Tertiary education providers are failing those who need it most, a Government-funded think-tank says.

The Centre for Teaching Excellence Ako Aotearoa has found only 39 per cent of the 160,000 students dubbed "priority learners" are passing their courses.

Priority learners are students who take New Zealand Qualifications Authority level 1-3 qualifications at polytechnics, private training organisations, wananga, and a small number of universities.

These qualifications – such as pre-apprenticeship training, or employment skills courses – are designed as a step towards higher diploma or degree-level tertiary education or work.

But, in a report released today, Ako Aotearoa's working group found just over a third of students who started a course in 2006 had finished, and the certificates were of questionable benefit.

The Government needed to put pressure on tertiary education institutions to provide outcomes, and consider how funding could be better spent, the Lifting Our Game: Achieving greater success for learners in foundational tertiary education report said.

"To be blunt, providers whose programmes are not meeting the needs of priority learners need to be challenged to improve their performance, and if they cannot, then they should not be offering those programmes."

Ako Aotearoa director Peter Coolbear said the Government's tertiary education strategy made it very clear that students should be achieving qualifications at level 4 and above. The lower-level courses were supposed to funnel people through.

"The bottom line is, we're not sure this is working. We have got to be much clearer about what these programmes are for, because they are meant to lead to other qualifications or jobs in the industry – but there is no data to show whether they are."

The differences in quality between providers was "immense", with only 10 per cent of students completing one institution's course. The highest pass rate gained by any provider was around 80 per cent.

Tertiary Education Minister Steven Joyce said he agreed with the report, and the Government was focused on tightening up foundational level tertiary education to make sure the $115 million a year was well spent.

New initiatives included only funding full qualifications of 40 credits or more with embedded literacy and numeracy aspects, and making a third of tertiary funding contestable and subject to performance, he said.