The further and higher education minister defended the focus on boosting skills in colleges and said vocational training would save thousands of teenagers from a future in low-paid jobs.
He said: "We are focusing on skills and that, frankly, is the best route out of poverty I know."
However, some principals claim that they will struggle to meet the cost of even "priority" areas, such as 16-19 provision.
The Train to Gain scheme, which encourages employers to train their staff to level 2 (GCSE-equivalent), is expected to bring extra business to most colleges.
The Government has increased funding for the sector overall by nearly 50 per cent since 1999 but colleges claim increased demands have stretched these extra resources thin.
John Brennan, chief executive of the Association of Colleges, said that despite the funding increases, the demands were so great that many colleges had been forced to cut back on adult provision. He predicted considerable redundancies across the sector. Colleges this week received detailed budget allocations for 2006-7, leaving one in 10 worse off.
While level 2 training remains a key plank of policy, Mr Rammell said the Department for Education and Skills recognised that more needed to be done below this level.
Alan Johnson, the Education Secretary, told an audience at the Institute of Directors that he wants to see English and maths problems eliminated in the workforce by 2010.
Mr Johnson said: "Despite all our progress, five million adults in Britain cannot read and 15 million people - almost half the workforce - are not properly numerate."
"In the workplace, basic skills are a pretty fundamental requirement for success. We should make it our goal to eliminate all illiteracy and innumeracy in the adult workforce by 2020."
Mr Johnson also promised to spend pound;20m training more women to work in less traditional jobs such as building.