Students should receive loans like their HE counterparts, colleges should be allowed to develop and accredit their own qualifications like universities and more information should be published about providers' performance, according to the paper by Alison Wolf, who is Sir Roy Griffiths professor of public sector management at King's College London.
Key to reform is the need to create a system that is genuinely responsive to learner demand rather than central government policy, Professor Wolf claims.
"The more individual learners decide where they want to go and where to pay their money, the better the system will be," she said.
The paper, titled How to shift power to learners and published this week by the Learning and Skills Network's Centre for Innovation in Learning, recommends extending the loans system currently available to HE students to those studying longer courses in FE.
But for shorter courses Professor Wolf recommends funding through learning accounts, which would allow the state, employers and individuals to put money in and make withdrawals to pay for courses.
"Cash is king. If you really want to give people control then they need cash," Professor Wolf said.
The paper argues that an FE market built on student choice must be underpinned by more and better available information on outcomes for courses and institutions. Colleges should be free to offer courses to meet demand and to enable this they should be licensed or quality approved at institutional level.