Choice is an old word that has been given new life in the Department for Education and Skills’ five-year strategy. There are plans to widen the choices for young people by allowing more schools to open sixth forms and by opening more academies.

Contestability has more recent coinage. It isn’t that different from competition except that whereas policymakers dislike competition out on the frontline - between individual schools and colleges - the same does not apply when government making public funding more “contestable” dictates the competition from the top.

Governments do this by introducing competitive elements to their funding decisions. Institutions may be invited to submit a bid to explain why they would make the best use of the money. This sounds like free and fair competition but contestability implies limits. The Government might want the winner to refrain from taking advantage of their success and to work with the losing party. Competition, contestability: similar words, subtle differences.

This new direction in post-16 education throws up some unresolved issues.

After all, the Learning and Skills Council was given life only four years ago with a strong planning role. The LSC has more legal powers and a larger budget than its predecessors. The Secretary of State at that time - David Blunkett - set a clear expectation that “significant changes in the pattern of provision” would follow within a couple of years. Local LSC offices have taken steps in this direction. The pace of college mergers has increased and there have been a few new sixth-form colleges. From 2003, the entire LSC network has been reviewing local needs. These strategic area reviews are now reaching their conclusion. The LSC has kept to its timetable and can consider the outcome of the reviews when it makes its funding decisions in the 2005-6 spending round.

The challenge for the LSC in 2005 is that government policy appears to have moved on. The talk in 2001 was of rationalisation, but it is now about expanding choice. New places for 16-year-olds to study are being created in city academies, the new 16-18 academies in London and in secondary schools which report good GCSE results. This expansion is justified in terms of choice at a time when the total number of 16 to 18-year-olds in education is at record numbers and is rising.

The policy of institutional choice may have other unintended consequences.

People running schools and colleges take decisions for the best of motives, but they must take into account the impact on their institutions. Schools are sometimes accused of wanting sixth forms to make them look more attractive to parents of 11-year-olds; colleges of wanting numbers to cover the costs of specialist subjects. Both sets of accusations may be unfair, but in a world where choice predominates, perhaps the issue is irrelevant.

As long as the school or college has the capacity to teach 16-year-olds effectively and properly, then its motives for doing so do not matter. It is obviously essential that the 16-year-old has impartial and accurate advice about their options. Beyond that, though, the views of planners become irrelevant.

The increased choice of places to learn also has a price attached, which will generally be paid by the LSC. The council may not be able to plan but it is still expected to fund. Although it does not fund city academies, it does underwrite school sixth-form costs, at funding levels at least 10 per cent higher than that paid to colleges. School sixth forms already account for pound;1 in every pound;5 that the LSC spends. Increased spending on schools is an important explanation of the pressure on the LSC’s budget.

Further expansion will inevitably limit funds for other priorities.

The long-term costs and effects of the policy are also worth a mention.

Inertia gives schools an in-built advantage over the other choices for 16-year-olds. There will always be those who find it easier to stay than to go. Given this, it is likely that most of the new sixth forms will take off and will recruit classes. As the age group grows, this causes few difficulties for existing institutions. However, there are already parts of the country where the 16-18 age group is in decline. In addition, from 2010, this demographic decline will be more widespread. This will create new financial pressures on institutions, which will tend to lead to them dropping minority courses.

It is easy to foresee circumstances where more institutional choice translates into fewer choices overall. The lost opportunity in the years that follow will be in adult learning and skills. Given the context - short-term growth and longer-term decline in the 16-18 age group - wouldn’t it make most sense for the Government to invest in institutions that can cater to adults in the future rather than to put all its eggs in the schools basket?

Julian Gravatt is director of funding and development at the Association of Colleges