Ministers now concede that an over-reliance on testing the skills of employees has undermined efforts to create a vocational qualification suitable for anyone, including pupils and students. Their action goes far deeper than recommendations made in three official inquiries into post-16 education and training.

As a face-saving measure, the name of the much-criticised national vocational qualification will remain, but what has been seen as an obsessive testing of job skills will be dramatically downgraded.

Gillian Shephard, the Education and Employment Secretary, has told advisers reshaping vocational education that they must stick with the name, ensure that “competence-based” assessment is still prominent and keep employer involvement in training voluntary. Otherwise, she is understood to have told them, they can do what they like. As a result hundreds of other school and college skill-based qualifications could be brought under the one umbrella.

Top-level confidential talks with leading figures in vocational education and training were held last week. Ministers want to orchestrate a careful transition to a new framework and avoid accusations of a climbdown.

One high-level source told The TES: “Everyone knows the NVQ structure is creaking at the seams but no one in Government will publicly admit that it’s failing.” While ministers did not intend to abandon work-place competence testing, they saw it as having a reduced role, he said.

Their determination to take radical action is understood to have been strengthened by a confidential report circulating within the Confederation for British Industry showing that the strong employer support for NVQs is on the wane.

Growing discontent was also expressed during the three official inquiries by Sir Ron Dearing, Gordon Beaumont and John Capey into the 16-19 framework, GNVQs and the top 100 NVQs.

The National Council for Vocational Qualifications also had a disappointing five-yearly review last month when it was accused in a Government-commissioned report of failing to keep a grip on standards. This fuelled suspicion that the planned merger with the School Curriculum and Assessment Authority would turn out to be a takeover by SCAA.

The NVQ framework abandoned traditional exams for on-the-job assessment and is wholly employer-led. It was produced by the NCVQ, a quango created by the Employment Department, in 1986 when efforts were being made to distance the still highly influential education establishment from workplace training.

The council was told to make vocational qualifications relevant to specific jobs and clear the much-criticised qualifications jungle. It set up employer-controlled lead bodies to devise qualifications. But 10 years on, the number of qualifications has proliferated to more than 16,000, two-thirds of which are still outside the NVQ framework.

There are more vocational education and training schemes in colleges than there are NVQs taken at work. These lead largely to trade and professional qualifications which offer more flexible skills training than NVQs.

One senior adviser said: “The situation is beginning to embarrass ministers because it betrays a weakness. The only way out, while saving face, is to find a new way of drawing those qualifications into the system. This will put inevitable strain on the NVQ criteria.”

Ministers are concerned that many non-NVQ qualifications do not meet industry’s needs. While abandoning their tight grip on NVQ regulations, they expect new criteria to be tougher on the rest.

Twelve project teams are working on the reforms recommended in the three inquiry reports. They cannot alter the traditional A-levels but they can reform the other pathways to work and higher education.

One proposal is to have a range of NVQs, similar to the old mode 1 and 2 CSEs. If accepted, it would be ironic since this was a leading alternative to the NVQ 10 years ago.