​This report proposes a way forward on the basis of the following principles:

• The funding method should be capable of supporting a planning dialogue between Highlands and DESC that covers the full range of activity that is undertaken by the college. This will include fully funded, part funded and unfunded activities.
• Student numbers should be broken down into broad categories that relate to the priorities of DESC and the Skills Executive. This should allow the strategic partners to help shape the overall direction of the college without getting involved in course level planning.
• Funding should link more clearly to the relative costs of providing different activities so that should the balance of work shift between more and less expensive programmes the budget can be adjusted to reflect the change.
• There should be an explicit policy on fee contributions by individuals and employers that should underpin college practice and the budget dialogue.
• The funding available to Highlands ought to be comparable to that received by schools for similar work.