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Funders. The Higher Education Funding Council for England suggests that, if significant structural change is needed, the council could have a more explicit interventionist role.

It notes the absence of any body "responsible for higher education in its widest sense" and asks whether its own remit should be widened to include structural and academic questions like the development of credit transfer. But it recognises that it could only engage credibly in these issues if there were a wide consensus for its having such a role.

It also argues that the size, shape and purpose of the sector - the issues discussed in stage one of the review - cannot be settled in detachment from funding, the subject of the stage still to come.

Predicting a more differentiated system - with a greater variety of students and institutions, some unable to match the aspirations of their missions - it argues that a number of world-class institutions must be preserved. It expects that differentiation to include more graduate work, but with more students taking short initial courses and an expansion in continuing education. It notes potential difficulties for staff through increasing numbers, teaching changes and possible polarisation of institutions.

Trends likely to continue include modularisation, credit transfer and more student-centred provision taking advantage of technology and open learning.

Noting the Robbins principles taken by Mrs Shephard as the starting point of the inquiry it points to two areas not considered by it - the role of institutions in local and regional communities and the potential of higher education as a tradeable activity.