It is good to see that the Association of Colleges is working to identify new ways for colleges to fund capital projects following the Learning and Skills Council’s capital funding debacle (“Colleges in Barclays talks to establish `Bank of FE’”, September 25).

Its capital task group appears to have thought outside the box and identified a range of proposals that would help colleges continue to meet their capital aspirations and improve infrastructure for students.

The arguments to end the requirement for colleges to pay VAT on capital projects are at least as convincing as those from the motor industry for the car scrappage scheme: both would equally have an impact on the revitalisation of the economy.

The proposal to establish a fund to allow colleges to lend out their cash reserves, to be drawn on by other colleges for capital projects, are certainly innovative and should not be dismissed out of hand. No doubt there would be a number of hurdles to clear, not least the scepticism of college governors, but providing the rate of return was at least equal to that achieved elsewhere, the scheme might have real potential. It would certainly be safer than investing in banks in Iceland, and would rebut unfair criticisms from government that all colleges ever do is moan about funding.

From time to time we hear calls from politicians to “claw back” reserves from schools and colleges, failing to understand that the way institutions are now funded requires them to build these reserves. If the scheme becomes reality then such calls would disappear. ACM certainly hopes that AoC is able to encourage its members to give the proposals serious consideration.

Peter Pendle, Chief executive and general secretary of the Association for College Management (ACM).