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I must admit I struggled through my Economics degree in the days when quantitative easing hadn’t been invented and, if times were hard, the government simply printed more money.

Despite getting a 2:1, I found the subject very confusing and at times unreasonably remote from real life. "Ceteris paribus" seemed to be the key phrase whenever we looked at a problem – or "other things being equal" which to me was a great excuse to forget reality and merely concentrate on what would happen if nothing else in the world was going on. If only life were that simple! Yet there were some basic principles that I did manage to grasp and which I have found useful to the present day. All of them were really just common sense with fancy names – but useful nevertheless.

The first of these was that, in the world of limited resources, you need to be aware of "opportunity cost". Quite simply you can’t spend the same money twice and you have to make choices. If you do A then it means that you can’t afford to do B as well. Straightforward enough, you would think but in the college sector at all levels it’s a concept that we are reluctant to accept. In our eagerness to try and be all things to all men we often seem forget this basic fact – with the result that resources are spread too thinly and in the end no-one gets a really good deal.

As the economic recession and budget squeeze begin to bite these choices are going to be ever more stark. Do we increase class sizes or turn away students with special needs, who require expensive but essential additional learning support? Do we hold salaries below the increases that teachers are receiving to balance the books, or raise them to comparable levels in the hope of attracting the best staff? Do we subsidise 14 year olds in school through the new diplomas at the expense of improving the experiences of those over 16?

In circumstances such as these the key question for me is why, when we are struggling to meet demands elsewhere, are we subsidising training for employers? Either we are stupid or they are. If training is such a good thing and impacts directly on the bottom line surely they will pay anyway? It would be crazy not to. Train to Gain would be a mantra adopted by the business community rather than the government and there would be no need for the LSC to spend over £7m in advertising the benefits of free training.

The sensible employer would invest anyway. Or has the concept of rational decision making in the business community so beloved by my Economics Professors, disappeared over the past thirty years?

The problem is of course that, ceteris paribus, it is the impact of the application of new technology and the availability of credit that really makes a difference to profitability. Otherwise when we have better trained employees than ever before, why would we be having a recession? Common sense says "Let the market decide what skills training is really worth to business and let the employer pay accordingly". There are better ways of spending public money on education and training.

So, if we removed the employer subsidy, what could we do with the £1bn-plus that would be saved in this way? To start with we would be able to invest in training for the industries of tomorrow rather than those of today. Our obsession with giving existing employers what they want has largely overlooked the skills that will be needed in new and emerging industries. Without investing in the future where are the "green collar" workers going to come from? Where will we find the inventors of the next round of new and more sustainable technologies?

We could also spend a lot more on individual adults. Like all other education and training activities the development of new abilities increases personal choice and life chances. It is a fundamental part of any society that has equality and diversity at its heart. And that freedom to develop skills when necessary has to be available throughout life and not only in preparatory years up until 19.

We have to start taking lifelong learning seriously and encourage individuals to see education and training as a part of life rather than essentially a preparation for their first job. As life expectancy and the age of possible retirement increases and the idea of a job for life disappears, it doesn’t take much of an economist to work out where the money needs to go. In a civilised and democratic society it is the individual and not the employer that should be king. Maybe Year 2 Marxism is just beginning to sink in?

Dr David Collins CBE is the President of the Association of Colleges (AoC)

Read other FE News articles by David Collins:

President of the AoC: 'Government must act to solve College Capital Crisis'

David Collins crosses the Digital Divide

AoC's David Collins on FE's 'perfect storm'

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