The provision of basic skills, the entitlement of all adults to achieve their first level 2 qualification (GCSE A-C equivalent) and the expansion of modern apprenticeships must have “first call” on resources, they said.

“Unless investment can be found to deliver “first level 2s”, then existing funds should be transferred from general post-16 education, especially that supporting non-accredited, non-vocational training,” they said in a report to this year’s government spending review.

The Association of Learning Providers (ALP), the majority of whose members are private and voluntary-sector organisations, said research and opinion increasingly pointed to the importance of using work-based learning to improve all employees’ skills. This was illustrated in the November evaluation of the Employer Training Pilots, where 90 per cent of training was at work.

The Learning and Skills’ total budget for 2004-5 is pound;8.6 billion, but only 6 per cent of this is spent on work-based learning. This highlighted a conflict in the skills strategy, they said.

The warning follows the Prime Minister’s speech at Labour’s spring conference when Tony Blair identified modern apprenticeships and job-related training as a means of encouraging young people to stay in education or training until 18 or 19.

Mr Blair said that minimising drop-out rates at 16 would be a priority if the Government secured a third term of office. “We want to make irrelevant the official school- leaving age of 16,” he said.

Graham Hoyle, ALP’s chief executive, said: “The Government’s skills strategy offers hope of reducing our productivity gap compared with other industrialised nations. Training providers are encouraged by Mr Blair’s embracing of work-based learning as a solution to the drop-out rates among 16 and 17-year-olds.

“But this will inevitably require tough decisions about the way funding has been traditionally located to different types of learning.”

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