Wish-list or hit-list: wait for Dearing

The Higher Education Funding Council for England has just issued a consultative document on the funding method it should adopt for teaching from 1997/98 onwards.

To its credit, the council's proposals reflect items on everybody's wish-list. Indeed, everyone is a winner in these proposals. Small specialist colleges get special recognition. Part-time students will attract an additional weighting and so additional money. Mature students and those with non-traditional entry qualifications will gain additional support. Even the more traditional universities with conventional full-time and postgraduate profiles are likely to do well as the bidding will take into account demand for places.

But when, superficially, there is something for everyone, is when the problem becomes obvious. The purpose of a system for distributing funding for teaching is not to allocate the money but to allocate the cut. There will always be less money than is needed. The purpose of the methodology is to allocate the shortfall. While the proposals seem seductively attractive in rewarding everyone, in fact they cannot: someone at the end of the day is going to lose out. The losers are not identified but it is certain that there will be losers or the new funding method is not doing its job.

One of the reasons for introducing the system is the commendable desire to fund similar activities at similar rates - a goal that the existing system has so far failed to achieve. Some institutions are funded at Pounds 500 per student more, others at Pounds 500 per student less than the average. The spread of funding should be narrowed. This can be achieved in the existing system by applying a greater efficiency gain to the well-funded institutions and exempting the least well-funded from contributing to the efficiency gain at all. The difficulty is that an unmanageable adverse rate of change may then be applied to the best-funded institutions.

At current projections it could take anywhere between 15 and 20 years for the range of funding to be substantially reduced. However, this is not a fault of the existing methodology but of the judgement that is made as to the maximum acceptable adverse change that an institution can manage. Presumably, exactly the same judgement would be made if the new system was introduced. It would therefore take just as long to narrow the range of funding for teaching with the new system as with the old: the mathematics are inescapable.

A further criticism of the proposed methodology is that it is retrospective in its thinking, emphasising a dated approach by reducing all costs to a standard price for a full-time equivalent undergraduate student. It has gone back on the advance that was made by the Polytechnics and Colleges Funding Council in 1990 by referencing part-time student activity to the full-time student. Once the volume measure is accepted as a full-time student equivalent then the thinking associated with the traditional full-time entrant tends to dominate the methodology.

The proposals emphasise the need to assess, plan and manage student demand. Managing the demand for full-time students on mandatory award bearing courses can be achieved. Managing demand for part-time students who are paying their own fees is a far more questionable activity. Part-time demand is influenced by local economic factors and is not something that should be planned in this way. Nevertheless, proposals for planning changes in student numbers characterise the methodology.

The new system is not simply a method of funding teaching. It is for allocating student numbers and planning the growth or contraction of higher education to an extent never previously envisaged. All changes in the size of institutions will be determined by one of five committees in accordance with these proposals. These committees will sit in judgement on institutions' aspirations and decide whether university "A" can have another 25 students in subject "X" and college "B" should lose 32 part-time students in subject "Y".

The control of student numbers by this method is infinitely more intrusive than the present control over undergraduate numbers. It will be a secret bidding process that characterises all the worst features of central planning. This might have been appropriate for running the economies of Eastern Europe but evidence suggests that they were not wholly successful.

It is difficult to imagine a system that would achieve a greater concentration of power and influence in the hands of the funding council than the one that is being proposed in this consultation.

Apart from objections to the methodology, there are two other reasons why the new system for the funding of teaching should be rejected. First, universities and colleges are, if the projections in the Public Expenditure White Paper are implemented, entering a time of significant cuts in both revenue and capital expenditure. Changing the methodology for funding teaching is always difficult. To be done correctly it is essential that some spare money is available to moderate the changes that a new method will inevitably introduce. The worst possible time to change the methodology for teaching is when there are significant sustained and substantial cuts being proposed. For this reason alone the existing system should be maintained.

The second reason for deferring action is obvious. The Government has established the Dearing committee. Part of its remit must be to look at the funding for teaching and the policies that will be needed to provide support for students, as well as the possibility of students contributing to the direct cost of their own higher education.

The Dearing committee is the most fundamental reassessment of the policy for higher education for 30 years. It is ridiculous for HEFCE to attempt a pre-emptive strike by introducing a new method of funding before the outcome of the Dearing review is known. This is one occasion when the message has to be "wait for Dearing". If the Dearing review supports proposals such as these then all that has been lost is, perhaps, 12 months when the existing method could have been used. If HEFCE's proposals are inconsistent with the Dearing review then it would have been ridiculous to impose on institutions significant changes in funding for one/two years, only to require a further change as a result of the review.

It was bad luck on HEFCE that it embarked on the review of its funding method before the Dearing committee was established. However, many initiatives have been caught by this particular trap and I see no reason why HEFCE should not suffer with the rest of us. To go ahead with the consultation and the implementation of this new funding method in advance of Dearing is about as useful as auditing the petty cash at Barings Bank.

Peter Knight is vice chancellor at the University of Central England. He writes in a personal capacity.