Colleges should cut wasteful competition and pool resources to save minority courses from extinction, Baroness Blackstone, the education and employment minister in the Lords, told the APC.
And she said there would be talks with colleges and funding chiefs soon on "whether we have got the right balance between a market and a planned approach to the number and distribution of colleges in the FE sector".
"Should we - in Barbara Castle's very helpful phrase - at least be applying more of a 'touch on the tiller' to encourage sensible organisational changes which promise more effective and efficient provision."
Her call to collaborate chimed with pleas from college leaders who recently argued that the rigid market model forced often unwelcome and wasteful competition, often undermining plans to merge or amalgamate. As a result expensive courses such as engineering and construction were in decline.
Lady Blackstone recognised that it would not solve the wider financial problems of colleges and promised the wider issues would be looked at in consultation with management and staff associations.
"Such collaboration is not a universal panacea, but it could certainly be useful in some circumstances," Lady Blackstone added. She also called for colleges to review their methods of disseminating good practices. "It could be helpful to the development of such collaboration, which would increase the cost-effectiveness of such collaboration."