She hinted that the reform of student grants and top-up fees expected in Sir Ron Dearing’s report on university funding could help fund Government plans to promote cradle-to-grave learning.

And she called on employers to do much more to support their staff’s education. “Employers are not making a contribution and they should be, and those in higher education who can afford it must pay more,” she said.

Launching her report into widening participation in further education - the contents of which were exclusively revealed in The TES on May 23 - Ms Kennedy pointed to possible proposals in the Dearing report as she called for new investment in FE to increase life chances. She said money was needed to redress the balance between education’s haves and have-nots.

She wants a change in priorities in favour of those who have lost out in education, as well as a reshuffle of existing college funds and cash from the National Lottery. She hinted strongly that Sir Ron’s report - due out on July 22 - would help ministers tackle the problems of higher and further education funding.

She said: “Government has to put more money into this. We need more than good words.” She had worked with the Dearing committee and explored the possibility of charging fees for higher education. But she stressed that raiding university budgets to pay for expansion was not feasible.

The 116-page report, commissioned by the Further Education Funding Council, contains 80 detailed recommendations to increase participation in further education. The main points include:

* Education to A-level standard for all - free for those with no qualifications or on low incomes.

* Learning centres to be set up in every firm employing 200 people or more. Companies to get tax breaks to encourage education and training.

* Create a level playing field for post-16 funding and student support, but give priority to education and training up to A-level or its vocational equivalent.

* A Learning Nation Fund to be set up with National Lottery cash after the millennium.

The report says: “The shocking fact is that support for students is heavily weighted towards those who personally benefit most from education and whose family circumstances are most favourable to continuing in education.

“Like the trickle-down theory of economics, there is a trickle-down theory of education - that concentrating the bulk of educational investment in the top cohorts produces an excellence which permeates the system. For centuries, this thinking has blighted not just the British economy, but the whole of British life.”

Ms Kennedy said her report was “in touch with the spirit of the times”.

Education Minister Kim Howells said the document would “resonate through the world of education and training . . . It points to shameful inadequacies of parts of our compulsory education system; to the extent of the waste in this country of the creative potential of so many young men and women and to the socially divisive consequences of that waste. I am determined that all of us - government, those who work in FE, local authorities and businesses - will give the sector the encouragement, ideas and resources to meet those challenges.”

But Liberal Democrats said the report had failed to grasp the funding nettle. The party’s FE spokesman, Phil Willis, said: “Potentially Helena Kennedy has thrown a funding grenade into the post-16 sector and the explosion will be heard throughout the length and breadth of Britain.”

The report gained wide support within education. Alan Tuckett, director of the National Institute for Adult Continuing Education and a key Government adviser, said: “The report offers challenge after challenge that, if accepted, would improve enormously learning opportunities for adults.”

Professor David Melville, chief executive of the Further Education Funding Council, which commissioned the report, said it was a “visionary” document.