John Adams, director of research at left-leaning think-tank IPPR North, looks at the impact of yesterday's Government White Paper on skills.

Yesterday saw the publication of the Government's latest White Paper on skills policy, this time focusing on the role of further education (FE) colleges.

The media headlines are likely to be dominated by the Government's proposals that failing colleges may face a private sector takeover or that industry high-fliers will be encouraged to work in further education colleges.

However, more interesting is the Government's argument that FE colleges need a new "economic mission" and that this mission is at the heart of the FE sector. The Government also wants to see stronger links between jobs, adult training, regeneration and economic development in major cities, although it is not clear why this would not also be beneficial for County Durham. The White Paper is the Government's response to a report published at the end of last year by Sir Andrew Foster, former head of the Audit Commission, which argued that the nation's economic performance required a clear focus on skills. While the White Paper contains numerous proposals that are important for the FE sector, this is the issue which is perhaps most salient in the North-East.

But this is not as straightforward an issue as many assume. One of the problems with the present adult skills policy has been the failure to appreciate the nuances of the impact of different types of qualifications. Skills can benefit the economy in a number of ways - they can help improve productivity (the rate at which a firm produces goods or services); they can help improve the employability of people who are out of work; and they are an important factor in improving an individual's earnings. But one point that is often overlooked in debates on this issue is that different elements of skills and training will have a different impact on each of these three objectives.

Academic research is beginning to paint a better picture of what impact specific qualifications have in the labour market. In brief, it would seem that there are high wage premiums for academic qualifications (degrees, A-level and higher GCSEs), professional qualifications, and many of the high and intermediate vocational qualifications. Worryingly, the evidence also seems to suggest that people with low-level National Vocational Qualifications (NVQs) are likely to have lower wages than those without NVQs.

In addition, while five good GCSEs and an NVQ level two may both be technically regarded as level two qualifications, they are treated substantially differently by employers - five good GCSEs are simply worth more than an NVQ level two.

Some NVQs at level two, however, attract positive returns from employers in the labour market.

For example, women in the health and social care sector or male plant and machine operatives (mostly in manufacturing) earn a wage premium from having an NVQ level two. However, it makes no difference in the hotel, catering or distribution industries. And if you have a level two NVQ and are in banking, insurance or the finance sector, on average, you will earn less than your colleagues without one.

This analysis raises difficult questions for policy-makers. How can we ensure that these subtleties are incorporated into the learning and skills sector?

One alternative is for the public sector to plan courses to assess what qualifications will matter to individuals or business and then provide the relevant courses. Such a system will necessitate a substantial bureaucracy and is unlikely to produce successful outcomes. Parts of the Government's adult skills policy to date could be characterised as relying on this planned approach.

However, the White Paper could herald a significant shift in policy. It contains a commitment to a decisive shift towards a system that is driven by the needs of service users. Despite the negative publicity following the failure of Individual Learning Accounts (ILAs) in 2001, the Government has decided to introduce a system of learning accounts for adult learners. These learning accounts will only initially apply to learners at level three, and will subsidise about two-thirds of these tuition fees. However, it recognises the fundamental point that individuals who make their own learning choices are more successful than those who have less choice.

This is long overdue. In the UK, most public funding of adult education and training follows the individual learner. For example, individuals who attend university choose the degree course they study and 16 to 19-year-olds similarly decide which course they wish to pursue if they stay in education in a school, a sixth form college or a further education college.

However, the situation is reversed for adult skills. Eighteen-year-olds are assumed to be able to make their own informed decisions in relation to higher education, but mature adults have been assumed unable to make their own informed decisions about further education and training.

The introduction of learning accounts would seem to be a welcome move by policy-makers to trusting adults to read the labour market and choose the course that best suits their individual characteristics. While we hear much debate about the importance of choice in public services, it is rarely applied to adult learners. But perhaps this is one area where more choice could result in better outcomes for all.