Capitalise on strengths and collaborate with others if you want more cash. Alison Goddard reports on the latest funding blueprint

The blueprint for the next five years of English higher education was unveiled today. The strategy extends the government's policy of specialisation and pledges extra cash for teaching excellence and for collaboration with local businesses.

At present, universities are rewarded for excellence in widening participation and research. In future, they will be rewarded for playing to their strengths.

Each university and college will undertake core work in teaching, research, widening participation and links with business and the community, with the option of specialising in one or more of them. The proposals are contained in the Higher Education Funding Council for England's strategic plan for 2003-08.

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Sir Howard Newby, chief executive of Hefce, said: "Individual universities and colleges will have to recognise that they cannot all meet the full range of customer and stakeholder needs. They must work to build on their own chosen areas of strength, in collaboration with other providers, so that the sector as a whole continues to deliver all that is required of it.

"Each institution should be proud to play to its strengths. Such specialisation is not a sign of weakness. The corollary is to recognise that there are some things that other institutions do better - and that limited resources could be better concentrated where they can be put to best advantage."

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The plan outlines how all institutions will be expected to sustain high-quality teaching. However, the funding council is developing plans to reward particular excellence in teaching through targeted funding for 70 centres of excellence in teaching. It is also proposing rewards for individual academics who excel at teaching, which would come through its human resource strategies.

Sir Howard said: "Teaching and learning are a core business of higher education. With teaching, because students are involved, it's important to ensure that the worst are raised to the level of the best. Everyone will get teaching funding, but the units and individuals who can demonstrate excellence will attract funding for that purpose."

Likewise, all institutions are expected to engage with their regional and local communities, and to contribute to economic and social development.

Additional funds will enable some to develop this role further.

The plan states: "Some institutions could, as their distinctive form of excellence, develop themselves as partners in Knowledge Exchanges, becoming the regional or sub-regional focus for intensive engagement with business and the community. These institutions will not necessarily have undertaken the research whose application they support; their expertise would be in understanding and meeting the needs of the user community."

As part of the strategy, the funding council has set targets in four areas.

On widening participation, for example, its aim by 2004-05 is to have no more than two institutions with five percentage points less than their benchmark of students from the lower social classes. By 2010, the aim is for no more than two institutions to have three percentage points less than their benchmark.

At present, just three institutions with reliable data fall into the first category: the universities of Bristol, Newcastle and Oxford Brookes. The universities of Durham, Exeter and Leeds, plus Northumbria and Leeds Metropolitan, fall into the second.

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Universities will also be asked to ensure that dropout rates do not rise as more students enter higher education. The strategic plan sets an initial target entry rate into higher education of 43 per cent for 2004, rising to the government target of 50 per cent by 2010.

On teaching, the funding council has restated its intention to establish 70 centres of excellence by 2006 and to evaluate their impact by 2008. It reiterates its intention to set up a new academy to support quality enhancement in learning and teaching.

Moreover, it has set a target of at least 95 per cent of Quality Assurance Agency audits to identify satisfactory provision between now and 2008. The funding council also aims to increase the number of staff who are accredited teachers or who have become members of the Institute for Learning and Teaching.

There are three targets for research. The funding council wants to maintain the country's leading international position in research excellence while developing new metrics to identify the economic and social benefits of research. It reiterates the promise to reform the process for assessing research quality by 2008.

Finally, it pledges to improve research sustainability by 2008 by developing measures based on the transparency review, which identified that teaching funds were being used to fund research.

On enhancing the contribution of higher education to the economy and society, Hefce sets two targets. The first is to demonstrate a year-on-year improvement in the collaborative and individual interactions of all institutions with business and the community by 2005. Hefce plans to develop a set of objective measures of what is delivered between now and 2008 from this established baseline.

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To make progress in widening participation, Hefce will investigate alternative access indicators and use them to determine funding as appropriate. The white paper states the government's intention to move towards more sensitive indicators, such as a student's family income, parents' level of education and the average results of the school or college the student attends.

It will also develop a framework for fair admissions processes, and work with the sector and the Department for Education and Skills to develop the role of the proposed access regulator.

The development of each institution's widening participation strategy will be overseen by Hefce. It will consider how well provision meets the demands of students and develop new pathways into higher education.

To help enhance excellence in teaching and learning, Hefce will review the burden that the quality assurance framework imposes on the sector. It will embark on a national survey of student opinion, and will assess the implications of any move towards a more coordinated Europe-wide system of quality assurance for the UK.

It will pilot and evaluate compressed two-year honours degrees and establish Foundation Degree Forward as a national centre of expertise.

To advance research, Hefce identifies a need "to recognise researchers whose work supports public-sector professionals, the cultural industries and civic society, alongside those whose work has brought about economic benefit or expanded the frontiers of knowledge". Together with the other funding bodies, it will commission studies on the social impact of research and develop tools for measuring the outcomes of investment in research and the sustainability of research.

By autumn 2004, it aims to develop minimum standards of training and an appropriate assessment measure for provision or training for PhD programmes.

Hefce has also identified three themes that underpin the four areas:

* How interaction between the core aims can be reflected in funding terms

* Developing leadership, governance and management

* Internal development of the funding council.

The plan sets another target: "By 2006, it expects all institutions'

corporate plans to identify clearly how the institution will develop and sustain distinctive research excellence in one or more of its areas of relative strength, and its plans for collaboration related to its mission."

A new strategic development fund to support institutions engaging in collaborative activities is mentioned, with the aim of supporting structural change and increased collaboration between institutions.

The target for developing leadership, governance and management is for institutions to show measurable improvements in at least one dimension of equal opportunities by 2008.

Hefce also plans to reduce the administrative burden on institutions by moving from an audit-focused accountability relationship towards helping them build stakeholder confidence through visible good practice.

The final target is one Hefce has set itself - that by December 2008 it will be "recognised for excellence" by the European Foundation for Quality Management.

The strategic plan is being put out for consultation.

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