Lecturers should be given more say in public policy for further education, a report by the City amp; Guilds centre for skills development says.
Interviews with training providers and college staff found they feel they are not trusted by the system and that the target-led culture may be keeping them from helping people to find work and employers to get skilled staff.
In fact, the report said, providers were ideally placed to help the Government understand the needs of local employers and the three-fifths of the workforce who work in small or medium-sized businesses.
Kate Shoesmith, senior policy and practice manager at the centre, which is the research arm of the City amp; Guilds awarding body, said: "With so many people employed by small firms, it's incredibly important for those firms training needs to be dealt with effectively.
"Colleges and training providers understand those needs far better than government, which necessarily has to look at the bigger picture."
Practitioners' local knowledge, understanding of their students motivation and links with employers meant it was a mistake to neglect their voice, the report said.
Lecturers and heads of department told the researchers that they were unduly restricted in their options for students who had a bad experience of school. The insistence on heavily theoretical work, even in vocational courses, might be driving away recruits, they said.
"Most of the people we spoke to felt that the Government was hitting the target but missing the point," Ms Shoesmith said. "Literacy and numeracy are important, but the present system is, frankly, terrifying for people who already feel left behind by school."
The report said a substantial number of students would not be served by the 14-19 diploma or apprenticeships. "An alternative qualification still needs to be available," it said.