A free-market think-tank has recommended scrapping the post-18 funding bodies and handing Pounds 13,000 to everyone on reaching adulthood to fund education, training or apprenticeships.
Researchers from Reform said the Pounds 9.6 billion spent on capital and teachers' salaries should be handed directly to 18-year-olds to choose their own provision.
David Willetts, the Conservative shadow secretary of state for skills, launched the report, which presents a more radical view for FE than his speech to the Association of Colleges' conference last week.
Then he told AoC members: "We are going to cut through stifling bureaucracy by giving freedom to further education colleges. We want to free them up so that they can be the true community colleges I know they want to be."
The Reform proposals would mean apprenticeships and work-based qualifications would be accredited only by employers and colleges would be free to set their own salaries and fees, while the plans are also intended to open the system to more competition.
Britain's skills system was likened to an "unwieldy education maze" by the report's authors, pointing to four government departments and 29 quangos involved. "If Britain's productivity was dictated by the number of skills bodies it had, it would be a world leader," they said.
The report said national skills planning was "obsolete", citing the admission of Lord Leitch's review of skills in 2006 that no one could accurately predict the type of future skills needed.
Britain's labour market was local rather than national, the authors said, with fewer people moving for work than in the US or Europe. They argued that it was more important for colleges to respond to local demand than to have a national agenda set by quangos.
Giving industry the responsibility to develop their own respected, professional qualifications would also simplify the range of vocational courses and end the "series of artificial qualifications generated by bureaucrats", the authors claimed.
The new diplomas were following the same cycle as NVQs and GNVQs, the report said, with courses designed by government agencies despite claims of employer involvement ultimately failing to win the confidence of industry.
Barry Lovejoy, head of further education at the University and College Union, said a crude free-market approach was not the solution to the complexity of further education. He said: "It seems to be somewhat against the trend of developments in the economy, where we have seen more regulation, rather than less. It's deregulation that got us into this mess, it's a step in the wrong direction."