Colleges will need to forge stronger links with universities if chaos over the financing of degree courses in the further education sector is to be avoided, a top-level report warns.
The study, published this week by higher education funding leaders, calls for a radical restructuring of the relationship between the sectors to sort out the present "haphazard" funding system.
The report, from the Higher Education Funding Council for England, calls for partnerships between colleges and universities, which would bid jointly for cash for college-run HE courses. Increased closeness in the form of consortia and confederations is the best way to make sure local needs are met, the study says.
The report will now go out to consultation in both sectors, but immediate change is impossible while the future of HE remains undecided. A national committee of inquiry on the university system, announced this week by the Government, will not report before summer 1997, relieving political parties of the need to outline policies for reform before the election.
The study is the report of a working group set up to scrutinise responses to the HEFCE's earlier consultation paper on HE in FE, Funding the Relationship.
That study, published a year ago, found colleges offered a "distinctive HE experience". They were "access oriented", drawing in high numbers of local, mature and part-time students who might not otherwise have entered higher education.
In 1994-5, more than 36,000 students - 8 per cent of the total in HE - attended HE courses run directly by colleges, while 40,000 more were on programmes sub-contracted to colleges by universities.
But despite colleges' success in expanding their HE provision, consultation on the report revealed many are deeply discontented with the present funding system, under which some receive cash directly from HEFCE, some from university partners and others get Further Education Funding Council cash.
The new consultation paper says diversity in colleges' HE programmes has been encouraged, but acknowledges growing pressure for change.
The call for a more co-ordinated system raises the issue of how far the HEFCE should use a reformed funding framework to dictate the kind of HE to be offered in colleges, perhaps building on their strong track record in providing vocational and sub-degree courses.
But the working party advises against differentiating between HE providers as it fears this could set up "a new binary line" between universities providing undergraduate and higher-level courses and colleges offering lower-level HE.
Instead, it recommends longer-term change towards a funding structure based on regional confederations which would encourage colleges and universities to plan their HE provision jointly according to their local circumstances and regional needs.
The proposal fits in with partnerships already being built up between institutions, including full merger moves in Derbyshire, Birmingham and Staffordshire.
The consultation paper calls for further debate over how the split between FEFC and HEFCE funding of higher education courses in colleges can be resolved. Logically, it says, the HEFCE should take over responsibility for the funding of all types of HE, but such a move would have significant implications - including a change in the law - and needs further consideration.
It also recommends a joint investigation by the two councils of past funding arrangements for HE in colleges, as many colleges claim they lose out to universities over cash. In a further concession to colleges' concerns, the working party recommends ending the ban on colleges bidding for special initiative money from the HEFCE.