Schools with sixth forms are refusing to work with neighbouring secondaries and colleges because of concerns that they will lose pupils and funding, a new report has warned.
The Assembly government's much vaunted 14-19 learning pathways policy was designed as a way of increasing pupil choice in schools and colleges and increasing collaboration between post-16 institutions.
But Estyn inspectors found that although a wider choice of vocational courses is having a positive impact on student achievement, attendance and behaviour, very few colleges and schools are working together effectively.
No schools and colleges have yet set up formal arrangements, and those that are working together are not doing enough to track learner progress or evaluate the impact of their provision, the report says.
It says some schools are resisting efforts to collaborate, and some are actively discouraging their pupils from choosing courses offered by other sixth forms, concerned it will lead to a drop in their pupil numbers.
Their headteachers fear that this will affect their per-capita funding and reduce their capacity to retain teachers.
A leading 14-19 expert told TES Cymru the situation will only change when funding mechanisms are reformed.
Professor Gareth Rees of Cardiff University's school of social sciences and one of the authors of the Nuffield review of 14-19 education said: "Collaboration is crucial, but the fact is that school funding remains on a per-capita basis and encourages competition between institutions.
"It's ironic that this policy is collaborative while the system is still competitive. Until we change the basis of funding so it becomes dependent on collaboration then we are going to have these tensions."
But Welsh headteacher Brian Lightman, general secretary-elect of the Association of School and College Leaders, urged patience.
He said: "School and college leaders are very supportive of this agenda, but you can't expect it to happen overnight; it's incredibly ambitious, isn't cheap and takes time.
"Further collaborative links will develop with careful planning and more certainty of funding."
However, he dismissed the finding that heads were discouraging their pupils from studying elsewhere.
"Heads want students to follow the most appropriate courses for them wherever they happen to be based," he said.
The learning and skills measure that underpins the learning pathways policy states that by 2012 all local networks must offer a minimum of thirty courses to learners, including a minimum of five vocational options.
This year more than 2,000 vocational courses are available to learners across Wales, compared to less than 1,000 two years ago.
Estyn says this is having a positive impact on students, and in most schools the availability of level 1 and 2 vocational courses has contributed to improvements in attainment, attendance and behaviour.
But while most schools already meet the minimum 2012 requirements, there are doubts as to whether many of the vocational courses can be sustained in the long term.
Too many courses have limited viability because they attract only a small number of students, and are funded by grants instead of mainstream funding.
Inspectors also found that most schools and colleges effectively plan and deliver the `learning core', a set of skills, knowledge, understanding, values and experiences that all 14-19 learners need.
This is especially effective where learners are studying the Welsh Baccalaureate.
The report makes a number of recommendations that would help expand choice and flexibility and improve the learning core, including closer collaboration and planning between providers, and ensuring that all learners receive impartial advice on their options.
Ann Keane, Estyn's chief inspector, said: "Significant progress has been made by schools and the post-16 sector in widening choice and implementing the learning core for learners aged 14-19.
"These learners now have more opportunities and experiences to help them develop the wider skills needed for life and work, as well as the support and guidance to help them reach their potential. With stronger collaboration between schools and colleges and better evaluation, learners will reap even more benefit."
An Assembly government spokesman welcomed Estyn's finding, and said: "As 14-19 Learning Pathways is rolled out further it will continue to provide more opportunities for the young people of Wales."
Original headline: Estyn finds funding worries scupper 14-19 collaboration