A radical new system of performance-related funding for the university sector has been proposed by the Higher Education Authority (HEA).
Under the plans, funding for universities would be linked to their success in increasing the output of graduates for key areas of the economy.
They would also be rewarded for efforts to widen access for lower-income groups and those with learning needs.
The HEA also says colleges could be penalised if they fail to generate less than 5 per cent of their funding from business and other sources.
The authority also signals key changes in the way in which universities decide to provide various courses. In reviewing course provision, the universities should be guided by the "need to meet national needs in economic,social, cultural and service terms".
Any decision to table new courses should "reflect student choices and preferences" as well as the universities' overall mission.
Colleges, the HEA says, might also review business and student demand for such courses.
In relation to existing courses, the HEA says colleges should check with business about their relevance and about the quality of graduates. It should also consider how recent graduates are faring in the jobs market.
It is understood the Department of Education, which is preparing new proposals on third-level funding, has backed the thrust of the HEA plans.
The HEA proposals represent a radical departure from current practice, whereby the seven universities receive block grants from the Exchequer, with only a small element of "targeted" funding.
The HEA says the new funding model was required because of the need to balance the independence of the colleges with "meaningful accountability" to various stakeholders, including the Government and the wider public. There is, the HEA acknowledges, "growing concern with issues such as quality ... relevance and value for money" in the university sector.
The HEA says any new funding model should:
reward the responsiveness of a university to national and regional needs;
increase opportunities for students of all backgrounds to gain the benefits of higher education;
provide incentives to colleges to diversify and increase income from non-State sources;
and promote a strategic approach by the colleges to their long-term development.
The HEA proposes that up to 15 per cent of the overall block grant could, over time, be used to support long-term strategic planning.
The authority signals that current efforts to boost the non-State income of the colleges has met with only mixed success, despite the incentives in place. "No adverse consequences have applied in those institutions where other income is below 5 per cent [of total income]. This needs to be further considered."
