Scotland's colleges and universities will know by 2008 how they are to be funded in the future.
A review of the methodology by which their teaching is resourced is being carried out by the Scottish Funding Council. The announcement of the results will be followed by a period of consultation and then implementation in the 2009-10 academic year. The move has been welcomed by the Association of Scotland's Colleges.
The funding council's current distribution allocates pound;413.8 million to the 43 further education colleges for teaching costs, and pound;634 million to 20 universities.
The review is being supervised by an advisory group under the chairmanship of Alan Tripp, a chartered accountant and businessman who is the funding council's vice-chair.
The group has already set out the key principles by which any changes should be tested. The new system will be expected to be: effective, responsive and adaptable, equitable, predictable, transparent, able to encourage efficiency and efficient to operate.
Among the areas which will be looked at are whether the council's teaching grant has sufficient incentives to allow colleges and universities to widen access, improve learner achievement and make sure students stay the course.
The review will also examine the costs of different subjects, the funding disparities between Higher National work in colleges and in universities, and the support given to part-time students.
The funding reforms are a central element in the funding council's three-year corporate plan for 2006-09, unveiled last week under the title Learning and Innovation. It promises to usher in a much tighter regime for measuring how colleges and universities are performing. The document is "an important milestone for the new council", said John McClelland, its chairman.
The performance of the sector will be judged against seven general aims for the three years (see panel above) and 75 more specific "priority actions"
to achieve them. The overall message is that support for the economy is being put at the centre of what colleges and universities do.
That will involve, among other things, ensuring that the funding mechanisms improve access for students, address the social inclusion agenda and reduce student drop-out rates.
"We intend to be a key player in the economy of Scotland, not a peripheral one - and that's the view of the sector as well," Mr McClelland said.
The drive towards equipping students with the right skills to make them employable would be at the heart of these efforts.
The council, and therefore colleges and universities, would have to become more "results-oriented," he added.
This will mean a major effort to measure how well the council is doing in achieving its seven aims, Roger McClure, its chief executive, said. An expert evaluation will be published every year, and this will involve not just the council but independent specialists as well.
"If the evidence shows we're not making progress in any area, we'll reappraise it," he said. "If we don't measure whether we're making headway, why bother doing anything at all? In the past, we haven't focused enough on the innovation that needs to take place to get things done."
Mr McClure stressed that the emphasis on the economy in the council's plans did not mean a shift away from the interests of students. "It's not an either or," he said. "The labour market is all about millions of individuals making choices.
"The emphasis on the economy means equipping individual students with the skills to make these choices in a way that contributes to the economy.
"The student is the carrier in all of this."
fair access to learning
increase the relevance of skills and the employability of those intending to enter the workforce
ensure learning is of high quality
universities to provide high quality and internationally competitive research
effective knowledge transfer that stimulates innovation
support international ambitions to promote Scotland as a place to study and work
colleges, universities and the council to be world-class organisations