Education Secretary David Blunkett plans to take draconian action against failing colleges after he sets up the new Learning and Skills Council for England.

The “special measures” for failing or vulnerable colleges mimic those for schools and are likely to be in an education Bill this autumn. The Bill also looks set to include new “tertiary education action zones”, targeting under-performing areas, and private sector take-overs for colleges that repeatedly fail.

The Secretary of State can currently only advise the Further Education Funding Council to act. But the Bill creating the new super-quango for post-16 education and training - which replaces the FEFC and training and enterprise councils - will invest him with considerable powers to intervene directly.

Parliament’s value-for-money watchdog, the National Audit Office, is investigating the financial difficulties which continue to bedevil further education. The inquiry shows how seriously college failures are being taken in Westminster. A number of MPs are known to have raised concerns about their local college.

Launched this summer, with no advance publicity, the inquiry is being kept low-key and will be over before the post-16 reforms go before Parliament.

Almost one in five colleges is in serious financial difficulty and high-profile cases such as Bilston and Halton have damaged the sector’s image. Ministers are concerned that the problems are undermining the Government’s aim of a lifelong learning revolution.

Although the audit office is independent of the Government, ministers will be hoping that it will provide a blueprint for the sector to escape its problems.

The new education Bill is expected to be included in the Queen’s Speech in November. A senior official said: “It will be swift enabling legislation and not go into too much detail.”

The Government’s “get tough” policy was first flagged-up by former education minister George Mudie at the annual conference of the Further Education Funding Council in February.

Using the analogy of foul play on the football pitch, he warned: “We will introduce a yellow-card early warning system for colleges which cause significant concern.” Failure to put things right within the year would lead to the “red card”.

College leaders are angry at what they see as the continued aggressive stance of ministers. They say performance and inspection evidence points to considerable success in the overwhelming majority of colleges, particularly in deprived areas (see page II).

Figures from the Department for Education and Employment also show disastrous pass rates in the Government’s flagship Modern Apprenticeships scheme, which has shifted many training schemes from colleges to industry.

David Gibson, chief executive of the Association of Colleges, said: “I am surprised that ministers are talking of more private industry involvement while they are removing the business majority from our governing boards. The vast majority of colleges are successful.”

The new Bill is expected to go through Parliament within six months of the Queen’s Speech.

A spokesman for the audit office said that it was too early to draw conclusions from their work but that college management had already emerged as a key factor.