The government has pledged to boost Britain's skills base with a "demand-led" approach and better links between employers and education.
Five million adults have no qualifications at all
Secretary of State for Innovation, Universities and Skills, John Denham, said the aim was to make the UK a world leader in skills by 2020.
The proposals include an adult careers service for England and individual "skills accounts" to fund training.
Colleges will have to change to be more responsive to learners and employers.
Speaking in the Commons, John Denham said: "We will bring about a skills revolution and close the gap between where we are now and where we need to be in 2020."
A key report on the UK's lack of skills, by Lord Leitch, recommended raising the age of compulsory education from 16 to 18. This has already been taken up by Prime Minister Gordon Brown.
The government also accepted a target Leitch set for 95% of adults to have basic skills in literacy and numeracy, with the aim of 1.1 million more people achieving this over the next three years.
Mr Denham said it wanted a "skills revolution", in which vocational training was "employer-led" and demand-led, so that colleges would aim to provide training in what local people or businesses wanted.
He announced the setting up a new careers service for adults in England, which would offer advice on training, job-seeking and childcare.
The number of apprenticeships would be increased and there would be a new entitlement for 19 to 25-year-olds to free training to Level 2, equivalent to five good GCSEs.
He also said a new UK commission for employment and skills, set up after a recommendation from Lord Leitch, would be reviewed in 2010.
Mr Denham told journalists he wanted a culture change, so if someone was moaning about being in a dead-end job their best friend would ask them what they were doing to improve their skills.
Skills accounts - giving them funding equivalent to perhaps £1,500 - would empower people to talk with colleges about what they wanted to achieve.
The other main plank of funding would be via employers through the Train 2 Gain programme.
Leitch had suggested directing all funding through that by 2010. The government's judgement was that it had to move more slowly so as not to destabilise colleges' funding.
But colleges that had thought they could get through the next three years unscathed "are going to have to change", Mr Denham said.
The Association of Colleges said it welcomed the government's plans.
Chief executive John Brennan said: "Colleges look forward to playing a major role in the delivery of the plan, and welcome in particular the commitment to pilot opportunities to develop their own qualifications, to extend the brokerage role of providers and the creation of a universal careers service."
However, they wanted to see more employers paying for training and being held accountable for the nation's skills.
CBI director general Richard Lambert said the system needed to give greater recognition to the £33bn spent by employers on raising workers' skills.
Otherwise there was a risk of "chasing qualifications for their own sake" with very little impact on productivity.
Ministers have said they are working on the detail of giving greater external recognition to employers' own training programmes.
But the National Union of Students was concerned that the demands of specific employers would have too significant a role to play, at the expense of individuals' development.
And the University and College Union (UCU), representing lecturers, said the government should give less attention to employers' demands and more to citizens' skills needs.
Shadow universities and skills secretary David Willetts said he completely agreed with the government that a demand-led and employer-driven system was needed.
"But in order to deliver that type of system we need a tough-minded and rigorous assessment of how our skills policies need to change, and in reality that is not, I'm afraid, what we've had today," he said.
The Liberal Democrats said the proposals amounted to a series of reannouncements.