The Government is expected to bail out the Higher Education Funding Council to the tune of up to #163;35million when it takes control of funding for higher education courses currently taught in colleges later this year.

The Further Education Funding Council has estimated the cost of sub-degree courses, such as HNDs, in colleges at #163;35m. But the Higher Education Funding Council for England, which is set to take over control of the funding, insists it will need up to #163;70m to reflect the real costs.

As The TES was going to press, it emerged that the Department for Education and Employment was close to a compromise whereby the HEFCE would get up to #163;70m but that only #163;35m of it would be taken from FEFC budgets.

College leaders were seeking assurances from the Government and HEFCE that the new money would go to colleges and not be siphoned off for expansion of university student numbers.

College principals are also concerned over the historic levels of HE funding which, one principal said “appear to have left the FE sector short-changed”.

There was further anxiety about where the bulk of new money for an estimated expansion of 80,000 in HND student numbers over the next three years will go. Education Secretary David Blunkett has said sub-degree expansion should be in colleges, but the universities were never happy with this decision.

The FEFC and HEFCE insisted there was no dispute between the two councils.Geoff Hall, FEFC director of funding, said: “The discussions throughout have been amicable and constructive. I believe the exercise has been useful for all involved. We have both learned from one another and have been able to improve the transparency of funding arrangements.”

Philip Walker, of the HEFCE, said: “We have reached agreement in principle with the FEFC and DFEE on the basis of calculating the transfer of funding from HE students from the FEFC to the HEFCE. We are now awaiting confirmation of the numbers in December.”

But others in FE want greater assurances. John Brennan, development director for the Association of Colleges, said: “We are not going to argue about the cheapest options - residence and transport costs apart - but about the quality of provision and equity and fairness to ensure that the students get the best deal wherever they go.”

There has been a long-running debate over the relative funding of sub-degree courses in HE and FE. The councils commissioned accountants KPMG to report on costs well before the Government decision to transfer funding.

The KPMG report was unable to give any clear guidance on relative costs. It reckoned that they were similar for business studies and management courses. But for subjects such as science and engineering, the report is inconclusive. Concerns in the FE sector remain, however, over the possibility of HEFCE giving less for HE in colleges than for courses in universities.