The formula is designed to end anomalies which lead to schools receiving more cash than colleges for the same work.

Schools receive about 13 per cent more than colleges for educating 16 to 19 year-olds, according to a recent report by the Learning and Skills Development Agency, commissioned by the LSC.

David Hughes, of the LSC, who led an inquiry into post-16 funding, believes mechanisms to close the gap are ready to be put in place. He has been working with college principals and education department officials on the funding aspects of the LSC’s Agenda for Change (see FErret, below).

He said: “We think we have come up with a single funding system that does address those technical anomalies that are responsible for a large part of the funding gap between schools and colleges.

“The question is whether we can persuade the Department for Education and Skills and schools that this is a very good system. We think we can.”

Unlike schools, colleges get no extra cash if they recruit more students than they planned. Schools incur no financial penalties if students drop out of courses, although colleges do.

Mr Hughes, who has just been appointed director of the LSC’s London region, admitted that the new single formula “will not sort out the funding gap in one fell swoop”.

“It will have to be phased in over a period of time,” he said. “It will depend on what funding is available for moving towards convergence.

“We have started detailed discussion with the department to use the system for funding school sixth forms.

“We think that if we can apply the same system, we will have a fantastic basis for collaboration on the 14 to 19 agenda and will be able to remove the technical barriers to colleges and schools working together.”

The single funding system, he said, would also apply to adult and community learning and to work-based learning.

He said the new system would be tested in colleges in 2006-7, before being implemented in full the following year, after consultation. He expects schools to adopt the system a year later.

The system is based on a common measure of activity, known as the standard learner number. An “SLN factor” of one will involve 450 to 599 guided learning hours. A short course of between nine and 29 hours will have an SLN factor of 0.05.

Closing the funding gap, he insisted, is only one aim of the new system. “A major part of the proposals is that we will be cutting red tape,” he said.

“Simplification of the system will reduce bureaucracy and free up resources that colleges can put into the front line. It will also involve a fundamental shift in our relationship with colleges and other providers.

Currently, so much of our relationship is about money, and have colleges earned the money we have given them down to the finest detail.

“We are trying to build a relationship based on the quality of what gets delivered, and the outcomes, rather than just simply about have they earned the last pound of however many millions we have given them.

“The things we should be discussing are how is a college meeting employers’

needs and how is it delivering in the workplace.

“We want to help colleges and other providers to become more flexible to meet demands. At the moment, that is quite difficult.”

Julian Gravatt, director of funding and development at the Association of Colleges, said: “The commitment was made by the Government to close the funding gap in 2001 and it is now 2005.

“It is true that the proposed new system will make it easier to close the gap, but action can also be taken by tweaking the existing system. Colleges are impatient for action, given the impact on their ability to recruit and retain staff and meet the needs of their young people.”