The Further Education Funding Council’s method of financing colleges will be phased out in favour of a “coherent but flexible” system where money will “follow the learner”, according to a Government consultation paper about the new council, which takes over post-16 further education and training from April 2001.

But while the familiar FE jargon of “units” and “ALFs” (average levels of funding) will be discarded, the new formula will retain several features of the current system. The major element of funding will still be for courses - with a weighting reflecting the fact that some, like engineering, are more expensive to deliver. This will incorporate the payment linked to the number of students who start each course.

For the first time, school sixth-form funding will partly depend on the A level pass rate.

Ten per cent of funding in schools and colleges and 20 per cent in work-based training will be linked to the achievement of students. Extra “achievement” funding may go to institutions with high pass rates in areas of skill shortage.

But John Brennan, the Association of Colleges’ head of development, said the plans lacked a rationale for varying achievement payments. He asked: “What are the criteria for determining what the achievement element should be?”

Funding that rewards colleges which widen participation will be extended. Currently, students who live in deprived postcode areas can rigger an extra 6 per cent funding for the college, a figure that will rise to 10 per cent next year. The council will look at ways of increasing it further and conduct “a thorough review” to find more effective indicators of disadvantage than postcodes. London weighting will also be introduced.

Funding will be redesigned around “blocks” broadly reflecting student numbers rather than the more abstract FEFC system of units, which required colleges to consult a database of more than 30,000 qualifications and their unit value to claim their cash.

The paper says “too much attention has been paid to maximising units of funding” rather than focusing on the number of learners and what they learn.

The funding changes, to take effect in 2002, could put an end to “unit farming”, the lucrative business whereby consultants charge for identifying unclaimed units.

Mr Brennan welcomed the move away from unit-based funding but said that more detailed projections of the new system’s effects on college income were needed. He said: “If the Government is saying we want to target learners not units then that is justified. But the department has not done a model to show the effects of all this on existing provision. Until they do that we can’t make a judgment on whether it is a good system or a bad system.”

“If some institutions end up getting 10 per cent less money for the same volume of work you have to say: have we got the resources distribution so wrong that shifts of that order are justified? If that happens I don’t think the sector will automatically accept it.”