It may have lacked the hype and fanfare that often attaches to major government statements, but the speech by universities minister David Willetts at Oxford Brookes University earlier this month could turn out to be a landmark for further and higher education in England.

It is a speech that deserves careful reading, for it is clear that Mr Willetts is considering a fundamental change in the way HE is conceived and delivered.

His proposals are predicated on the need to expand HE in a way that is cost-effective. The Government’s difficulty is that the current student funding system is built on loans repaid by students after they graduate. The upfront cost of HE is therefore covered by the state, meaning that further expansion requires more public investment - an unpalatable option for the foreseeable future.

Acutely aware that talk of cost-effectiveness might be interpreted as a drive for education on the cheap, Mr Willetts stresses that any reform must also deliver improvements in teaching quality, widen access and improve employment opportunities.

“I want to see an HE system that’s more competitive - one where new entrants can address the growing and varied demand from potential students, and where there’s strong motivation to improve teaching,” he told his audience.

“I want to float an idea that I think could transform the incentives to focus on high-quality teaching. It would not just create incentives to raise teaching standards, though. It could also provide a cost-effective means of spreading educational opportunity in straitened times. And it could help us generate more social mobility too.”

It is against this backdrop that Mr Willetts appeared to give the green light to an expansion of HE in FE, with colleges and new providers, some of which could be privately owned, funded directly to deliver off-the-peg degrees examined and validated by reputable universities.

“I do think it’s possible to provide good-quality HE in an institution that doesn’t award its own degrees, and institutions may find it is cheaper and more efficient as well,” he said.

“This could, for example, help FE colleges looking to improve their higher education range and their progression routes. It’s how they could continue to offer degrees, should university partners move their provision back on campus.”

The message was well received in FE but, as Mr Willetts acknowledges, the sector fears that cash-strapped universities will stop franchising the delivery of degrees through colleges in order to protect their core provision.

A number of colleges are in the process of applying for powers to award their own foundation degrees rather than have them accredited and validated by a partner university.

On top of this, colleges would like to see more HE funded directly by the Higher Education Funding Council for England (Hefce) rather than have their cash channelled through, and top-sliced by, partner universities.

Although colleges directly funded by Hefce receive the same amount per equivalent HE student as a university, over half of HE in FE provision is paid for indirectly. According to the Association of Colleges (AoC), the average top-slice is 25 to 30 per cent.

The AoC is lobbying for more directly funded HE in FE and is not ashamed to stress the cost-effectiveness of this method of delivery. In The Case for HE in FE, it says that colleges offer a better deal than universities by delivering more face-to-face teaching time, charging students lower tuition fees in general, allowing students to study while living at home and providing education focused on the needs of employers.

The clear message is that expanding HE in colleges, where fees and living costs are lower, would cost the state less than expanding universities. The potential savings could be greater still if, as expected, Lord Browne’s inquiry on tuition fees recommends a substantial rise.

But for some, FE’s desire to flaunt its cost-effectiveness is a high-risk strategy that might backfire if the Government demands expansion with insufficient investment in teaching.

“One in nine undergraduates already take higher education courses in further education colleges and we would welcome any move to widen participation,” says Sally Hunt, general secretary of the University and College Union (UCU).

“If the Government is serious about encouraging more students to follow this route, however, it must put the proper funding in place. This can’t be allowed to turn into education on the cheap.”

Ms Hunt also says there are hidden costs to delivering high-quality education.

“Staff teaching these courses must be given the time needed to conduct scholarly research and be properly paid, and learners must be given the personal support and resources they need to enjoy a first-rate student experience,” she adds.

UCU figures show that the gross mean for academics in 2009 was pound;46,251 while for FE teaching professionals it was pound;34,000.

John Offord, HE policy officer at the UCU, fears that expansion could have implications for staff workloads and quality.

“Some lecturers are already teaching on multiple level 3 and 4 courses,” he says. “They are being stretched. It is inevitable that quality will diminish if staff have too much to prepare and deliver.

