New Government fund will enable employers to invest in own vocational training

Businesses will be invited to bid for a share of the new fund from early next year. The Department for Business, Innovation and Skills (BIS) said that the fund would enable employers to invest public money into the training they actually need.

Prime Minister David Cameron said that he hoped the "radical" approach would encourage more employers to take on apprentices and ensure that their workforce had the right skills.

"I know times are tough – especially for young people - who are trying to get their foot in the door and launch their career. That is why I am determined to do all that we can to give people the very best skills, training and opportunities to succeed; and why despite tough spending decisions we are investing in a record number of apprenticeships," he said.

This week the number of unemployed young people aged between 16 and 24 reached over one million. The number of unemployed people in the UK has reached 2.62 million – the highest total since 1994, according to figures from the Office for National Statistics.

Businesses of all sizes and from all sectors of the economy will be able to bid for a share of the new training fund, the Government said. However, bids will need to demonstrate how public funding will leverage private investment, support apprenticeships and show a commitment to raising skills levels in their business sector or supply chain.

Funding for 2012/13 will be routed from existing skills budgets and will be up to £50m with an additional £200m earmarked for the second year of the programme. BIS said this would be subject to evidence of high-quality proposals from employers and ongoing evaluation.

The Government said it was hoping to issue a formal prospectus on the fund early in 2012, with a view to the first publicly-funded training projects beginning later in the year.

The fund has been developed in consultation with the UK Commission for Education and Skills (UKCES), a non-departmental public body which works on skills and employment issues across the UK. Part of UKCES' remit has been to encourage greater employer ownership of training programmes, the Government said.

"Skills are not a separate agenda but integral to growth. We have seen some progress but not enough. Too often the skills system appears to businesses as a government-led enterprise rather than one led by employers," said UKCES chairman Charlie Mayfield.

"We need more businesses working together with their supply chains, sectors or localities to develop the skills they need. The best way to do this is to route funds directly to employers, placing the responsibility and reward for how money is spent with the employer, not government," he said.

Business Secretary Vince Cable said that the existing system needed more flexibility to allow the UK to compete internationally.

"We have to fundamentally alter the relationship between employers and the state – giving the employers the space and opportunity for greater ownership of the vocational skills agenda, including the chance to bid for direct control of public funds. This will encourage greater competition in the market as we strive for sustainable growth," he said.