Ministers have given schools and colleges 18 months to revamp post-16 studies and offer broader pathways through AS-levels to both A-levels and general national vocational qualifications.
All students would be expected to take an additional diploma that would assess their literacy, numeracy and information technology skills.
But there will be no extra resources to meet the estimated Pounds 600m bill. Nor is there any sign of how the small sixth-forms - which ministers expect to emerge from parental demand and the Education Bill - could survive.
Under free-market arrangements, only the colleges and large sixth-forms are geared up for the changes, say critics who nevertheless welcome the reforms in principle.
The announcement came just days after ministers told Sir Ron Dearing's committee of inquiry into the future of higher education that the future supply of graduates is likely to outstrip the demand from the economy.
"There is a limit to how many graduates the economy can absorb before the increased productivity they generate starts to decline," said the Department for Education and Employment in evidence to Sir Ron.
The call for a squeeze has angered almost every commentator in further and higher education. They are agreed that without better planning and a strategic approach that is not purely market-driven, FE colleges will be the first to feel the squeeze.
It could be worse than the HE freeze imposed in 1994 when seven out of 10 FE colleges were forced to abandon degree and diploma courses. Many were run in association with the universities and were the first to be hit by cost-cutting.
Labour condemned the latest evidence to Sir Ron as "wrong-headed" and based on out-of-date research from 1981-1991. The shadow FHE minister Bryan Davies said: "All across the world, governments are responding to the demand for highly skilled people by increasing access to higher education. In the USA, participation rates have reached 60 per cent of high school graduates."
Tony Higgins, chief executive of the Universities and Colleges Admissions Service, said: "To say people are over-qualified for a job is to undervalue the jobs they are doing." He said a more imaginative approach was needed to higher education that would enable colleges to take many students on two-year HE sub-degree courses.
This is backed by Labour, the Association of Colleges and the lecturers' union NATFHE, all of whom call for a role for the FE sector in a rolling tertiary programme from school to university.
They call for better planning and co-operation between schools and colleges at A-level and GNVQ, coupled with a more strategic role in providing higher education locally.
Mr Davies said: "If you look at areas like Cornwall, the Lake District, Lincolnshire and Suffolk, where there is no university, the FE colleges are perfectly placed to meet the needs of many who wish to study locally.
"We need the combined and strategically planned efforts of schools, colleges and universities, flexible enough to meet the advanced and higher education needs of each locality."
Derek Betts, NATFHE's head of policy, said the post-16 reforms announced this week were long overdue but still failed to promote vocational qualifications and give them equal status with A-level. It would be seen as an option for failed students.