This week Britain's university leaders have been meeting in private conclave in Strathclyde. The Committee of Vice Chancellors and Principals have a number of thorny issues to confront. What are they going to do if the Government does not produce more money from next year to match the inflow of student fees? Are they going to go along with the new Quality Assurance Agency's plans for developing threshold standards for the various levels of the qualifications framework that the Dearing committee proposed? Who will they back to develop the qualifications that are likely to be required for academic staff?

Decisions on these and other issues - if decisions there are - were not due to be made until after The THES had gone to press. What those decisions may be could determine whether the CVCP itself has a future. There are threats and opportunities.

The biggest threat is that the committee will fall apart as different factions war over the distribution of too little money and the tactics for trying to get more. The new chairman, Martin Harris, will have had a job this week trying to hold hawks and doves together. Some will share his view that they should trust the Government to do the decent thing. Others will point to the effectiveness of bad behaviour in 1996 when the threat to impose fees resulted in the establishment of the Dearing committee.

For the ugly truth about the universities' financial situation is becoming depressingly clear. The latest figures from Noble Financial publishing (page 6) show the extent to which institutions are going into debt. Nick Barr and Iain Crawford (page 3) will point out once again before the education select committee next week that universities are not going to get the extra money they need now or in the foreseeable future unless the Treasury changes the accounting rules on loans - as the German government is apparently doing in respect of a tranche of lending for health provision so as to meet Maastricht criteria. Indeed per capita spending may shrink even faster than planned if universities have indeed recruited above target this autumn fearing a fall in demand when fees come in next year.

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Funding issues are not the only ones threatening to tear the CVCP apart. As Peter Scott will point out (page 14) at next week's conference "ÖйúAƬ and the Scottish parliament" in Inverness, sponsored by The THES, regional development and the stratification of research funding will drive the differentiation of institutions. Separate interest groups (big research universities, small research universities, "modern" universities) and regional groups (Scottish principals, heads of Welsh institutions) already exist and will strengthen.

But paradoxically this fissiparous tendency could provide the CVCP with its big opportunity. Regional developments have taken a massive stride forward in the last ten days. Initially the establishment of separate funding councils for England, Scotland and Wales threatened to tear the committee apart as institutions became subject to diverging regimes.

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But now that real power is to be devolved to locally elected bodies, the power of local quangos will diminish. This will reduce the baffles between local politicians and institutions, making it vital that universities retain contact with a wider hinterland. The CVCP, with its UK-wide membership, will be the only remaining forum for co-ordination and mutual support, a very different role from the time when universities dealt with a monolithic national government operating through first one and then several tightly controlled government agencies.

Higher education is an international business and universities cannot afford to become parochial. Universities may - and should - develop increasingly strong links with their local communities, industries and regional governments but the free movement of staff and students means that they are par excellence an industry in a cut-throat global market.

Organising cross-regional and cross-national co-operation and calibration will become ever more important. This week we report Malaysia's moves to assess the quality of its ÖйúAƬ institutions. Singapore is developing links with the Massachusetts Institute of Technology as a means of attaching its universities to a world-leading "brand". The CVCP has a role to play in ensuring that Britain's reputation for ÖйúAƬ does not evaporate as regions differentiate and institutions diversify.

The key to the CVCP's ability to fill this role is the new Quality Assurance Agency. Vice chancellors won a doughty victory when they secured the establishment of an agency independent of the funding councils and therefore of government. They now need to ensure that the agency, on which they are well represented, develops enough clout to prevent subsequent political intervention.

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Judging from newly appointed chief executive John Randall's interview this week (front page) the agency is starting out well in tackling the extraordinarily difficult and sensitive issue of threshold standards and institutional assessment. That the next phase of audits will be the first in a new cycle of assessments based on institutional review shows that much has been learnt about what works to produce genuine improvement in universities (robust internal scrutiny) and what invites cynical manipulation (the arrival of visiting assessors for brief paper-driven inspections). Mr Randall's approach to threshold standards and programme objectives suggests an approach that will not be so heavy handed as to throttle innovation, while still making sure that students know what they can expect from their courses. What the QAA stands to gain if it can handle this process successfully is the UK-wide calibration of standards.

At present the Scottish funding council is loath to let go of quality assessment, though the Scottish principals would prefer to be assessed by a wider peer group. In Wales assessment has been developed with a higher degree of consensus than in England. The ability to bring all UK universities within one system will depend on their willingness to join and therefore on the credibility and diplomacy of the agency's leaders.

For this reason it is a pity that Mr Randall seems to be inviting confrontation over the training and assessment of the academic profession itself. Here habits of mind associated with National Vocational Qualifications, industry lead bodies and competence testing seem to have reasserted themselves at the expense of the one-remove approach the agency seems to be adopting towards other professional bodies.

Competence-based approaches have not had a good press in ÖйúAƬ for the sort of reasons which vice chancellor Brenda Gourley develops this week (page 16). Universities should not be just servants of their country's economies, but "nurturers of rounded civically responsible citizens and sites of reflective thinking".

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Last week in The THES Fergus Millar reminded us of the nature of the academic enterprise, the need to question and to test received wisdom. If universities are to fulfil this role, their teaching staff will need more than narrowly assessed competencies. The alternative is not, as Mr Randall puts it, incompetence but inspiration and imagination.

The QAA is going to have enough to do negotiating acceptable threshold standards for courses in a time frame which does not court government impatience and organising the cadre of "academic reporters" needed to operate the system. It should stick to the knitting and not get involved in the detail of professional development where there are other able and more suitable contenders.

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