Consultations on the Dearing committee's report, ÖйúAƬ in the Learning Society, are now closed, although late submissions are still trickling in. Next comes the report of Bob Fryer's advisory group on lifelong learning and sometime later the government's white paper. Timing has slipped from early to late November and may slip further.

This is not surprising. The task is hideously difficult. What the government can do depends in large part on what it is willing to fund. The competing claims of further and ÖйúAƬ must be balanced. Within further education decisions are needed - though there is little sign they will be made - on a simple structure for 16 to 19 qualifications. Within ÖйúAƬ excellence and access must be balanced.

As the Dearing consultations have gone on, initial relief that the report accepted ÖйúAƬ's need for more money has given way to disappointment. The report seemed quite literally to come apart in people's hands the more they studied it. It is now felt that the committee, concerned with consensus, ducked the big issue.

That issue has emerged as the protection and management of diversity. As debate has bogged down over funding, quality assurance, research organisation, qualifications frameworks, it has become apparent that there are broadly two ways to protect diversity in a mass system. There is a market model in which student choice drives diversity and institutions respond to demand. Or there is managed diversity on something like the California model where institutions are separated into different groups: research institutions, four-year universities and two-year community colleges, each with distinct missions.

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Equally apparent is that neither model is acceptable to all. The market model terrifies those in institutions and teaching courses which attract less well-off students or do not lead obviously to jobs - and this week's news of the sharp fall in applications for next year will reinforce those fears. A formally tiered system is anathema to institutions only recently freed from the restrictions of the binary line.

Instead of opting for one or other and seeing how to make it work, the Dearing committee did neither. Instead it recommended a series of mechanisms and agencies - threshold standards, a common framework for qualifications, better information for students, a teaching and learning institute, accredited training for academics, strengthened external examiner arrangements - which are to be largely created by institutions' collective effort and are presented as a defence against interference.

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This, in the view of that most experienced commentator, Martin Trow, who was speaking last week at the first of the Missenden Centre seminars on the Dearing report sponsored by The THES, is the worst way to defend diversity. He sees these recommendations as heavily dirigiste and centralising, an attempt to impose by exhortation, if not by law, a uniformity quite inappropriate to a mass system which is already very diverse. And he warned that the process, which he sees as bound to fail, could greatly damage institutions' capacity to manage themselves and diversify their activities.

It is probable that where Dearing ducked so will the government. A market solution is out. Introducing flat-rate means-tested fees is proving difficult enough politically. By departing from Dearing they have landed their policy in all kinds of difficulties of which the latest concerns means-testing European Union students. There is plenty here already for protesting students to exploit. This will reinforce ministers' determination to prevent institutions making things worse by charging top-up fees.

But formal tiering is also impossible politically. There would be uproar from the majority of institutions whose aspirations would be capped - and they are the universities and colleges closest to the government's heart in terms of access and vocational orientation (see Baroness Blackstone's vision, page 22).

The likely outcome is informal stratification and continued pressure towards convergence. The elite will get a bit more to keep them in line. Oxford and Cambridge will settle for somewhat more generous block grants to replace the revenue now flowing through the college fees. This will be dressed up as special factor funding for maintaining buildings, as replacement of that part of the block grant now clawed back because of fees, and perhaps as additional funding to ensure the universities put real effort into wider recruiting. They will probably also charge more for board and lodging.

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There will be further concentration of research cash through the funding and research councils to help the top group - though there is, alas, no sign yet of extra research money (indeed the Department of Trade and Industry's budget is being raided to bail out the National Health Service) and what there is is likely to be yet more geared to Foresight exercises. The bitterness of the excluded will need to be softened by requirements that staff in less privileged institutions be given access to "centres of excellence" on a regional basis. Universities which receive little public money for research will continue to do research for other customers and it will be possible for excellent work to develop anywhere. But top-rated individuals and teams will be cherry-picked by an elite offering more attractive working conditions.

Meanwhile, universities and colleges at the other end of the league tables, which have concentrated on large-scale recruiting, teaching at low unit costs and fulfilling the government's aim of wider access, need more money badly. The price of eschewing the market model and keeping the elite under control is that there will be less for these universities and colleges.

The hope here has to be that the education department can use the prime minister's unexpected announcement of some 10 per cent increase in student numbers over five years to lever extra cash from the Treasury - and that universities and colleges get to keep their block grants steady even if they have over-recruited this year or under-recruit next.

Meanwhile at the edge of ÖйúAƬ stealthy growth will continue. An announcement about Bolton Institute's application to become a university is expected soon (page 3). And there are other aspirants. There are also colleges of ÖйúAƬ using or longing to use the title "university college", though there was no indication at the Standing Conference of Principals' conference in Brighton this week that this will be sorted out in the white paper.

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The title could be reserved for colleges closely associated with a single university, a development along the lines of the university colleges in London and Oxford - not an attractive option to large independent-minded colleges with a strong identity. It could be formally allowed for those with degree-awarding powers for taught courses only. This would be a departure from the notion that the title "university" can only be used by institutions carrying out both teaching and research but it could assist the emergence of a tier of American-style four-year institutions.

No decision will mean continuing frustration for colleges and confusion for students. But then that is likely to remain the salient characteristic of British ÖйúAƬ. On the plus side this allows flexibility to adapt to change (even if too slowly and very late). But if the second-order Dearing recommendations for centralising arrangements are implemented without a clear decision on the first order question of protecting diversity, the pressures to convergence will increase further and diversity will diminish.

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