Ministers are proposing to protect private English language schools by allowing them to take foreign students without having to meet minimum quality standards.
A proposed new registration system for language schools, while making it harder for bogus institutions to operate as a front for illegal immigration, would still allow sub-standard colleges to sign up thousands of foreign students.
A "regulatory impact assessment" from the Department for Education and Skills says compulsory accreditation would be an unfair burden on colleges.
Instead, it proposes voluntary registration granted to any college which can prove it exists. Once colleges have registered, students from outside the European Union will be able to get visas to study at them.
It is estimated that there are 600 English language colleges without accreditation, mainly in London and the south-east.
The paper, produced for the DfES by PricewaterhouseCoopers, says:
"Mandatory accreditation of all learning providers could put many providers out of business if the standards were too high. In addition to the direct economic losses of those businesses failing, it may be that the sector could not then grow sufficiently to meet the expected increase in demand from overseas students."
This position directly contradicts statements made this year by two secretaries of state in the House of Commons, In April, Education Secretary Charles Clarke told MPs: "There are a number of private English language schools already accredited by the British Council who will automatically be registered.
"Other private colleges offering genuine educational opportunities will have nothing to fear and will be included in the list following an accreditation process."
And in the same month, Home Secretary David Blunkett said: "By the end of the year, we will be issuing visas only to students attending accredited colleges."
A Home Office spokeswoman later said Mr Blunkett meant registered, not accredited.
The development has angered the Association of Colleges, which had hoped for a crackdown on cowboy language schools. Jo Clough, the association's international expert, said: "AoC believes this is not an acceptable or ethical argument. Any institution not up to core minimum standards should not be allowed to trade."
Tony Millns, chief executive of English UK, representing 330 accredited English language centres, criticised the report for going soft on substandard institutions. Its formal response to the consultation says a compulsory quality accreditation scheme is "the only option", even if it is phased in.
A spokeswoman for Natfhe, the lecturers' union, said: "We already have a voluntary system and it doesn't work. We would join the AoC in calling for a compulsory system with accreditation."
A DfES spokesman insisted quality controls would be imposed, despite the clear advice to the contrary in the report, seen by FE Focus. He said:
"English language schools, which have been of particular concern, will be subject to a higher degree of scrutiny which will include consideration of the quality of education offered."
Prime Minister Tony Blair wants 75,000 more non-EU students to be studying in the UK by 2005.