But businesses will have to wait for increased influence over courses, say ministers in response to Leitch
colleges and employers are to be allowed to create their own qualifications without reference to awarding bodies.
The qualifications will be overseen by the Qualifications and Curriculum Authority.
The scheme will be introduced on a trial basis, with the intention of extending it nationally if there are no major hitches.
The move has long been called for by colleges and acknowledges the fact that some companies already offer high-quality training that is not recognised by the state.
Previously, public funding was largely restricted to courses that led to qualifications drawn up by QCA-approved awarding bodies, including City amp; Guilds.
The new qualifications are part of a raft of measures announced in Parliament on Wednesday, in the Government's response to the Lord Leitch review of FE.
The report said the new qualifications are "part of the drive for self regulation for the FE sector. We would expect such qualification-awarding powers to be used to focus on gaps in the market where their is clear evidence of unfulfilled demand."
In the wake of the report, an employability skills programme will be launched for people on benefit, allowing them to qualify for a certification that proves their vocational skills. Fifteen thousand people are expected to be on the programme in the first year.
Also, a "skills account" scheme intended to put spending power in the hands of potential adult students will be set up. This comes five years after the closure of the ill-fated Individual Learning Accounts scheme, which was discredited after widespread abuse by fraudsters and bogus training outfits.
On opening an account, adults will get access to a "universal adult careers service".
Other Leitch recommendations to be implemented include establishing a Commission on Employment and Skills to increase the involvement of employers.
There is also a commitment to encourage employers to invest more in skills at all levels, with the possibility of levies if agreed by industry sectors.
There could be an entitlement to training up to level 2 (GCSE-equivalent) in the workplace if sufficient progress has not been made in this area by 2010.
Private training providers protested that ministers had watered down Leitch's position on putting employers in the driving seat Leitch had said adult skills should be fully "demand led" by 2010.
But ministers believe that such rapid change would be too risky for colleges. Instead, the Government wants to move towards a demand-led system without the pressure of Leitch's proposed deadline.
The Association of Learning Providers, which represents vocational training organisations, and whose members are largely from the business world, said it was baffled by the Government's risk-averse approach.
Graham Hoyle, the association's chief executive, said: "We have the capacity to meet expanded demand, so why not let us get on with delivering it?
"If some providers are not ready to respond to Leitch's blueprint for adult skills, then there are plenty of others who are.
John Brennan, chief executive of the Association of Colleges, said: "Colleges would like to see stronger mechanisms to unleash employer investment in training.
"Further debate on the use of levies and a licence to practice [for lecturers] are welcome, as is the new Commission for Employers and Skills.
"But there remains an urgent need to streamline and simplify the operation of skills delivery."
Alan Tuckett, director of the National Institute of Adult Continuing Education, said: "This report is something of a relief. We were concerned that adult learning might be subsumed in an employer-led strategy."