The things to watch out for are the hidden extras.

The Learning and Skills Council Hotel opens for business on April 1, 2001. The Learning and Skills Act documents the design of the council. It has objectives and a start-up plan from its government owners, set out in a 19-page remit letter. Cabling and equipment is being hurriedly transferred from its FEFC and training and enterprise council predecessors. Staff have just been appointed.

Three months before it opens, prospective guests still have only a hazy idea about what Hotel LSC will offer. There’s been a chance to look around and we have been told it will not be quite so comfortable as its predecessor. But we won’t really know what to expect until the new managers and staff get to work.

In the short term, many things will be familiar. Many of the same staff will be working in the same buildings, surrounded by the funding furniture transferred across from the FEFC, Tecs and adult education. In the first year, colleges will continue to be paid according to the old FEFC funding method with odd adjustments. The big clear-out, we now know, happens in 20023. The outlines for this were confirmed in David Blunkett’s remit letter and speech to the Association of Colleges in Harrogate in November. There are four big plans.

Plan one is the drive to rationalise 16-18 provision in big cities and areas with below-average participation and achievement. The areas have been identified in the Excellence in Cities initiative for schools.

The tool to achieve change, borrowed from the schools sector, is the Ofsted inspection. There will be 40 area inspections in the next two years and they will suggest solutions for local problems. The first five area inspections have already resulted in plans for three new sixth form institutions in inner London. It has been announced that pound;45 million in capital funding and pound;60m from the Standards Fund is available to drive further change in the next 40 areas.

The number of college mergers has increased recently, but only a handful of these cross sector boundaries. The new plan is to merge college and school provision. Making this acceptable locally will be the first test of this policy but the long-term gain, it is hoped, will be excellent city sixth forms.

The second big plan is specialisation. David Blunkett’s Harrogate speech set out a vision of a network of specialist centres attached to colleges across the country. He allocated pound;100m to achieve this aim, approximately pound;1m per centre, divided between capital and revenue funding. He expects private sector partners will make an important contribution.

Colleges will bid to operate centres but the final decision aout who gets one stays with the Government. The centres are likely to get favourable treatment in the 20023 funding decisions. The local learning and skills councils have 18 months to draw up their plans for that year. There is a lot to take into account; it is impossible to say now where the plans will go.

Quality is the third big plan. The learning and skills reform has lowered barriers between different funding streams and could lead to increasing competition between colleges, training providers and employers for money. If so, this is not evident yet in public announcements which emphasise competition on quality, not on cost.

The emphasis on quality explains the allocation of pound;80m for lecturer training in colleges with funding in full for training of new lecturers and aspiring principals and part-funding for serving teachers. Initiatives are already underway to upskill basic skills teachers in 2001.

As well as carrots, there will also be sticks, which will again be wielded by the inspectors. Separating inspection from funding and planning will make it easier for inspectors to write critical reports and for the skills councils to respond by taking local action.

The final big push for 2002-3 is participation. The Learning and Skills Council has a duty to encourage learning. Two of its four priorities from government are to increase participation. Participation is the main story and accounts for the bulk of the pound;5.5bn learning and skills budget. The large cash increases in the three years from 2000 to 2003 are intended to increase student number growth and achieve the overall government target of 700,000 new learners. In 2001-2, the council will use existing funding systems to make progress. From September 2002, all systems change and the skills councils will introduce their new approach, common to all sectors.

We do not know all the details but we know the outlines. There will be different calculations for 16 to 18-year-olds and adults, a simpler funding formula and a greater emphasis on individuals. Eighteen months of work has still left some questions unanswered and the skills councils will have their work cut out to answer them. But one clear shift is away from using a single funding method to implement all policies. This was the FEFC’s innovation and it required an ever more complicated formula to cope with a wide diversity of objectives. As money got tight, the FEFC even moved various grants into the general pot.

The LSC will inherit many things from the FEFC but will do many things differently. It is likely that 20023 will bring a simpler funding method but a host of targeted grants. Fixed prices in the Hotel LSC but watch out for the extras.

Julian Gravatt is director of finance at the City Lit, London: j.gravatt@citylit.ac.uk