NEW money hardly ever comes with no price tag. The new money for further education has some clear conditions. One of these is the government's desire for rationalisation. We do not know how many colleges the government thinks we need.

The Further Education Funding Council seems prepared to take the lead in rationalising provision. As a consequence it is moving from a monitoring to a planning body. The reason is clear. Left to their own devices the colleges have produced few mergers, and most of these have seen relatively large institutions taking over small specialist ones.

The reasons are easy to see. To achieve a merger under current rules there is a complex series of hurdles even after the parties have negotiated a provisional agreement. These hurdles involve thorough consultation and convincing the funding council's regional committee, its national committee and the secretary of state for education and employment.

So, the FEFC needs to stimulate and not just respond to merger proposals. What devices and standards might it use?

ÖйúAƬ

It is unlikely that the centralist measures adopted in Holland, through which the government threatened to cease funding institutions that did not find merger partners will prove suitable here. This strategy is expecting a lot from a funding council and system of colleges that have been reared on the philosophy of free market competition implicit in incorporation.

It is equally unlikely that using the FEFC regional committees to nudge financially weak colleges into the arms of the financially strong will work either. The regional committees have not had such a directive role in the past, and the problem is one of culture and, perhaps, legislation. The strong financial colleges have been taught the benefits (such as they are) of market economics. If a weak college is going under it is best to wait on the event and delight in the new market that opens up, rather than engage in the costly business of merger. If regional direction is to succeed the committees will need to be visible, directive and offer the inducement of fast-track mergers with a minimum of liabilities.

ÖйúAƬ

And so to the universities. Having faced the Derbyshire disappointment, it would be surprising if the FEFC put much store by cross-binary mergers. Too many ventures across the binary line leads to awkward questions such as why do we need two funding councils. Against this it has to be seen that university/college mergers are the most exciting of reorganisation plans. But the problem facing the funding councils and the nation is once you start this, where do you stop? And how do you persuade enough colleges that they will not be second class if they remain outside the charmed circle? The funding councils urgently need a policy on when, why and under what conditions university/college mergers are acceptable.

There is a different course. The FEFC and its colleges are about to enter the world of self-accreditation. Even those with short memories will remember the impact of this status on the growth of ÖйúAƬ institutions. If self-accreditation involves financial robustness, a comprehensive curriculum and a certain size and quality of provision, each region is likely to throw up a relatively small number of starred institutions. Surely they should be the magnet to which weaker brethren are drawn.

Regional colleges would stand a chance of equity with regional universities in future negotiations on links, federations and mergers. They would give the government and the funding councils greater controlability and make for better collaboration and planning with sub-regional bodies.

All this, of course, is the opposite of laissez-faire. And such new bodies would need a distinctive name. What about "polytechnics", or has that been used before?

ÖйúAƬ

Keith Scribbins is a consultant in education governance and management.