The move is designed to route public investment directly to employers and give UK businesses the power to design, develop, purchase and invest in the vocational training programme they actually need.

Cameron said: "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 record number of apprenticeships.

"We are seeing an incredible take up of these apprenticeship places. I want that to continue, which is why we are taking action to make it easier to take on apprentices, and now we are giving employers the power to take control of the training so that it best meets the skills they need.

"I hope this radical new approach will encourage even more employers to take on apprentices and ensure that the UK workforce has the skills we need to boost growth."

Vince Cable, Secretary of State for Business Innovation and Skills, welcomed the launch at the AoC annual conference event in Birmingham.

Cable said: "Skills are central to the UK economy and our long-term competitiveness. Despite some good progress our system needs more flexibility and we are treading water by international standards.

"We have to fundamentally alter the relationship between employers and the state, giving 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."

The vision of greater employer ownership has been championed by the UK Commission for Employment and Skills (UKCES) – an NGO that provides strategic leadership on skills and employment issues.
UKCES chairman Charlie Mayfield said: "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."

The government expects to issue a formal prospectus on the fund jointly with UKCES early in 2012, along with inviting the employers to bid for a share of the fund.

Funding for 2012/13 will be up to £50m, with an additional £200m in the second year, subject to evidence of high-quality proposals from employers and ongoing evaluation.

Backed by significant resources from existing skills budgets, the competitive fund will test different approaches, come up with new ways of engaging employees and potential employees, other firms and their supply chains to develop news ways of investing in skills, and working with the FE and Skills sector.

It will also be open to collaborative proposals from businesses of all sizes and from all sectors of the economy. Bids will need to demonstrate how public investment will leverage private investment, support Apprenticeships and show a commitment to raising skills levels in their sector or supply chain.

Aastha Gill