Tight controls must not squeeze out innovation

The 1980s and 1990s have seen the effect in Britain of carrot-based funding for universities and colleges. First cuts in university budgets drove colleges out into the world market in search of fee-paying students. Then removing the cap on numbers allowed them to expand home student numbers on marginal fees. The result was extraordinary ingenuity and growth. So much so that by 1993-94 the brakes had to be slammed on, home numbers once again capped and marginal fees reduced.

In further education in the 1990s, colleges' incomes were driven by their ability to attract and hold additional students. Now they, too, are to be subjected to closer control (page 4).

In both cases entrepreneurial activity resulted - as it often does - in much useful innovation and some dodgy ventures. The latter, attended by spectacularly bad publicity, damaged Britain's reputation for high-quality education. As a result, regulation was tightened and British universities are now subject to more detailed quality scrutiny than any others.

As our report from Malaysia and Thailand (pages 6-7) and South Africa (page 12) show, this has done much to rescue Britain's reputation overseas. Not a moment too soon if we are to compete with aggressive Australian and American marketing. But regulators should take care not to tie strings so tight that they throttle new ventures.