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Teacher training heads say the funding system brought in by the new Teacher Training Agency will hit them with a "double whammy".

Allocations announced last month have been based on so-called "contracted" student numbers which are on average about 10 per cent lower than the recruitment targets for teacher training courses in 1995/96.

The system is meant to reflect the expected drop-out rate on teacher training programmes. But course leaders say that it imposes financial penalties on institutions whether they do well or not. Those which manage to retain a higher number of students than predicted will end up providing unfunded places, while those whose numbers fall below the contracted targets will lose money.

Even institutions which hit their targets exactly will face problems, because while the TTA feeds them funding in stages throughout the year, most are required to pay up to Pounds 1,400 per student upfront to schools for teaching practice places.

Mary Russell, secretary of the Universities Council for the Education of Teachers, said teacher training heads had been hoping the TTA would fully address the problems when it took over funding courses from the Higher Education Funding Council this year.

John Howson, acting head of education at Oxford Brookes University, said there were also worries that the funding methodology would encourage teacher trainers to hang on to underperforming students to avoid falling below contracted numbers.