“The universal belief is that HE in FE is cheaper, but it is not. It is only cheaper on the backs of UCU members.”

Shane Chowen, vice-president (further education) at the National Union of Students, shares the UCU’s concerns.

“We wholeheartedly welcome the expansion of provision of higher education courses in further education institutions. Often, shorter, more flexible courses in more accessible locations in further education institutions enable people to realise their aspirations for higher education when they wouldn’t be able to in a university,” he says.

“However, investment in providing higher education in further education institutions must not be a way of providing higher education on the cheap.

“The standard of higher education and facilities in FE colleges must be the same as that in universities and anyone going to study at a further education institution must be able to do so because the course and learning environment is right for them, not because financial constraints force them into a local institution or shorter course.”

Ian Clinton, principal of Blackburn College which has a University Centre with some 4,000 HE students, welcomed Mr Willetts’ vision for expansion through FE but warned that colleges must be clear about offering higher education as a distinct product.

“In terms of staff, we increasingly have a slight separation. For example, HE staff teach for fewer weeks a year because they are doing research and marking,” he said.

“It will be necessary to have staff who teach either HE or FE because there is nothing worse than when people switch between the two - that’s not giving students a good deal.”

Mr Clinton said that the idea of off-the-peg degrees was attractive, giving colleges the chance to respond quickly to employer demand for HE qualifications. He said that Blackburn would continue to work with its validating partner, the University of Lancaster, but that Mr Willetts’ proposals raised the possibility of creating many more links with other universities.

For John Widdowson, a member of the AoC board and principal of New College Durham, a major provider of HE, the key argument for expanding HE through FE is in spreading educational opportunity and economic benefit.

“Around 90 per cent of those with A-levels go on to study in HE but only half of those with vocational level 3 qualifications do,” he explains.

“Universities have had a good go at recruiting people from this category, but because colleges already have people with vocational qualifications, they are in a very strong position to deliver them into HE.

“The economy needs people with high-level skills but not everybody is going to be able to take three years out, so it is inevitable and highly desirable that we offer these opportunities for people.

“I think we are moving away from a model predicated on people leaving school at 18 and going on to university and towards HE accessed when and where people need it. We have bits of that but the system is not driven by that.”

The appetite for change and constructive dialogue in FE will come as music to the ears of Mr Willetts, who wants a debate about the future delivery of HE where no proposition is deemed “off limits”.

A far bigger challenge may face traditional degree providers in the shape of universities and higher education institutions. Many of these are currently under considerable financial pressure and increased competition from colleges or new commercial players in the market is unlikely to be welcome.

As the HE representative body Universities UK says: “We are yet to fully work out our position on this particular issue.”

ALL FIGURED OUT: THE HE IN FE STORY SO FAR

108,000 students studied on HE-funded programmes in colleges in 200607.

About 8 per cent of all undergraduate education is delivered in FE.

In 200708, 60 per cent of HE students in FE studied foundation degrees and sub-degree programmes such as HNCs and HNDs.

In 200607, 49 per cent of HE students in FE were part-time, but the majority doing first degrees and foundation degrees were full-time.

In 200607, Hefce provided direct cash to 124 colleges and a further 162 received money through franchise agreements with partner universities.

The number of students at FE colleges enrolled on HE courses varies: based on headcount, there are 115 colleges with fewer than 200 students and 21 with more than 1,000.

Much of this provision - 48 per cent based on student numbers - is funded indirectly through a higher education institution.

In 200910, fewer than half of all colleges offering HE had lodged an “access agreement” with the Office for Fair Access, suggesting that more than half still charged the minimum annual tuition fee of pound;1,285.

HE students in FE colleges are more likely than their university peers to be aged over 25, study part-time, study foundation degrees and sub-degrees such as HNCs and HNDs and to come from areas with low rates of participation in HE.

Universities top-slice an average of 25-30 per cent from the teaching grants destined for partner colleges actually delivering the qualification.

Source: HEFCE and AoC.