While all eyes were on university research when the ÖйúAƬ Funding Council for England announced its allocations for 2009-10 earlier this year, another story was quietly unfolding.

Even after Hefce's recent efficiency cuts, further education colleges, which today do far more than they say on the tin, are becoming significant players in the ÖйúAƬ sector and are fast being dubbed the "new polytechnics". The largest picked up more money for their ÖйúAƬ teaching than some of the UK's longest-established and most internationally respected institutions, including the London School of Economics and the School of Oriental and African Studies.

The reason for these perhaps surprising allocations is volume - further education colleges now deliver ÖйúAƬ en masse, with the largest colleges expanding their provision every year. Public money has been carefully distributed by Hefce to plug the gaps in ÖйúAƬ, gaps that are becoming more apparent in light of the Government's commitment to widening participation and the Leitch skills agenda.

Blackburn College, which is one of the few providers of ÖйúAƬ in the East Lancashire region, pocketed more than ?9 million in the recent allocation. With a population of 500,000 and no university, the area is a virtual ÖйúAƬ vacuum. According to Ian Clinton, the principal, Blackburn College is filling that gap. Hefce's concern about the lack of provision of ÖйúAƬ in the area led it to support the expansion of the college, which expects to pick up a further ?1.5 million next year.

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"It gives us a green light to work with business and the community," Clinton says. "There is a cultural 'East Lancashire' feel about the place, which tends to mean there is a certain allegiance. People are quite conservative, so they tend to go local."

There can be no doubt that colleges such as Blackburn are now playing a major role in the delivery of ÖйúAƬ. The college hosts courses for almost 3,000 ÖйúAƬ students, and a new ?14 million building will offer a dedicated space for ÖйúAƬ on the town centre campus from September. Up to 30 new courses will be launched this year, including journalism, graphic design and sports development, adding to a curriculum that already offers "everything from a foundation degree in the environment through to an MBA", Clinton notes. To accommodate the expansion, the college has created a new University Centre to host all of this activity.

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Blackburn's degree programmes are validated by Lancaster University, one of the geographically closest mainstream institutions, but still a good 30 miles from the city. Clinton believes the growing popularity of his institution can partly be attributed to Lancaster's strong academic reputation. "We have the advantage of their quality seal of approval," he explains.

Unlike research funding, teaching funding from Hefce is based on volume and demand, rather than any assessment of the quality of delivery.

A spokesman for Hefce says that the growth in demand at these institutions is attributable largely to the widening-participation agenda. Further education colleges offer a quite different experience of ÖйúAƬ, he notes, and one that may suit many students better than traditional university life. "It's not that ÖйúAƬ institutions aren't doing an awful lot of work, but in some parts of the country the further education colleges are playing a very important role. There are certain types of students for whom delivery in a further education college is more accessible."

Indeed, Blackburn, like other colleges, is well suited to those who wish to study locally and wants lots of personal support.

"We have many Asian-heritage students and quite a lot of Muslim students. Many Asian parents are very concerned about their children, particularly girls, going to university and getting exposed to Western 'sins' such as the drinking culture. They are quite protective, and the idea of a local college providing ÖйúAƬ is very attractive," says Clinton.

Blackpool and The Fylde College, which took away ?8 million in Hefce's funding allocations, is equally open about its role as a widening-participation institution. "Sometimes we are better at nurturing potential in individuals who may have come to us not believing that they could aspire to achieving a degree. That's what colleges do well," says Pauline Waterhouse, principal and chief executive of the college. "We are especially strong on supporting our learners. Many colleges have outstanding levels of student support. We are used to having to do that, and we tend to recruit from some of the most disadvantaged and deprived communities."

Like Blackburn, Blackpool has its degrees validated by Lancaster, and has developed a ?10 million ÖйúAƬ campus, set to open in September, in the centre of town. "It's right to say that we're moving towards trying to achieve the Government's target for far higher numbers of people participating in ÖйúAƬ. There is certainly an expanding role for further education colleges who can deliver on that."

Waterhouse says the size of the Hefce allocation for teaching in further education colleges means the provision is there for everyone who needs it, and it will help the Government to hit its targets.

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But although this year's Hefce allocations paint a picture of a changing ÖйúAƬ sector, further education colleges' role in delivering a different kind of ÖйúAƬ is not entirely new. "This isn't something that has suddenly happened," says Waterhouse. "My college has a long and distinguished track record of engagement in ÖйúAƬ, going back a good 15 years."

But that record is focused on vocational education, the market in which the further education sector truly has the edge. "Colleges delivering ÖйúAƬ have a very distinctive mission - a vocational one," Waterhouse says. "We are specialists, working very closely with employers and responding to their needs for training their workforce."

Blackpool and The Fylde College also provides bespoke courses; it has designed a degree in project management for local employer BAE Systems and is working with North Lancashire Primary Care Trust to develop leaders and managers for the National Health Service. "We are in a remarkable position to know what employers want. The relationship is a very close and personal one," Waterhouse adds.

