Union leaders warn that unless investment in FE is increased, colleges could close and vocational education will suffer. The warning comes in a 16-page policy document calling for a Dearing-style review of further education, as revealed in The TES last month.
The document, Putting Skills to Work, claims many on-the-job courses are being taught in the classroom alone.
"The cuts in funding for the FE sector means that colleges are facing enormous difficulties in financing equipment for courses and are therefore being left behind where the latest technological developments are concerned.
"In fact, many colleges are already resorting to teaching vocational courses on a theory-only basis, supported by occasional visits to places of work, which offer students the sole opportunity to see equipment in use - hardly a satisfactory state of affairs.
"The long-term effect is that colleges are increasingly reluctant to run industry-based courses and curricula offered by colleges are becoming funding-linked, instead of being based on students' needs."
The union is seeking a freeze on funding in real terms for a year before the proposed inquiry reports.
Meanwhile, NATFHE has increased pressure over pension rights by applying for a judicial review of Government changes to early retirement regulations.
Education and Employment Secretary Gillian Shephard has already deferred until September moves to transfer the cost of early retirement from the pension scheme to employers.
But NATFHE leaders say they have legal opinion suggesting the moves exceeded her powers.
NATFHE general secretary John Akker said: "We are challenging the Government's decision in the courts to reverse what is a devastating blow to thousands of lecturers and teachers.
"Despite the DFEE claims, members of the Teachers' Superannuation Scheme have been led to believe by the TSS handbook that pension payments are available in the case of early retirement."