The border between England and Wales is, for further education, becoming a fault line: the Welsh Assembly government is planning changes which will leave colleges on either side with radically different powers.

While the Coalition in Westminster promises ever-increasing autonomy for colleges, in Wales the Labour-Plaid Cymru Government is threatening to dismantle the independence they have enjoyed for 17 years.

Leighton Andrews, the Welsh Assembly minister for children, schools and lifelong learning, has appointed a review group to investigate proposals for new governance systems, which is due to report by the end of the year.

Headed by the former Niace Dysgu Cymru director Rob Humphreys, who now works at the Open University, the review promises to be more radical than the conclusions of an earlier stakeholder group, which were described by the minister as “evolutionary rather than revolutionary”. Bringing an end to incorporation is part of the brief.

Announcing the plans, Mr Andrews was careful to praise colleges for their performance. He said: “They have supported skills development, broadened curriculum options for young people and offered learning opportunities to a huge range of people of all ages, background and experience.

“They have made an enormous contribution to our ambition to improve social justice and enhance the skills base of the Welsh workforce.”

But the praise left Colleges Wales wondering what the rationale for such an upheaval was, if they had been doing such a good job under incorporation.

Mr Andrews said the changes were necessary as 14 to 19 provision has grown in colleges, and there is a need to balance accountability to business for work-related training against accountability to parents.

He said: “Do the current arrangements sufficiently reflect the accountability to local communities for that activity - as well as reflecting accountability to local employers for the work-related training which further education also offers? This is the question of balance of accountability which I think we need to explore.”

Unions reacted with delight to the prospect of ending a policy that was a huge obstacle to enforcing effective national agreements on pay and conditions.

Barry Lovejoy, head of FE at the University and College Union (UCU), said the announcement was a high point for lecturers in Wales, but warned that the battle was not yet won.

He said: “There is a commitment to ending incorporation. They are going to have to be vigilant in putting it through.”

Members at the UCU’s recent annual congress had also bitterly criticised the current governance arrangements across the UK, arguing that governors formed self-selecting cliques that were not accountable to their communities.

Guy Stoate, president of UCU Cymru, said that the new system should put the needs of students, rather than employers, at its heart and give “genuine, democratic accountability” in return for the millions of pounds invested by taxpayers in colleges each year.

It was a view shared by other unions. Dr Philip Dixon, director of the Association of Teachers and Lecturers Cymru, said: “Totally independent corporations simply don’t fit in with the Welsh education agenda, which is based on collaboration and co-operation.”

But Sylvia Davies, communications director for Colleges Wales, put it the other way around: since colleges are already co-operating successfully in Wales, what problem is this intended to solve?

She said: “We have asked that question and we have never been given an answer. We asked both Plaid Cymru and Labour and we got such vague answers.

“We get fantastic inspection reports, they’re going up. They have welcomed our self-regulation proposals. As a sector, we’ve done better than others, we’re outperforming the others.

“Colleges have forfeited their commercial interests and are sharing sensitive commercial benchmarking information so they can identify best practice. They’ve given up on competition.”

Of Plaid Cymru, she said: “The issue they’ve got is on principle, regardless of outcomes. In principle, we are not elected, therefore we’re not accountable. But we are accountable to Government for all sorts of things - there’s a huge list.

“Plaid Cymru, and I guess Labour, have got an issue with incorporation being a Tory legacy.”

Ms Davies said the minister had assured them that the review would not simply be a retrograde step: he has ruled out a return to local authority control. “If it was a choice between local authority and how we are now, we’d choose the status quo,” she said.

The minister’s statement hinted that he wants to find an alternative to either local government control or directly running colleges from the centre.

He asked the review to look at “social enterprise” and co-operation.

Mr Andrews said: “The review panel will look at the breadth of social enterprise models here in Wales and beyond, to see how they might enable the further education sector to continue to meet the needs of citizens and key stakeholders.”

Social enterprise - businesses run for social benefit rather than profit - fairly accurately describes what incorporated colleges have been doing since before there was a buzzword for it, however.

One clue as to what a de-incorporated future might look like can be found in the origins of the review: the manifesto for the leadership of Welsh Labour belonging to the new first minister, Carwyn Jones.

In it, he promised: “Ending incorporation of FE colleges, with reforms to governance structures to give proper representation to staff, students and communities and an all-Wales contract for FE lecturers.”

The most significant change might prove to be the last in that list: not the new governance structure, but the intention to bind colleges to a single, nationally negotiated contract.

Since most of the money in FE is in staff costs, taking away colleges’ right to decide terms and conditions will severely restrict their freedom of action while giving back trade unions their strongest card. Principals could end up looking over the border from England with concern, lecturers with envy.

But a least the diverging paths of Wales and England offer some prospect of settling the question of whether incorporation was a step forward or back. If colleges on one side of the border start to out-perform their neighbours, the answer may become unavoidable.