The Learning and Skills Council is gearing up to support more higher education in further education colleges.
It is preparing to invest some of the extra £1.2 billion earmarked for the sector from September into developing more "all-through" institutions, where students can enrol on low-level courses and progress through to higher education programmes.
It has also set about creating a closer working relationship with the Higher Education Funding Council for England in an effort to streamline funding and audit arrangements for such institutions.
The plans have been bolstered by the government's higher education white paper proposals for future funded higher education expansion to take place at sub-degree level. LSC chief executive John Harwood said it presented an opportunity to break down traditional barriers between further and higher education, as had already happened in Scotland.
He said: "I would argue strongly to blur the divide of further education and higher education institutions,' status and students' aspirations. I am firmly on the side of those who are seeking to change that landscape and the culture that goes with it. What it means in practice is moving away from having institutions that are firmly labelled as higher education where you can only do higher education, and further education colleges where you can only do further education."
Mr Harwood said the LSC planned to allocate resources to expand the higher education capacity of colleges. In some cases this would mean cash for new building.
The growing network of Centres of Vocational Excellence (Coves) would provide a good base for expansion of higher education in further education, he suggested. Coves deliver specialist vocational training across a wide range of subjects and skill areas, from plumbing to business and management, and vary in size from a single department to a whole institution. The LSC's target is to create 400 Coves by 2006.
Mr Harwood said: "Coves are broad sector-based centres where you can go on to study for a number of higher education qualifications.
"That provides a really interesting dimension to the relationship between further education and higher education, and to the offer that is available to students."
The LSC and Hefce have set up a joint steering committee to consider harmonising approaches to data gathering, funding,audit and supporting widening participation.
• The LSC has launched the next phase of its bureaucracy-busting campaign.
Sir George Sweeney, head of its bureaucracy-busting task force, has turned his attention to cutting red tape for 1,700 work-based learning providers.
He rejected claims that the LSC was generating more bureaucracy by setting new targets for further education. "The general view is that we are taking the right approach," he said.