Colleges and universities should be given a free hand to collaborate on post-16 education and training without being dictated to by central government, Sir Ron Dearing insists.
But there must be a rigorous accreditation system and quality controls to ensure that national standards are maintained.
And there should be a curb on the creation of new universities and the widespread abuse of the title "university college" by FE colleges. The committee is concerned also about the misuse of the word "university" by company training establishments - a concern which throws into doubt the title of Chancellor Gordon Brown's proposed University for Industry.
A survey for Sir Ron's committee, carried out by the University of Manchester's centre for urban policy studies, exposed many inadequacies in collaborative set-ups. There were many weaknesses in associate degrees and the two-plus-two arrangements where the first half of an honours degree is taken at FE college.
It says: "Many higher education institutions are unpersuaded of the quality of the learning experience of students tackling HE courses in FE institutions and see the current issue of quality as being the key to the relationship between HE and FE.
It was widely argued that the two-plus-two system would lead to academic drift. There was also a reluctance in many universities to accept students from such college foundation programmes.
The franchising system, where colleges carry out part or all of the degree course for a university were often poor, done on the cheap and lacking in rigorous scrutiny by the higher education institution.
But such weaknesses would not be overcome by imposing a national model on universities and colleges. "There is little support for a formalised national structure of links between the various elements of HE," said survey project director Brian Robson.
"There is a recognition that regional contexts are sufficiently flexible to make any such national system unresponsive to the regional and sub-regional diversity of needs, opportunities and constraints."
Regions devised different solutions to collaborative needs. There were the "virtual universities" voluntarily developed through FE and HE links in Derbyshire and the "central" post-16 universities proposed for Cumbria and the Highlands and Islands.
The Manchester research underlines the Dearing committee's call for a division between university and college HE and a moratorium on FE colleges awarding degrees but an expansion of HNDs and HNCs.
FE staff responding to the Manchester survey saw little future in franchising and wanted locally-agreed collaborative teaching arrangements.
The survey concludes: "The healthiest relationship between HE and FE might therefore be seen as developing, on a non-exclusive basis, negotiations between individual institutions in which quality assurance mechanisms can be agreed I within a national or regional framework of quality standards."