I hope you have seen sufficient evidence to satisfy you that these were not empty or shallow gestures. Certainly, viewed from the council’s perspective we know we have gained much from the efforts of you and your colleagues.

We are currently examining how we might develop to a second and more advanced level of accountability and openness, and before too long I hope it will be possible to say more on that front.

How we carry out our work is important. Nevertheless, it is of second order to what the council does to influence you and what behaviour you follow.

The preferred mode of influence is summed up by economist Adam Smith’s metaphor of the hidden hand through which imperfections in the supply and distribution of goods could be remedied in the marketplace - a hands-off position whereby the council would not intrude into the internal management and organisation of colleges.

It would endeavour to create conditions through its deployment of funds, which would themselves promote expansion, effectiveness and efficiency. A passive, but informed relationship would be the norm of council behaviour. The council would only seek to intervene when the outcome in an area was operating against the needs of the individuals in that area or the sector overall.

The coincidence of benefit by individual colleges and by the sector overall cannot always be assumed to be identical. There will be occasions when those in a single college see corporate advantage in activities which, if replicated throughout the college sector, would not be to its advantage. In mitigation we could say that it is not the task of any one college to be the custodian of the national good. It has narrow, more specific, objectives.

There will also be occasions when a college may argue that as the position it is adopting is legal, that alone justifies its actions. Such an example could be a decision by a college to give no remission of fees to adults irrespective of their personal circumstances and to seek to charge the maximum possible fees to all.

Replication of this throughout the country would cause concern, inducing a sense of injustice leading the Government to do something.

Just as there are actions which, if taken by an individual, are legal but wrong, so too there are corporate actions which are legal but unacceptable.

Franchising is an area of activity developed in places to bring higher education into a locality, for students to pursue courses of study where they cannot go to a university campus. This has been extended to FE. However, there are occasions where it is duplicating provision elsewhere.

The greater the distance between the college in whose name it is being provided and the activity itself, the more the conditions in which malpractice can grow.

There are several things to consider: Is there proper assurance over who is in control? Are public funds being used properly? Is the principle of only paying once for the service at risk of being breached?

Some colleges want guidance on funding. One possibility is to enter into formal arrangements through a memorandum or agreement for evidence of a channel for funding arrangements.

The more the council places reliance on expansion then the greater the evidence required of that expansion - that is, evidence of your enrolments.

It could be said that some are doing predatory trading; not attracting new students but substituting by taking from others. There will always be those who want to transfer, but when the prime motive of such a venture is for substitution rather than development, questions arise.

If a student who is enrolled at a college is being provided for off-site (by another college), the strength of the new funding arrangements is that it will cater for that.

Difficulties arise if there are places you fund from different bodies, councils or managing agents - providing twice for the same students. There must be no double funding of students.

It is matters such as this which in the commercial sector would give rise to talk of business ethics, as of individual ethics. The difficulty for the college manager is the following multiplicity of interests to which he or she must have regard: * the corporation and its financial good health * the employers and parents who look to the college as a provider * the students who expect a satisfying education * the staff whose livelihood is drawn from the college * the broader community interests * the well-being of the sector.

They all are reasonable grounds for influencing the ethical behaviour of the college. The challenge for the manager is to strike a sensible balance between their different values, expectations and aspirations.

Sir William is chief executive of the Further Education Funding Council. These are extracts from his speech to the Association for College’s annual conference in Glasgow last week