Small or underperforming exam boards will be encouraged to wither or merge under a new system of controls over training qualifications.
A set of slimline standards for national vocational qualifications will effectively leave reform of the much-criticised NVQ system to the market.
Work is already advanced on innovative courses to bridge the gap between college-based general national vocational qualifications and workplace NVQs, as well as so-called "foundation" NVQs for the out-of-work student or trainee.
The reforms, believed to have broad support with the three main political parties, centre on a new standards system to combat criticisms that NVQs are too narrow.
They are expected to deal with the three main criticisms in the major review of NVQs by the Beaumont Committee last year. Employers were said to find NVQs "too bureaucratic", dependent on external assessment by people out-of- touch with the industry and dependent on standards which were too detailed and rigidly defined.
Ministers predict a boom in demand for vocational training, and hope to capitalise on it with a reformed NVQ system.
Under the new regime the Qualifications and National Curriculum Authority (QNCA) will hold a set of model standards for each subject area, drawn up by industry bodies.
Individual training and awarding bodies will design their own courses and qualifications, to be tested against the national standard.
Ministers hope the new regime will encourage more vocational courses to come under the NVQ umbrella. At the same time all publicly-funded vocational courses will have to be approved by the QNCA, increasing pressure for the qualifications to become NVQs.
The reforms will help counter criticisms that NVQs are too narrow to cope with industry requirements, and political attacks from those who point out that 16,000 courses and awards are still outside the flagship NVQ framework.
Setting a national "gold standard" for NVQs will help combat fears of unfair assessment methods and inconsistencies between awarding bodies.
Officials will also impose a strict separation of powers between training and awarding bodies to tackle fears of poor assessment. Employers will have to "opt out" of the requirements for external assessment, if they think it inappropriate. But they will have to present evidence which satisfies the QNCA that they should do so.
The huge number of vocational awarding bodies is also under fire. Ministers shy away from imposing one or two national boards, but are equally clear that the current proliferation of more than 170 awarding bodies will be cut.
They predict that the new standards regime will leave many of the smaller awarding organisations unable or unwilling to cope.
"We anticipate there will be some rationalising of NVQ awarding," said a senior DFEE source.
But despite past problems with NVQ standards and take-up rates, ministers are keen to emphasise the evolution they say has taken place within the system over the past 10 years.
The department is planning a hearts and minds campaign to win over sceptical employers, with a flurry of promotions to mark the 10th anniversary of NVQs.
An international vocational training conference is planned for November to promote and encourage world wide interest in the NVQ system, said to have a high reputation among some of Britain's foreign competitors.
"We are persuaded here that with these changes and with the demand there's a goodish chance of making this stick and increasingly building on it," the source said.
"We are very keen that we should capitalise on this watershed in the NVQ system to have a kind of relaunch to trumpet to the world that we have something which we are proud of."