Free training will only be eligible for benefit claimants on jobseekers allowance or Employment and support allowance, who are required to seek work as a condition of receiving their benefits. These new rules will come into power for the 2011/12 academic year.

But to enable colleges to meet local demand for the skills that lead to employment and growth, further education providers will also be given some local discretion to provide fully subsidised courses for people on a wider range of benefits – provided the training is to help them enter employment.

Skills minister John Hayes said: “The Government has repeatedly taken action to lessen bureaucratic restrictions on colleges, and to give them the flexibility to respond to the needs of employers and learners in their areas.

Today’s announcement marks a new phase in this process. It is good news for people who are currently reliant on benefits but want to get into work, and good news for employers looking for a local supply of the right skills to help their businesses to grow.”

Geoff Russell, chief executive of the Skills Funding Agency said: “This decision is another example of putting freedom and flexibility into practice. We will now make this explicit in our funding rules.”