Steps should be taken towards creating a single funding system for further and higher education in England, an advisory group reporting to the government has concluded.
Such a move is needed to overcome problems in funding, strategic planning and administration encountered by an increasingly important group of mixed-economy institutions that deliver both further and higher education, according to a draft of a report being prepared for the Department for Education and Skills.
Although the report acknowledges that mixed-economy institutions represent a significant minority in the two sectors, it says that government policies outlined in the higher education bill "may lead to many more mixed-economy institutions coming into being, and thus becoming more 'normal'
The report by the further and higher education practitioner group also suggests that a new "absolute definition" of what constitutes higher education may be needed to mop up courses that are delivered in colleges but fall outside the higher education funding system.
The report argues that the existence of separate funding systems for further and higher education is "at the heart of most of the difficulties for mixed-economy institutions" and that this needs to be resolved in the long term.
It says: "Acknowledging the political and legislative realities, the prospect of a single funding system or at least of some convergence of funding methodologies in the long run is worth considering."
Its recommendations come in the wake of months of talks between the Higher Education Funding Council for England and the Learning and Skills Council over proposals to integrate funding and planning for further and higher education.
The report outlines issues that need to be resolved, which include mismatches between Hefce and LSC funding cycles, data collection, levels of funding, audit requirements and management information systems.
These are all major problems for the 161 further education colleges that provide more than 10 per cent of higher education, as well as the 45 higher education institutions that run LSC-funded courses.
It suggests that work between Hefce, the LSC and other agencies to tackle the issues may ease the burden in the short term.
The group also suggests that there should be an "absolute definition" of what constitutes higher education. This would allow "non-prescribed" higher education courses - including non-degree higher level professional programmes in accountancy and engineering - that are delivered to 60,000 students nationally in further education colleges to be shifted from the LSC funding system to Hefce.