The chances of continuing to expand higher education within further education institutions are now slim, according to managers running some of the largest degree programmes in the FE sector.

Currently 8 per cent of higher education is delivered in FE institutions. Though HE provision dates back 30 years or more in a few colleges, the last decade has seen a boom across the sector, with almost non-stop growth in HE courses as well as access and foundation programmes.

Lawrence Turner, principal of New College, Durham, where close to half of all provision is HE, said the most colleges could hope for was “preservation of the status quo” in their degree courses.

Alarm bells are ringing in the sector as the Higher Education Funding Council for England prepares to publish a consultation document on the future funding of HE programmes in colleges.

The paper coincides with the setting up of a joint working group involving HEFCE and the Further Education Funding Council. Top of the agenda is likely to be the pros and cons of full-scale mergers between HE and FE institutions - schemes widely believed to find little favour with the FEFC and the Government. Merger talks are under way in Derbyshire, Staffordshire and Birmingham.

The HEFCE new paper, due out next month, calls for views on proposals including limiting extension of funding of HE courses in FE to colleges linking with a higher institution under a sponsorship deal.

The recommendation has disappointed some principals who hoped for the chance to bid directly to the HEFCE for funding, as universities do. David Eade, principal of Barnsley College, where a tenth of provision is HE, sees colleges as the likely losing partner in sponsorship deals.

At the moment, only 76 colleges, including around a dozen “mixed economy” institutions offering substantial HE programmes, receive funding directly from HEFCE. Those who moved into the degree market more recently, like Barnsley, receive HEFCE money via a partner HE institution.

The consultation paper proposal is likely to mean more franchising deals - arrangements under which universities pay colleges to offer programmes on their behalf. Some colleges feel they lose out because their HE partners cream off a proportion of the HEFCE funding, leaving them to run courses on a shoestring. The deals also leave colleges at the mercy of partner institutions, who may pull out if funding gets tight.

David Eade also detects a “fairly concerted campaign” nationally not to allow further expansion of HE in FE, with vice-chancellors unhappy to see colleges delivering degree-level courses more cheaply than their university counterparts.

The imminent HEFCE consultation paper is based on the recommendations of an advisory group set up to collate responses to the HEFCE’s preliminary report Funding the Relationship.

Attitudes to HE in FE have changed even within the past 12 months, according to Lawrence Turner, a member of the advisory group. Broadly positive views on expansion among those in HE have been eroded. November’s harsh Budget settlement combining an extension of the freeze on HE places with capital cuts and efficiency gains was the final straw.

Mr Turner, heading one of the mixed economy colleges whose HE income is primarily direct from HEFCE, fears for future funding if the recommendations of the new consultation paper are approved.

Fellow advisory group member John Brennan, director of policy development at the Association for Colleges, agrees funding pressures and a cap on numbers in HE have set the tone for the debate, but believes direct funding is safe. “We have succeeded in freezing the status quo. Any institution currently getting money will not see that taken away, but anyone hoping to start offering higher education will now have to go to a partner institution for sponsorship. ”

Colleges can take heart that the existing position of HE providers has been protected in lean times, he suggests, with scope for expansion should the Government release its cap on numbers.

Principals do appear to have had their voices heard in calling during the preliminary consultation for rationalisation of the split in funding of HE courses in colleges between HEFCE and FEFC. The new paper recommends a review of the division, widely seen as a bureaucratic anomaly.

The paper also proposes giving colleges in consortia with HE partners the chance for the first time to bid for HEFCE cash for special initiatives - another change called for by the AFC and principals during consultation.

The concept of partnership recurs frequently in the vocabulary of those now propelling the HE in FE debate. Members of the advisory group report a strong concensus on the validity of colleges’ role in providing HE - a role acknowledged to have widened participation, particularly among non-traditional students and those in work who are unlikely to travel far from home for degree study.

Dick Evans, the principal of mixed economy Stockport College, believes the principle of complementarity - in which colleges and higher education institutions are both able to offer HE courses without duplicating provision and without sacrificing the broader mission of FE - was firmly endorsed during last year’s consultation. “It was a very comprehensive attempt to rationalise and also create a longer-term strategy.”

The latest consultation document deals more with strategic issues of structure than funding specifics, according to Cliff Allen, HEFCE policy adviser. “The advisory group felt that the present policy context was so uncertain that it would not be proper to set out in detail what the funding arrangements ought to be for HE in colleges. The idea is to raise a number of possibilities and options for debate.”

Currently 8 per cent of higher education is delivered in FE institutions.