Last week, Charles Clarke announced his progress report on the skills strategy, which aims to boost the nation's skill levels and make Britain more productive and competitive. A pivotal issue is not just how to encourage the take-up of vocational qualifications, but how to make sure they meet the needs of employers and the economy.

The debate over how to rationalise the alphabet soup of vocational qualifications has been raging for over a decade. Log on to the Learning and Skills Council's database and you will find a total of 85,669 qualifications – a high proportion of them vocational. Statutory organisations, professional and awarding bodies are offering qualifications that are baffling to students and employers. With such a wide variety on offer, qualifications oftenoverlap, and there is no comprehensive framework in place.

The challenge is not just to streamline the system, but to make it flexible, so that employers and students can customise qualifications to fit their needs needs, instead of being stuck with a "one size fits all" approach. Surveys of employers show that they place great value on vocational qualifications, but national qualifications often fail to meet their needs – a clear signal that the current system needs reform.

Ivan Lewis, the Minister for Adult Skills, says that employers have a right to expect an education and training system that is sensitive to their needs. This may mean "unitising" National Vocational Qualifications so that people can put together a hybrid package composed of different units. But there are inherent design faults that limit the combination of NVQs with other qualifications: many units are not free-standing. This is why large companies often commission awarding bodies to devise qualifications to fit their own requirements. The funding system for education institutions has not been sufficiently flexible to adapt to the notion of "hybrid" qualifications, either.

What employers, and students, want is fit-for-purpose qualifications, not an extensive menu of non-negotiable options. This could mean a core set of units with various options developed for particular industries. Whatever, it is time for a radical rethink of the design and regulation of vocational qualifications. Tinkering with the system will not work. The aim is that by 2010 we will have a modern, responsive, easily understood system of vocational qualifications with clear branding, which meets the needs of the economy, employers and students.

The writer is head of the Learning and Skills Development Agency