More money must be put into vocational training or the UK will be left facing a huge skills gap for years to come, college heads have warned.
Colleges 'teach skills to more people than businesses'
Ministers have set a target of halving the number of workers without basic qualifications by 2010.
But the Association of Colleges (AoC) says red tape is holding its 450 members back.
It claims current funding limits the number of extra adult students taken on each year to just 2% - or 60,000.
Freedom to compete
AoC chief executive David Gibson said: "The further education sector wants to continue to be innovative and responsive when it comes to meeting industry's training needs.
"Colleges need to be given the freedom to compete against private trainers on a national level.
Currently one in three adult workers does not have any qualifications or is qualified below GCSE level.
Ministers have accused colleges of failing to work closely enough with employers to meet their training needs.
But the AoC said there was a lack of commitment to training by businesses, both nationally and locally.
Mr Gibson said: "We need to dispel the government's rhetoric and make it clear that colleges do perform when it comes to delivering training and qualifications.
"A recent Adult Learning Inspectorate report commends colleges for their achievements in working with adults, and details that most adults aiming for a qualification are successful and that achievement rates are rising."
We need to dispel the government's rhetoric and make it clear that colleges do perform when it comes to delivering training and qualifications
The government wants to reduce the number of workers without qualifications equivalent to GCSEs by 40% by 2010.
This represents 3.6 million workers, 13% of the total workforce.
According to the AoC, the average amount of on-the-job training per employee in 2002 was only 1.8 days.
It said its colleges had provided three times more training for companies than industry itself - 200 million days, compared with 60 million by employers.