The much-criticised funding regime that has dominated colleges for almost a decade will be abolished within four years.

Virtually all colleges will be given three-year budgets for long-term planning from next September and radical reforms to slash red tape, simplify funding and consolidate most of the targeted cash into core budgets will follow within two to three years.

But John Harwood, chief executive of the Learning and Skills Council, said he expects at least 20 colleges to pilot a new funding regime from January. He is seeking “volunteers” from top-performing colleges. While he refused to suggest names, it is certain the beacon colleges with high-flying leadership will dominate the list.

His announcement comes in the wake of a record pound;1.2 billion (19 per cent) rise in college funding, from pound;4.4bn to pound;5.6bn over the next three years. He has also accepted in full the recommendations of the bureaucracy-busting task force, which calls for the effective dismantling of the old Further Education Funding Council spending regime.

“It has led to a huge audit burden on colleges that diverts attention from what we are actually trying to achieve with this spending,” he told FE Focus. “At present everything has to wait until auditors tell colleges whether they have achieved,” he said.

Mr Harwood wants simple checks and balances “in year” to guide managers on their performance.

“If Peugeot down the road (at Ryton, near the LSC’s Coventry base) could not say how many cars they had made until they were signed off by auditors, they would be out of business,” he said.

At present, about half of all colleges operate on deficit budgets and Mr Harwood accepted that they would have to be turned round within two years for the reforms to succeed. He was confident that with the new government cash this could be achieved for the vast majority.

But, echoing a tough message from Education Secretary Charles Clarke to the annual meeting of the Association of Colleges in Birmingham, he said radical intervention might be necessary. This includes merging weak colleges with those on a sound financial footing.

Mr Harwood’s message to the AoC will disappoint some colleges as Mr Clarke had created an impression of an almost immediate consolidation of funds and abolition of the cash clawback penalties for colleges that fail to hit recruitment and achievement targets. But Mr Harwood said: “We have to move at a realistic pace if we are to avoid the sort of mistakes we have seen with A-levels.”

The 20 colleges this year will be those with “timely and accurate information systems and quality controls”. They would be a test-bed for the removal of clawback and yearly audits. A further tranche of at least 100 colleges would follow next September, with the bulk of colleges operating under the new regime by 2005.

While the 19-member bureaucracy-busting task force, chaired by Sir George Sweeney, calls for the new system to be in place within four years, Mr Harwood said: “I would like to see it happen earlier if possible. I have sympathy with those who are frustrated by the slow speed of change.”

Record investment, 37

Cutting bureaucracy, 39