Cash for new two-year foundation degrees may depend on the ability of universities and colleges to find jobs for graduates.
Ivor Crewe, who is chairing the design group for foundation degrees, said that the new degree had to be seen as a qualification leading to employment and that all options on funding were open.
Professor Crewe, vice-chancellor of Essex University, will chair a committee of up to 15 members. It will devise a model for the delivery of foundation degrees. But the group, which is due to hold its first meeting on March 10, will also make recommendations about the funding base for foundation degrees.
Professor Crewe said: "It is too early to say anything specific. But the foundation degree is intended to be a degree that does lead to employment and is therefore attractive to certain students."
Education secretary David Blunkett told Tony Blair in December 1998 that he would not be opposed to exploring whether the funding of foundation degrees should depend on institutions' success in getting students into employment.
The design group is unlikely to recommend an overly prescriptive model for the delivery of the foundation degrees, according to Professor Crewe. However, one likely model involves universities validating degrees for partner colleges that are working in conjunction with local employers.