Colleges, schools and the private sector will be forced to compete to run new sixth forms, the FE white paper will reveal when it is published in 10 days.
Ministers will also announce plans to pay for every person under 25 to take a full level 3 (A-level-equivalent) qualification if they have not got one and wish to do so.
Consideration will be given to reviving Individual Learning Accounts - grants for training in much-needed skills and key areas of adult learning.
But they will be much more tightly controlled than previously. The original scheme was scrapped in 2001 following revelations of at least pound;100 million in fraud.
A Department for Education and Skills source told FE Focus: "For god's sake, don't call them ILAs. Clearly, we won't want to make the same mistakes as last time."
The white paper will also recommend further changes targeting 14 to 19-year-olds and aimed at getting 14-19 diplomas into place.
There will also be further incentives for employers with the nationwide launch of employer training pilots - now called "Train to Gain" - which will pay firms to train staff to level 2 (GCSE equivalent).
But there will be little or no new money before 2008-09. The Treasury is considering plans to boost the pound;399m Train to Gain cash by about 10 per cent in the Budget next Tuesday. However, the white paper will do little more than "redescribe" what is already there in current spending plans.
For example pound;750m is earmarked for "employer focused" work. But it is not new.
Colleges had been hoping for bold reforms following recent pronouncements from Ruth Kelly, the Education Secretary, that the time had come for FE and skills. Gordon Brown, the Chancellor, is also backing a strong push for greater investment in FE and skills.
However, leading figures in colleges who have seen drafts of the white paper, say it is neither radical nor backed by new cash.
A DfES source said: "One reason why ministers are writing it is to lever some more money into the sector when it is available."
The white paper is not expected to lead to new legislation.