Learners taking out an FE loan next year could be forced to pay 20 per cent VAT if they study with an independent training provider, according to Graham Hoyle, Chief Executive of the Association of Employment and Learning Providers (AELP) .

The charge will be introduced as part of the “24+ advanced learning loan” scheme next year, but will not affect learners studying at a general FE college.

Mr Hoyle, said the new VAT payment was “worrying” and “entirely unacceptable”.

Speaking on the first day of the AELP National Conference 2012, he said: “That really will be a nonsense if there is a VAT differential between the type of provider.”

Mr Hoyle said he was told about the 20 per cent VAT payment by a colleague that attended a meeting with a Treasury official, but did not tell AELP members because he “didn’t want to upset them”.

John Hayes MP, minister of state for further education, skills and lifelong learning, didn’t comment on the issue publicly.

“Well Graham you know me well enough to know that I am far too professional a politician to ever speak, answer or comment outside of my box,” he said

“But I hear what you said and I have no doubt you will be making a recommendation to me and I will be making one as well to George Osborne in the treasury.”

Martin Doel, chief executive of the Association of Colleges (AoC), was also presenting at the conference, and used the morning session to outline other key differences between independent training providers and colleges.

Mr Doel said colleges, universities and schools operated on different ‘playing fields’ to private providers.

He argued that general FE colleges are different in particular because they are not-for-profit and serve their local community.

“I am quite aware that some colleges serve beyond the place they’re located in,” he said.

“But I would submit to you that the defining characteristic of a college is that it belongs to the place, in a way that is very different from a university, which of course serves a region or national agenda.

“Colleges serve and belong to the place where they are, and how they affect upon that community.”

Mr Doel said that if independent training providers wanted to operate on the same ‘playing field’ as colleges they would need to accept accountability to their local community.

“With freedom comes responsibility,” he said. With responsibility comes accountability, and that accountability must be to their community or the stakeholder in the communities.”

The AoC chief executive acknowledged that while a number of AELP members are either charities or not-for-profit, colleges are always looking to reinvest surplus funds.

“They’ll do things that are not easy to achieve – success in the various metrics that are being applied by Ofsted or by government – because they are the right things to do, the necessary things to do to serve that community,” he said.