The report by the Tomlinson Committee on special needs provision in the further education sector says strict funding rules which have left many students with disabilities taking inappropriate qualifications should be reinterpreted.
That would allow colleges to claim cash from the Further Education Funding Council for courses designed for people who are maintaining their skills rather than acquiring new ones, helping them transfer existing students to more suitable programmes and attract new enrolments.
However other recommendations in the study, including a proposed mass staff training programme have prompted warnings from the new Association of Colleges that other new money will be needed. Chief executive Roger Ward welcomed the aims of the report but said: "The government must commit itself to providing the resources, both capital and recurrent, to make all of this happen."
The report, based on more than three years' work by the committee and hailed this week as a landmark by chairman Professor John Tomlinson, contains over 50 recommendations.
It sets out measures to improve the quality of learning for the estimated 130,000 students with learning difficulties or disabilities already studying in FE colleges and to widen participation by people with special needs.
The study acknowledges that inspection evidence shows disabled students currently get a poorer deal in colleges, and that some institutions do not fully meet their needs.
The FE sector is meeting its legal obligations towards students with special needs and has made considerable progress, but still needs to make a fundamental shift to ensure the way each individual is assessed, taught and supported matches the way they learn best, says the report.
Among the key recommendations given top priority by Professor Tomlinson are a plan for a Pounds 5 million three-year national staff development programme and a strengthened inspection framework paying more attention to colleges' track record on matching teaching to the learning needs of all students.
Moves to increase participation will require colleges to focus more clearly on reflecting the profile of their local area in terms of special needs when drawing up strategic plans. In a proposal that tallies with the Labour Party's proposals for a beefed-up role for the FEFC's regional arms, colleges will also be encouraged to collaborate with neighbouring institutions and other agencies under the supervision of proposed new FEFC regional sub-committees charged with monitoring participation.
Gaps might be filled with help from a proposed Pounds 3 million pot of start-up funding, distributed over a possible five years.
FEFC chief executive Professor David Melville acknowledged some of the recommendations, which are not costed in the report, would have financial implications for colleges, but said the proposals would be included in the Council's submission to ministers on the 1997-8 public spending round.
Professor Tomlinson said much of the change suggested could be achieved using existing resources, though he admitted some of the funding for staff development - the recommendation with the highest price tag - would have to come from within the sector.
A consultation on the report expected this autumn will reveal whether colleges feel they have the resources to foot the bill, or echo AOC reservations.
Professor Melville highlighted the new cash set to flow if funding rules were reinterpreted to embrace more courses suitable for people with disabilities.
Mike Austin, principal of Accrington and Rossendale College, said the sector would welcome the proposals on course funding. He said: "There are large groups of students for whom progression to an examination course is just not on. On the other hand they are being mentally stretched by acquiring new skills at their current level."
Sadie Walton, new principal of Stourbridge College and Britain's first disabled woman principal, also praised proposals for a pre-foundation level course suitable for people with learning difficulties. "That is crucial in order to recognise the tiny steps these students take," she said.
Efforts to match colleges' provision to need in their local community were welcome, she added, but would require teeth to ensure they were enforced.