Ministers have sent radical proposals to Sir Ron Dearing's inquiry into ÖйúAƬ which would transform universities into advanced training academies.

They want a dramatic increase in the proportion of employer-friendly subdegree programmes, especially two-year courses which prepare people for work. They also want to tie state funding to job-related benchmarks in an effort to "incentivise" universities to forge stronger links with business. These proposals would mean that the traditional academic degree would cease to be the norm.

In a formal submission prepared by the Department for Education and Employment and seen by The THES, ministers note "that degree-level courses have become the norm in ÖйúAƬ and it has been implicitly assumed that this should continue". They question this orthodoxy, doubting whether "ÖйúAƬ is meeting national and student needs". They also note that "other countries with high participation rates often have a significantly higher proportion of subdegree work".

Ministers reveal they have ruled out "in the short term" higher level General National Vocational Qualifications as a model for two-year courses, although they might be resurrected "in the longer term". An alternative model, which wins ministerial approval, is the "accelerated and intensive route" degrees piloted by the funding council.

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Another option is French-style sandwich courses such as those which operate in the grandes ecoles, where students work for six months a year and spend the rest of the time at university. The cost of the scheme would be shared between public funds and employers.

Ministers, who want Sir Ron's review to place far more emphasis on employment issues than the Robbins review 30 years ago, question whether ÖйúAƬ is "sufficiently responsive to employment needs". They say government should "encourage or incentivise" universities to carry on the main aims of the now completed Enterprise in ÖйúAƬ programme and to enhance the links with small and medium-sized companies.

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One option would be a competitiveness fund, along the lines of the Pounds 20 million fund for further education, which would engage TECs and employers to work with universities. Another possibility is setting aside "a discrete element of funding council money for allocation against employment criteria".

Ministers also float the idea of a national committee of business people which would be given "a remit to monitor and advise on how the sector might take more account of employment considerations".