There is a significant amount of circle squaring ahead for the new Skills Funding Agency (SFA), according to its chief executive Geoff Russell.
The particular challenge is how to organise further education and training so that it is genuinely responsive to learner and employer needs while ensuring the best possible return on precious public resources.
The former requires a loosening of the reins by the centre, the latter suggests a need for greater control and accountability. Achieving the right balance would be challenge enough in a time of fiscal largesse. But in the current financial climate, what government is going to want to loosen its controls on public spending?
"Just as we are giving up a lot of levers there is a strong push from government which says that (it) cannot stand back and watch it all happen," Mr Russell says. "It's about squaring that circle."
The good news is that Mr Russell's vision for the SFA is in tune with much of the thinking across FE. Think tanks, political parties and FE leaders seem to be agreed that providers, employers and learners should have more influence on what is studied, where and when.
"It's about moving away from manpower planning. We will stimulate the demand side of the market through subsidy," Mr Russell says.
A start was made under the Learning and Skills Council (LSC) to create a demand-led system in FE. Train to Gain was meant to be an initiative that responded to employer demand for training and skills.
The trouble is that Train to Gain is a vast, state-run scheme that planned for a certain level of take-up. When that was not initially forthcoming, the Government raided its considerable budget, leaving it under-resourced just as demand started to take off.
"It is right for Government and business to have a conversation about what they think the economy needs for the future, but you can never be sure," Mr Russell says. "That's why you do not want a hard lever, you want nudges using the information available and price to signal what the priorities are.
"We will be moving out of the business of saying we must deliver X by doing Y," he explains. "And we will be moving into the business of saying `if you want to do it this then we will pay you more to help achieve that'.
"We will move away from the top-down approach towards a much more market- driven position where our role will be simply to do three things.
"We will provide funding, we will manage quality and we will try to empower the customer and free the employer to respond to customer demand and let the system run."
If this vision is realised it will represent a radical shift in the way education and training are delivered in England.
Employers and students, armed with learning or skills accounts, would buy the courses they want from providers. The funding agency would confine itself to distributing the money in accordance with demand, and the Government's planning role should wither away.
It sounds beguilingly simple until one remembers that the newly founded SFA will be no lean and mean organisation existing just to lubricate a fully functional FE and skills market.
It will open for business next week with a staff of 1,800 - 400 of which will belong to the National Apprenticeship Service - based in 21 offices across the country. So, while the funding agency will be a stripped-down racer compared to the LSC, which not so long ago had around 4,000 staff based in 51 offices, it is still a far larger and less administratively efficient body than, say, the Higher Education Funding Council for England (HEFCE).
There are other similarities with the LSC that makes it hard to believe the leopard will be able to change its spots. Much like its predecessor, the SFA is a national body - a Crown agency rather than a quango, as it happens - staffed by many of the same people from the LSC, delivering national skills targets through a network of regional offices.
Despite the vision and intent of Mr Russell, surely there is considerable risk of the SFA behaving like the LSC.
Not so, says Mr Russell.
"The Government has priorities and the regional development agencies have priorities. My job is that while I must have regard for these, it cannot be that we are into manpower planning," he says.
"A good crisis helps to change a large organisation. We will be a body that engages with the sector because we will shift from an organisation whose main job in life is to find somewhere to put money to an organisation whose main job is rationing resources."
The role of regional development agencies (RDAs) will be key. It was with some surprise that FE learned last summer that England's nine RDAs would be responsible for devising skills strategies that would be binding on the SFA.
The decision seemed at once to disempower the funding agency and undermine the goal of developing closer links between students, employers and providers.
RDAs will draw up their regional strategies and pass them to the Government, which will use them to create a national skills strategy which is then given to the SFA to implement. It all sounds a bit like manpower planning.
"Skills strategies will be binding in the sense that they will inform the overall strategy that the Department for Business, Innovation and Skills (BIS) prepares and sends to me every year saying this is what we want you to do," Mr Russell says.
"RDAs will prepare the skills strategies and they should be based on conversations so that they will capture what the regional priorities are. We need a better conversation between employers and providers at regional level.
"But it cannot be that one party in the system has the ability to say we want 17 ballet dancers in London."
However, the SFA may have less capacity than the LSC to hold its own conversations with employers and providers on account of its lower level of staffing and reduced local presence.
"We have to be careful that we don't throw the baby out with the bath water and lose touch with local providers and employers," Mr Russell notes.
If all goes to plan it could be the dawn of a new market-driven era for FE in England. But are there any regrets for the way things have been of late in the sector?
"The truth of the matter is that while we screwed up the capital pipeline, the position that colleges find themselves in today is a result of the recession," he said.
"If we had screwed up and there had been no recession we could have trotted off to the Treasury."
And finally, if the SFA does "screw up" in future then, unlike the LSC's apparently relaxed handling of the emerging capital crisis, the agency's alarm bells are likely to sound sooner.
"There will be an advisory board comprising three groups of people: learners or their representatives; employers or their representatives; and people that together make up the system like the Young People's Learning Agency, BIS and HEFCE," he says.
"They will meet bimonthly and, yes, we will be publishing regular minutes of these meetings."
KEY EVENTS IN 16-19 COMMISSIONING AND FUNDING
April 1, 2010
LSC disbanded; Young People's Learning Agency (YPLA) and SFA created; local authorities (LAs) take on their new responsibilities.
April 20 onwards
LAs pay colleges and other providers for the first time and work with them on arrangements to implement Sept 2010 academic year.
The National Commissioning Framework comes into operation for commissioning for the September 2011 academic year.
YPLA supplies data to LAs; LAs work with 14-19 Partnerships and publish interim local commissioning statements (LSCs).
Further work to develop local planning and refine LSCs, including discussions with regional planning groups.
September Guarantee for all 16- and 17-year-olds. LAs implement standards for 14-19 prospectus and common application process.
Grant letter issued by DCSF to YPLA; YPLA considers grant letter and issues national commissioning statement.
YPLA informs LAs of initial funding position. Regional planning groups produce commissioning statement; LAs publish final LSCs.
YPLA confirms national funding rate.
Regional planning group aggregates local commissioning plans into a regional commissioning plan.
YPLA considers, moderates and agrees regional commissioning plans.
YPLA informs LAs of final funding position and LAs inform providers of final allocations for September 2011.