The Centre for Economic Performance, a research body at the London School of Economics, says that training schemes need a radical overhaul.

The report calls for a doubling of new apprenticeships by 2003 as the Modern Apprenticeship scheme, founded five years ago, is failing.

The scheme, set up to counter the large decline in apprentices, is based on improved ways of cost-sharing between employers, the government and young people.

But with large numbers of apprentices giving up before they have finished training, the scheme should be reformed, the report recommends.

The report, entitled "Apprenticeship: a strategy for growth", urges the government to provide greater subsidies for traineeships, giving employers more incentive to train young people.

Trainees drop out

Employers say they are discouraged by the vast numbers of apprentices who give up before the training has finished.

The massive drop-out rate makes them loath to stump up the £8,000 to £30,000 needed to provide the three-year training.

Skilled craft industries, IT, and the health service are all suffering as a result of the shortage of recruits and skilled workers.

"Trainees on high quality courses should accept a pay cut"

The report also recommends that young people receiving high quality training, such as in engineering and building, should accept a lower wage in the first two years.

Poor education

Technical education also comes under fire in the report for not underpinning training more.

It says: "The standards of general education aimed at are still well below the levels expected in apprenticeship in other European countries."

Russell Luckock: The problem is finding the right candidate

Employers welcomed the report's call for the government to subsidise the scheme further, but some believe it is more a problem of finding the right candidate for training.