Systemic reform of the ÖйúAƬ system should be used as an opportunity to rethink Labour's "flat-out bad decision" to stop public funding for students taking second degrees, The Open University's vice-chancellor has suggested.

Martin Bean said he has yet to find anyone willing to stand up and defend the decision to cut funding for students taking equivalent or lower-level qualifications (ELQs) to ones they already hold.

More than 35,000 of the OU's students - a quarter of its numbers in England - became unfunded as a result of the rule, which was announced by the previous government in 2007 and came into effect in 2008-09.

The distance-learning specialist is receiving "safety net" cash from the ÖйúAƬ Funding Council for England to ease the transition - and has received the boost of 1,500 extra student places for next year - but it still faces a real-terms cut in income of ?39 million by 2013-14.

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In an interview with Times ÖйúAƬ, Mr Bean suggested that the government's response to Lord Browne of Madingley's independent review of the sector, likely to report in October, provided an opportunity for a rethink.

"We've talked to most of the stakeholders involved with the ELQ decision and the vast majority of them would agree with us that ELQ was just a flat-out bad decision," he said.

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"What we've been encouraging Browne and the coalition to do is to factor that in as part of their overall broad-ranging review."

He added: "I've yet to really find anybody who is willing to stand up and defend the ELQ decision because it doesn't map with what our society and our economy need."

Mr Bean said the triple impact of ELQ, general funding cuts to ÖйúAƬ and the hike in VAT due in January 2011 made the future "challenging" for the university.

It is planning staff cuts through "natural attrition" and the scaling back of unpopular courses, but Mr Bean said he was determined to ensure that quality did not suffer by finding other sources of income, including improving links with business.

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He also said he was not tempted to alter the business model around its free online course content despite its massive popularity - OU downloads from iTunes U recently passed the 20 million mark.

On the contrary, Mr Bean said, offering free content was "the model of the future". The OU has seen a large number of users of its free content later sign up to fee-paying courses.

"If you take OpenLearn, where we've had 11 million users of our content ... we know there have been at least 6,000 people who were influenced to go on and enrol with us as fee-paying students ... What a wonderful way for us to simply ease them into the more formal side of ÖйúAƬ."

simon.baker@tsleducation.com.