Universities must face up to spending cuts and repeated calls for greater efficiency until at least the end of the century, according to one of the Government's leading economic advisers.
The price of Britain's economic recovery and sustained growth is a switch of resources from "graduate to technician training," said Donald MacKay, one of the chief advisers to Scottish secretaries of state since 1971.
A freeze on university funding will continue regardless of which political party wins the next election, he told the annual FE conference organised by The TES Scotland and Perth College last week.
The focus of spending must be the FE college, he said. "Downward pressure on the funding of higher education will be necessary to raise resources to expand FE."
But his recipe for expansion - with a move away from the degree culture - was attacked by delegates as "a recipe for giving technicians second-class status". He also clashed with the Confederation of British Industry over its call for a target of 40 per cent of 18-year-olds to be in higher education.
Professor MacKay is chairman of Scottish Enterprise, one of the Government's leading agencies for economic regeneration. He was also a key adviser on policies which have seen Scotland shoot to the top of the European league table for overseas investment.
He warned colleges hoping to expand into higher education to think again. The Government target of getting one-third of 18-year-old school-leavers into HE by the year 2000 has already been achieved.
A cut in HE spending had been planned for years ahead, even before this growth. "It is difficult to believe, whatever Government is in power, that things will change markedly."
While applauding the revolution that had taken place in universities, Professor MacKay said: "Government priority is now for sub-degree qualifications and this must remain." Any blurring of the distinction between FE and HE must be halted or "it might be difficult to produce the technician skills which our country badly needs".
Citing evidence from Sir Claus Moser's National Commission on Education, he said: "The training of 16 to 18-year-olds is the weakest point in the education and training system." It also had to be the focus of improved skills training for jobs in the next century.
His message applied as much to colleges south of the border, he said, as it did to Scotland, where 26 per cent of students in FE colleges are already on HE courses.
He also made it clear that any extra cash released for colleges in the funding switch would continue to be tied to drives for efficiency. The Government is currently committed to a 16 per cent increase in funds over three to four years, but only if colleges expand by 25 per cent.
Evidence from Professor MacKay suggests that the universities have already over-stretched themselves in the drive to expand and that FE colleges must avoid the same traps. Universities had been "overtrading" or spending beyond their means, he said.
"The squeeze on capital spending means they cannot cope with the student numbers. They have been overtrading on human capital as well," he said. Lecturers' salaries had fallen in real terms - having risen by only 24 per cent since 1979 compared with teachers' rises of 67 per cent. "Universities cannot recruit the calibre of staff if that continues."
Other speakers at the conference argued that the way ahead was through the CBI route and new-style universities building on the "solid ground of FE".
Latest plans for a new University of the Highlands and Islands (the UHI) were unveiled by the project director Robin Lingard. Not only would it "blur the boundaries between FE and HE," he said, "I can see boundaries between FE and schools crumbling."
He threw down a challenge to politicians and policy makers who follow Professor MacKay's line. "We intend to make full use of the ability of Scottish FE colleges to provide higher education courses through Scottish Office Education Department funding.
"We fervently hope the moratorium on the growth of full-time HNC, HND and degree numbers will be lifted quickly, because we cannot see how it can be in the wider interests of the Scottish economy."
The UHI will be a regional university, involving 10 further education and specialist colleges on a "dispersed campus". It would be an amalgam of traditional colleges, research institutions and new-style distance and open-learning schemes, serving local areas but responding to national education and training needs.
The model fits in with Professor MacKay's vision of efficiency. IT would be used to make administration and communication with "outreach" students more efficient. Colleges would be encouraged to develop courses jointly or to buy in to existing courses to cut costs.
But, Mr Lingard argued, the growth of networks of community-based colleges and universities in the regions, co-operating on national policy, can achieve efficiencies without having to choose between FE and HE.
"It would be foolish to try to turn a group of FE colleges and research institutions into a university without assistance from the existing universities. We therefore seek to include them in our partnership," he said.