Mandelson, who effectively became Deputy Prime Minister in the recent Cabinet reshuffle, is aiming for the policy to be published before Parliament breaks for the summer recess. Sources have described it as Mandelson's "pet project".
His proposals will focus on bolstering the nation's skills in response to the needs of businesses. This will involve the government providing training for young people and adults, based on an analysis of which sectors are likely to do well in coming out of the recession.
But college leaders have warned that the government must radically improve vocational qualifications if the plans are to succeed.
Malcolm Trobe, policy director at the Association of School and College Leaders, said the plans would require enhanced vocational qualifications.
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