Teaching Matters: Now that some pressure has been taken off third-level funding by the Government's highly welcome, more generous spending allocations, it is perhaps time to look at how the extra money will be spent, writes  Danny O'Hare

To this end, the Higher Education Authority (HEA) has devised a new system for allocating resources to their designated institutions (for the moment this means the universities, teacher-education colleges and the National College of Art and Design, but will also include the institutes of technology when they are brought under the sway of HEA).

In general, I welcome this new approach, though with some reservations.

Under the new regime, a third-level institution will get its money in three ways. Most will still come in the familiar form of an annual block grant, allocated between institutions using a formulaic approach (as happens now). This basic grant will then be topped up by two other sources of funds:

Performance-related elements, which will be benchmarked against best national and international practice (in this there will be emphasis on setting targets and monitoring outputs).

Mechanisms to promote innovation, especially in areas that support national strategic priorities (this will be where the recently-announced Strategic Innovation Fund will be spent).

In devising this package, the HEA has had to juggle two aims, conflict between which has created untold problems for the third-level system in the past. On the one hand, it seeks to maximise the autonomy of each institution, and leave in their hands the way they manage their individual day-to-day challenges. On the other, it also wants to ensure that the public money involved is spent effectively and transparently, and above all that the spending reflects national priorities.

The HEA's job is to be a referee, promoting a fair and clean fight between the Government in one corner (which has always sought accountability through over-management) and the institutions in the other (who have always sought the freedom to do exactly what they liked). The proposed solution, though perhaps satisfying nobody fully, seems to me to be a reasonable mechanism for rounding this particular circle.

Wisely, the system emerged following detailed consultation with the universities, and the success of that consultation is a tribute to the universities' commitment to a change process. This latest initiative will perhaps further assure Government that genuine change is afoot in the university system, and may help to silence the doubts which in the past led them to keep their fingers so tightly closed over the purse-strings.

A welcome new element is the requirement for each institution to have a strategic plan. This will help to ensure that formulating and implementing plans will now be taken seriously; before, where such planning was in place it was too often regarded as a peripheral exercise with no real meaning in practice.

But the more interesting - and more unpredictable - element is that this planning will have to have regard for "national priorities". Is there a clear enunciation of such national priorities? Will they be handed down from Government or will they emerge from a consultative process with academics and the HEA? Most important of all, how specific will they be?

The worrying extreme of possibilities could be that precise target student numbers or graduate numbers per discipline might be dictated by Government, thereby restricting institutions greatly. Or would Government seek to define the roles of different sectors? These are big questions and the institutions should be alive to the need to address them sooner rather than later.

More immediately, it is a concern for me that the cost model in the new system is an allocative one, ie based on carving up the overall national grant from Government, not driven by the real cost per student. In my view, a part of the system should be the determining of a unit cost per student for each programme or group of programmes. Institutions would then receive a major part of their annual grant based on that unit cost and the student numbers.

But under the new approach, an institution could receive less than it got in the previous year even if its student numbers have not fallen - and, indeed, even if its numbers increased - because the system as a whole has increased its student intake more considerably. Some may say this is an excellent incentive to increase student intake and at face value that is so. But if the effect is to reduce the unit of resource per student that will affect quality in a dramatic way.

Again, it seems that the same allocation formula may apply to all institutions - to universities, institutes of technology, teacher-training colleges and the NCAD alike. If this is so, then what will emerge will be a convergence of all institutions since finance is one of the most influential levers on institutional priorities. And this is exactly what we do not want or need. A "one size fits all" just will not do.

Where I feel the HEA has missed an opportunity is in the rather neutral treatment it proposes for the institutions' private income, which is to ignore it altogether when setting the university grant. Surely it would be better to encourage more effort by the universities by adding a premium to what they generate or raise from the private sector?

However, such reservations are mollified by the HEA's welcome assurance to commit to a regular review of the system to ensure that it performs as they wish it to do and does not give rise to dysfunctional behaviour. This is refreshing, because too often bodies administer an unchanged system way beyond its usefulness. The truth is that nobody can ever predict what the effect of a new system will be in its entirety. Many administrators fancy that they can do so, notwithstanding history's many lessons to the contrary.

Danny O'Hare is a former president of Dublin City University