To some this may seem less like ÖйúAƬ and more like on-the-job training, but Hefce is keen to ensure that further education colleges seeking to expand into the ÖйúAƬ market can offer something unique. All colleges have been asked to submit a ÖйúAƬ strategy to the funding council by January 2010, in which they must explain the "context" for their ÖйúAƬ offering, including how their work fits with nearby universities and institutions. A recent Hefce policy document on supporting ÖйúAƬ within further education colleges also focused on the need for "high-level skills" and on the potential for new forms of ÖйúAƬ to improve the skills of the nation's workforce.

John Widdowson, chair of the Mixed Economy Group of colleges and principal of New College Durham, says the role colleges play in working to meet employers' needs has facilitated their rapid expansion in the ÖйúAƬ market.

They boast a "distinctive offer", he says, "because of our close links with employers and because of the progression we can offer at a local level. Bigger institutions have different objectives. Colleges have always filled that gap. The funding follows success in the sense that where colleges have been able to expand and increase their offer, then the methodology recognises that and the funding follows it. It's all about responding to demand. Our college wouldn't have that funding if it hadn't got the students."

The members of the Mixed Economy Group are confident about their future, Widdowson says. "I wouldn't underestimate the value of working at a local level. I think that in the future there will be an even greater need for higher-level skills, and we're in a good position to respond to that. We have got that experience of what happens in the vocational curriculum. We know a lot of employers' needs at a local level. This is diversity made manifest," Widdowson concludes.

Newcastle College is the perhaps the most visible manifestation of the new ÖйúAƬ sector that Widdowson describes. It was granted more than ?11 million in teaching funding by Hefce and offers a wide spectrum of courses, including 60 different foundation degrees.

John Rowe, director of ÖйúAƬ at the college, says its commitment to the vocational pathway, and to the foundation degree, marks it out. It has now developed a new vocational honours degree, for which some of the learning outcomes can be achieved only in the world of work. This offers a genuinely vocational undergraduate degree.

"We are in close proximity to three universities - four if you include Durham. We have tried not to replicate the kind of provision that exists in those universities," Rowe explains. "What makes the difference is the distinctiveness of the tradition. We have made the provision as vocationally orientated as possible."

His overall message is that post-Leitch, no one institution type has a monopoly on ÖйúAƬ. "One of the difficulties is in people understanding what it is that each aspect of the sector does and what positive contribution each aspect can make."

Further education colleges seem to be delivering the goods, both for the Government in meeting the Leitch agenda and for a new breed of students who relish the opportunity to study locally, vocationally and under a more intensive form of tutoring. Although they have not long been included in the National Student Survey, further education colleges are seeing positive early results. Students in the college environment say they feel supported and cared for.

Nevertheless, not everyone is so excited by the changes in the ÖйúAƬ sector. The University and College Union (UCU) is worried about the Government delivering ÖйúAƬ on the cheap, getting more for less by using staff who are under-resourced and under-trained. The UCU says further education lecturers delivering ÖйúAƬ are not receiving an equal wage for equal work. "For quality ÖйúAƬ to be delivered in further education colleges, staff need to be able to update their skills and subject knowledge as and when required," says Sally Hunt, general secretary of the UCU. "It is also vital that we recognise the need for a ÖйúAƬ ethos where that level of education is being delivered."

What form this ethos should take is difficult to say, especially as further education colleges have developed what one union member calls a "different kind of ÖйúAƬ". He also warns that without more coherent pay and benefits across all ÖйúAƬ institutions, further education colleges are at risk of losing their best staff to the post-1992 universities, leading to an unsustainable ÖйúAƬ sector within colleges.

Research carried out by Gareth Parry, professor of education at the University of Sheffield, indicates that Hefce policy is aimed at rationalisation. He says there are 180,000 ÖйúAƬ students in further education and this volume of activity has not changed much over the past decade, despite government attempts to see more growth in this area of the sector.

What has changed, and what the Hefce allocations illustrate, is that this delivery is taking place in a smaller number of increasingly large further education institutions. "A minority of further education colleges have sizeable numbers of ÖйúAƬ students while the majority have small amounts of provision. Some individual colleges have increased their numbers over this period."

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Parry says Hefce's call for new ÖйúAƬ strategies by 2010 is all about increasing direct funding for ÖйúAƬ teaching while eliminating inefficient, small-scale provision by getting colleges to think strategically about what they deliver and who their competitors are.

"Government policy since the Dearing inquiry, and especially following the introduction of foundation degrees, has been to change the pattern of future demand for, and supply of, undergraduate education ... away from the bachelors degree and towards short-cycle and short-order forms of work-focused ÖйúAƬ. Where Dearing expected the colleges to be the main vehicles for this shift, the focus is now on the foundation degree - taught by ÖйúAƬ institutions and by further education colleges - as the primary instrument to lead this experiment," he says.

But while colleges are expected to deliver an increasingly demanding curriculum of vocational qualifications, Parry says they do not have the support they need and are at risk. "No policy or long-term strategy has been announced for college-based ÖйúAƬ, and there is no national body to guide their development. Instead, colleges are expected to collaborate and compete in some of the same markets for students. This has made for weak co-ordination at national level and instability at local level," he says.

