It is tempting to dismiss this as so much “blue-sky” thinking, but the outcomes of all this Whitehall activity will be significant. By July, we’ll know the shape of public spending for the next four years and we’ll see whether the Government can come up with a significantly new approach to paying for adult education.

The slogan for the new approach is a “demand-led” funding system. What this means and what it looks like is still under discussion. The idea last year was that the individual learning account system could be expanded to take over some of the Learning and Skills Council money currently paid direct to colleges. But overspending, fraud and the suspension of the accounts introduces a note of caution. The Government may also wait for the education select committee’s inquiry into learning accounts. This will take place in public and could be embarrassing. But it will be over by July and the desire for a new approach runs too deep to be knocked off course by the problems with learning accounts.

The performance and innovation unit set out the case for change in December 2001 in its report on adult skills. The unit identifies various shortcomings in the current set-up, including persistent poor-quality courses and a lack of responsiveness to employer needs.

The unit suggests shifting LSC funds from colleges so they can be controlled by individuals and small firms. They would be allowed to use the money to upgrade skills or for entry-level qualifications. Direct funding of providers would be limited to various government priorities.

In other words, the unit wants “mark two” learning accounts backed up by a mark two standards fund.

The civil servants have six months to work on the practicalities of their proposals, but it is apparent that they want to move money around. Further education funds currently go only to colleges and adult education services. Cash for work-based learning goes only to training providers delivering specific qualifications. Opening up the learning market will spread public money thinner. Meanwhile, new schemes like paid educational leave will create new demand.

The Treasury is unlikely to increase the overall budget so it will have to take money from somewhere else. One option is to reduce funding for mainstream learning by working adults. The current system assumes that course fees cover 25 per cent of costs and public money pays for the rest. But this figure is not fixed, particularly if policy-makers believe that higher fees will make a limited amount of public money go further. This could be a dangerous assumption. There is little research on attitudes to fees, but individuals are resistant to paying high fees, except for computer courses. The evidence from most colleges is that higher fees mean fewer enrolments, which mean class closures. There is plenty of demand for learning but only at a subsidised price.

From one perspective, the loss of groups of adults is no bad thing. There are other ways to help them to learn a skill or a language. Some might say that, if their course is not connected to their work and they’re not prepared to pay full price for it, then tough. The price of change is losers as well as winners. Colleges should focus on teenagers, apprentices and adults doing basic skills.

However, if it takes this view, the Government could find itself paying a high price. The loss of working adults studying voluntarily could reduce the attractiveness of colleges to those compelled to go there. Adults steer clear of basic skills ghettos and they may not be the only ones. Choice is attractive in its own right.

The fact is people like college brochures with large lists of options. When local councils carry out surveys of their population, “evening classes” count as a popular service, even among people who have no intention of taking them. Choosing to learn is an important first step in learning. This desire could be undermined by a narrow focus on employer needs. The emphasis on compulsion in government policy fits oddly with the need to foster a desire to learn.

The existing system has its weaknesses but also provides considerable value for money. Courses are offered by non-profit-making organisations. Learners commit their own money and time. They study in groups. Their teachers are trained and qualified. The performance and innovation unit’s proposals would completely undermine this system. This could leave us further from the ultimate goal of a highly skilled workforce.

So which will it be for adult learning and skills: incremental change to current systems or radical, “blue-sky” thinking ? Over the next six months we will find out.

Julian Gravatt is director of finance at the City Lit, London