COMPANIES that fail to sign up to the drive to improve the skills of the British workforce could find themselves losing out on lucrative government contracts.
The warning comes at the first anniversary of the launch of the skills strategy.
In a move that could see more work for colleges and workplace learning providers, ministers warned that they might use their massive purchasing power in favour of firms which train.
Ivan Lewis, the skills minister, said: "When we look at procurement, there are certain things the Government expects of contractors... One of the areas we consider must be skills.
"I don't accept that it costs more to deal with companies which invest in training. Skills affect the quality of the product and that has implications for the value we get for the taxpayer's money."
Guidance has been issued across the public sector suggesting the skills record of contractors be taken into account. A joint report from the Department for Education and Skills, Treasury and the Cabinet Office, released this week, said: "Guidance has been issued to all central government departments and their main agencies and non-departmental public bodies.
"We are considering how these principles can be extended so that, wherever skills are relevant to securing cost-effective procurement of high-quality services, that is built into the procurement process."
Digby Jones, director for the Confederation of British Industry, voiced his support for the guidance at an event to mark the first year of the skills strategy in London last week.
Mr Jones said private firms should "look down the supply chain" and ask questions about the skills training record of the firms they do business with. He said it was important Whitehall gave the lead by doing the same.
The skills strategy has had strong support from the Gordon Brown, the Chancellor, who attended the London event, and John Healey, chief financial secretary at the Treasury whose previous post was as an FE minister at the DfES.
But any crackdown will require careful tiptoeing around EU law, which says government contracts must go to the cheapest or the most "economically advantageous" bidder.
The Government argues basic skills training is advantageous as companies with educated workers do the best job.
But a blanket ban on all firms that neglect basic skills is impossible.
Denying contracts to a company which fails to train staff properly is only allowed if it can be proved that the skills required are "relevant" to the contract.
Intervening simply for the benefit of the staff themselves, to support the skills strategy's wider objectives, would be illegal.
The Treasury says this means each potential Government contract will have to be considered separately to see whether standard basic skills training could improve the service provided.
Julian Gravatt, director of funding and development at the Association of Colleges, said: "The European rules are there to make sure there is a free market and companies can bid for these contracts. If the procurement contract is too restrictive you could find that nobody bids.
"But colleges are the main providers of basic skills training and obviously this guidance would generate more activity for colleges, which we would welcome."