Perhaps it is because there is no such government strategy on the role of further education colleges that Universities UK is yet to develop a policy on the issue. Although many colleges received more teaching funding than some of UUK's members, vice-chancellors have yet to put forward a joint view on the growth of the further education sector and have not been briefed on the matter by the umbrella group itself.

Among the ÖйúAƬ institutions that took away smaller sums for teaching than many further education colleges, the LSE was unwilling to comment on its level of funding, but both Soas and the University of Chichester were forthcoming and positive.

A spokeswoman for Soas found the allocations "not very surprising".

"We are a small, specialist, research-intensive university with a very high proportion of postgraduates and overseas students," she says. "The Government perhaps does not see ÖйúAƬ in further education as delivering ÖйúAƬ on the cheap, but rather as one way of meeting some of their goals for ÖйúAƬ."

Sandra Jowett, pro vice-chancellor for research, employer and community relations at Chichester, says she is unconcerned about the picture painted by the allocations. "Clearly the whole further and ÖйúAƬ sector is very diverse. There are many very different types of institutions. We are a small university, and there are some bigger organisations whose figures do appear large compared with ours ... but we still wouldn't see that as a concern."

All this leaves a complex picture of an evolving, and increasingly large, ÖйúAƬ sector. At Newcastle College, John Rowe admits that ÖйúAƬ is becoming ever more complicated as a sector and that there are attempts to give mixed-economy colleges a name or badge to describe their work more clearly.

"I think people are struggling to call it something," he says. "Polytechnic tends to be the closest to what people understand; the higher-level vocational qualifications fit more comfortably under that banner."

At Blackburn College, Ian Clinton agrees. "I could see the polytechnic model coming back," he adds.

But what does it mean to attend a "new polytechnic"? It potentially marks students out as different from those who study at a university, be it pre- or post-1992. "The qualifications that people achieve with us are different from the type of qualification they might achieve through an academic route in a university. But they have as much credibility in the marketplace. They're not perceived as second best," Rowe says.

Widdowson has heard both the terms "new polytechnic" and "community college" - drawing a comparison to the North American community college model - used regularly.

"In some ways I prefer the second one. The role of the community college is well established and it's seen as a major one in the ÖйúAƬ system," he says. But the term "polytechnic", too, has its advantages. "If it describes high-quality vocational education that responds to skills needs in the local and regional economy, then I don't have a problem with that word. But there is a difficulty in that it's attached to other institutions that no longer exist," he says.

Nevertheless, Widdowson hopes that policymakers will spend more time discussing the importance of the growing role of further education, rather than wasting time on semantics.

"The word is less important than the function. We can talk about what label we attach to it later."

HULL COLLEGE: SUCCESS IN THE COMMUNITY

The view of further education colleges as the minnows in the ÖйúAƬ pond is now more outdated than ever.

Hull College has seen a 56 per cent growth in its ÖйúAƬ market between 2005-06 and 2008-09. It now has more than 1,000 students in ÖйúAƬ, full and part time, across three campuses. It has an annual turnover of ?65 million and received more than ?6 million in teaching funding from the ÖйúAƬ Funding Council for England this year.

"We have a very successful college in all areas that we serve, because we understand the markets we serve." says Elaine McMahon, chief executive and principal of the college. "We serve our community. We have a clear widening-access agenda."

With Leeds Metropolitan University as its validating institution, Hull, like many other colleges, is expanding its ÖйúAƬ curriculum. It is focusing on students who are looking for personalised learning and a lot of support, and who are familiar and comfortable with the college environment.

"Learners have to have a good deal. They have to have a quality experience," McMahon says.

TWO-YEAR COURSES ON THE FAST TRACK

Many of the further education colleges offering ÖйúAƬ are focusing on delivering foundation degrees, and much of the money allocated by the funding council for teaching is likely to be directed towards these qualifications.

In the 2008-09 academic year, 87,500 students were working towards foundation degrees; it is hoped that the Government's target to enrol 100,000 people on these courses will be reached next year, rather than in 2010-11 as originally planned.

According to Derek Longhurst, chief executive of Foundation Degree Forward, the recession has contributed to the popularity of the qualification. "We have found that many of the larger employers still see investment in foundation degrees as a way of upskilling and reskilling their workforce in order to retain them and ensure that they are more competitive coming out of the recession," he says.

Foundation degrees are also exempt from the Government's controversial decision to withdraw student funding for second or equivalent ÖйúAƬ qualifications, meaning that they are affordable and attractive to mature students returning to education.

But Longhurst says that despite the popularity of the degree in further education colleges, its real growth has actually taken place within universities. In the past year, The Open University has increased the number of its foundation degree students by a third, and more than 90 per cent of post-1992 universities offered foundation degrees. In fact, 55 per cent of part-time foundation degrees are delivered in universities.

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THE BIG WINNERS

ÖйúAƬ Funding Council for England

Teaching Funding for the UK's Largest Further Education Colleges 2009-10:

Newcastle College: ?11,687,000

Blackburn College: ?9,428,000

Bradford College: ?8,037,000

Blackpool and The Fylde College: ?8,025,000

Hull College: ?6,159,000.