head of education and skills for the CBI, said: "Colleges know that they have to be more responsive to business, so let's get on with trusting them more to build that responsiveness. Why should they be over-burdened by inspection, audit and funding regulations?"
Under the CBI proposals, "non-essential" programmes, including "adult safeguarded learning", that support learning for its intrinsic value and do not necessarily deliver an economically valuable result, would have their funding halved.
Money should be redistributed to support apprenticeships, particularly to meet the growing demand from those over 25, and skills training in science, technology, engineering and maths (STEM) subjects.
Mr Wainer said: "If, at a time when budgets are under pressure, it means diverting resources away from leisure, personal learning and community development and putting it in training that will deliver higher economic return and improve people's employability, then that's the direction we have to move in."
Alastair Thomson, principal policy officer for the adult education body Niace, said: "The CBI fails to recognise that the UK needs social capital as well as human capital.
"Safeguarded adult learning provides quantifiable returns in terms of better health, lower crime and higher civic participation. The annual pound;210 million for safeguarded learning is less than 2 per cent of the total adult training spend, and the only part accessible to older people outside the labour market."
The paper also says that Train to Gain is not meeting business needs because the business and social objectives "have become entangled". Two- fifths of employers feel Train to Gain has had no impact on their organisation, according to the CBI.
It says one of the problems with Train to Gain is that it will fund eight times as many learners at level 2 with funding "badging up" existing skills rather than developing new ones. Allocations are geared to meet the Government's qualifications targets for 2020 rather than business needs.