College principals are ready to campaign to scrap the current funding system, say their leaders.
The Standing Conference of Principals, which represents non-university higher education providers, wants to develop proposals to fund institutions with block grants according to their individual missions.
The group states in a mini-manifesto that a small majority of its members favour a new approach to funding. In a discussion paper, published before its annual residential conference this week, Scop says it supports plans to fund institutions based on mission statements and that it wants to commission further research.
Scop is impressed by proposals from the centre for higher education studies at the Institute of Education. Under this model, suggested by Gareth Williams earlier this year, universities and higher education colleges would receive five-year single block grants on the basis of a business plan approved by the funding council. Performance would be measured against stated plans, and future five-year funding tranches would be based on meeting guarantees.
Scop is likely to meet opposition from vice-chancellors, particularly members of the Committee of Vice-Chancellors and Principals' funding options review group.
Patricia Ambrose, chief executive of Scop, said: "A lot of people feel that funding by mission would be very bureaucratic and would mean too much central planning, but our firm view is that it doesn't have to be like that."
Scop wants to develop a model that meets accountability requirements but ensures minimal intervention from the funding council or other agencies.
It believes that a series of basic performance indicators and benchmarks could be developed for external agencies to judge whether institutions meet their commitments.
"Our members believe that mission-based funding would enable greater parity of esteem for different aspects of institutions' missions," said Ms Ambrose.
Professor Williams's paper, published by the Council for Industry and Higher Education, says that the current funding system forces institutions through too many centrally determined hoops and threatens diversity by forcing all institutions to spread their activities too thinly.
Institutions are being forced to chase any sliver of funding, regardless of relevance to the institution's mission, the paper adds.
The paper says that the research assessment exercise has forced some institutions to pursue inappropriate areas of research. The student funding system also means that students have to be turned away from the most popular courses while others with poor qualifications are accepted on unpopular courses so that quotas are met.