Principals were celebrating this week as the Education and Employment Secretary David Blunkett announced an Pounds 83 million cash injection for colleges and promised them a Pounds 100 million share of Welfare to Work.
Mr Blunkett's package includes Pounds 25m to stave off further cuts in unit costs, Pounds 55m for widening participation in FE and Pounds 3m to double college access funds.
He also agreed to restore the Pounds 10m cut to competitiveness funds imposed by the Conservatives in the wake of the cash-for-growth crisis earlier this year.
Mr Blunkett said the Pounds 55m fund to widen participation in FE would bring 70,000 to 80,000 new students into college.
The package means that an estimated 5.3 per cent cut in college budgets expected next year will be reduced to 4 per cent. Colleges said the announcement is a step in the right direction.
But the settlement is still far short of the commitment to a 1 per cent maximum cut year-on-year won by the universities. Cash will come from savings gained by cuts in unemployment and a change to termly payments to institutions similar to that which saved cash for higher education.
No cash will come from university tuition fees. But employers will have to pay more for courses.
Mr Blunkett said companies would, in future, have to pay half the cost of training their staff. At present firms pay around 25 per cent.
Speaking at the Association of Colleges conference, Mr Blunkett hinted that more money would be found in the future. He said: "FE will be crucial to meeting the Prime Minister's commitment at the Labour party conference, of expanding student numbers by 500,000 by the year 2002.
"Together we have a chance which I think is unequalled in the history of post-16 education. My job is to ensure that further education has the resources from 1999 onwards to fulfil that challenge."
Mr Blunkett said he was working towards ending disparities between colleges and school sixth forms - and told principals that ministers were considering how to create new colleges.
He warned that greater efficiency and rationalisation would be needed, but promised colleges a key role in the Government's New Deal programme. He said: "I have got to help you with these new challenges with additional resources. We need to in terms of trying to bring greater stability and of course in implementing the (Helena) Kennedy (Report) agenda."
Roger Ward, AOC chief executive, said: "The Pounds 83 million is a welcome addition which goes more than some way towards alleviating the desperate plight of the college sector. It is sadly far short, however, of the Pounds 231m we have called for."
Ken Ruddiman, Sheffield College principal, said "The rot has stopped, but the rot has not been reversed." He called for speedy action to bring a level playing field to funding for sixth-form and other post-16 education. The cash injection roughly equals the money axed from FE colleges earlier this year by the last Government. It is about half of the Pounds 165 million awarded to higher education, although Mr Blunkett said universities would only get Pounds 125m directly.
Patricia Morgan-Webb, principal of Clarendon College, said the announcement was a victory for the AOC just a year after its formation. "We think we have moved a long way," she said. "All of us welcome the grant for FE. We want more, but we will always want more." Barnsley College principal David Eade added: "This will bring a renewed burst of energy and higher morale because we are accustomed to doing the best we can - this will give people new inspiration. Although some people will be disappointed with the amount they will be delighted that it is a start" Mr Blunkett declined to comment on the controversy surrounding Mr Ward. He said: "The AOC is an independent body. The AOC's business is its own and it will address clearing the air in the best way."