Private agencies would be able to compete with schools and colleges for government cash to run further education courses, and all education and training providers would be paid under the same funding formula. It would include a large element of payment by results.

The Government’s competitiveness White Paper Mark 2 proposes a “level playing field” for the funding of 16 to 19 studies, which would be policed through a tougher inspections framework, scrutinising the careers advice and guidance all young people should receive.

Government moves to crack-down on schools which try to prevent FE colleges recruiting their pupils were announced by education minister Tim Boswell in advance of the White Paper. He launched a review of the procedures under which information about colleges is passed on to pupils.

Ministers are concerned over the persistently high drop-out rates after a year of post-16 education and training. Although a record 89 per cent stayed on last year one in eight students dropped out by the age of 17.

Terry Melia, chief inspector for the Further Education Funding Council, welcomed the review. He said: “Better guidance will reduce the number of 16-year-olds being enrolled inappropriately on A-level courses on which they are unlikely to succeed.”

Colleges which felt the dice were loaded against them were promised action in the White Paper. But that action is not all to their good. While schools would no longer receive preferential funding - up to 50 per cent more than colleges - for A-level candidates, they would be freer to open sixth forms.

The virtual monopoly over FEFC funds that colleges enjoy would go. At present, if adult education centres or private training agencies want to bid for FEFC cash, they must do so through a college. Under the White Paper proposals, anyone could bid for cash directly.

Funding differences among schools, colleges and other trainers, and the regional variations in the cost of identical courses have been among the biggest barriers to the Government’s wish to introduce learning credits or vouchers which would allow young people to buy courses direct (see story right).

Another barrier has been the lack of a guarantee that careers advice is impartial. Further legislation is, therefore, being considered to improve this.

The School Curriculum and Assessment Authority will be asked to develop guidance on schemes to improve pupils’ negotiating and decision-making skills.

Gillian Shephard, the Education Secretary, said that when young people were making a choice of further and higher education courses, “they have to be equipped to make sensible choices. Negotiating skills mean we want young people to understand their own abilities and have the skills to make the right choices for their own futures.”

Under the tougher inspections regime, schools would have to demonstrate their awareness of the needs of the labour market and give evidence to show that they had provided “good careers education and impartial guidance”.

To improve the relevance of education and training to the labour market, links would be strengthened between inspectors from the Office for Standards in Education, the FEFC and the Employment Department.

Some of the efficiency measures, such as sixth-form funding that reflects performance and the proportion of students recruited and retained, are already being planned by Welsh Secretary John Redwood (TES, May 19). These are being looked at by the DFE. But the White Paper proposals are a radical step further.

Plans to deregulate the post-16 education market came under immediate attack from the Labour party. Shadow further and higher education spokesman Bryan Davies said: “We need mechanisms for collaboration and coherence, not more ruthless competition.”

Graham Lane, education chair of the Association of Metropolitan Authorities, said the Government was using the rhetoric of efficiency “to drag down spending on pupils in sixth-forms to that on students in FE colleges”.

The unions and professional associations were similarly sceptical of the proposals. Ngaio Crequer, communications manager for the Association for Colleges, said: “Much of it is a rehearsal of things already going on. You can feel the padding but cannot sense the thinking.”

There was, however, overwhelming support for the new education and training targets (see story below). Tina Townsend, chief executive of the Business and Technology Education Council, said: “History will judge this proposal as a major milestone in British education. We need engineers who can explain themselves, artists who can add up and chief executives who can use computers. ”

White Paper key points

Key points in the competitiveness White Paper Forging Ahead:

Ministers will:

* legislate to improve the careers service;

* ask SCAA to improve pupils’ negotiating and decision-making skills;

* publish data on achievement and career routes from schools and colleges;

* strengthen the role of inspectors in policing careers advice;

* investigate a common funding formula for schools and colleges;

* legislate to allow new FE providers to bid for Government cash;

* consider relaxing controls on applications for new sixth-forms;

* legislate to remove borrowing restrictions on GM schools.

The new national targets for education and training are:

* all employers to invest in staff development;

* all individuals to have access to training for recognised qualifications;

* develop self-reliance, flexibility and breadth in individuals.

Targets for Year 2000; Foundation learning:

* 85 per cent of 19-year-olds to have five GCSEs grade C or above (or GNVQNVQ equivalent);

* 75 per cent at 19 to have GNVQ level 2 competences in communication, numeracy and IT; 35 per cent to have these skills at level 3 by 21;

* 60 per cent at 21 to have two A-levels (or equivalent).

Lifetime learning:

* 60 per cent of workforce to have NVQ level 3 (or equivalent);

* 30 per cent of workforce to have NVQ level 4 or above (vocational, professional, management or academic);

* 70 per cent of organisations with more than 200 staff to be Investors in People.