The total increase in funding for FE in 2001-02 will be at least pound;423 million. This includes pound;365m already announced, plus an additional pound;50m for performance-related pay. There will also be an pound;8m increase for 16- to 18-year-olds paid as a direct grant to colleges.
Education Secretary David Blunkett said the extra money for pay would "ensure high-quality teaching and learning is properly rewarded, with early emphasis on recruitment and retention in sixth-form colleges".
In his comprehensive spending review, Gordon Brown, the Chancellor, said that to raise the "appallingly low" staying-on rate, pound;150 million would be set aside for education maintenance allowances - worth up to pound;40 a week to those in deprived areas who stay on after 16.
The new targets are that, by 2004, 80,000 more 16- to 18-year olds should stay on in education, and that nearly 60 per cent of 21-year-olds should leave school or college with A-levels or their equivalent.
In the next few weeks new resources to tackle adult illiteracy will also be announced.
Ray Dowd, principal of Wirral Metropolitan College, in Merseyside, welcomed the funding for performance-related pay but said FE needed a different formula to that in schools. He said lecturers should be assessed in teams rather than as individuals. He said: "Some courses, such as NVQ business studies, have input from a number of lecturers, whose performnce should be assessed on how they perform as a team. I think this is a wonderful opportunity to recognise the contribution our staff make."
The extra money for pay was welcomed by Barry Fawcett of the National Union of Teachers. He said: "The pay of teachers in sixth form colleges has fallen behind that of their colleagues in schools. This will help to ensure they can be competitive."
David Gibson, chief executive of the Association of Colleges, also welcomed the decision. "We will work with the government and the sector to find a mechanism to reward well-qualified and successful lecturers.
But lecturers' union NATFHEsaid performance-related pay was not the way to drive up standards. Paul Mackney, general secretary said: "It will only drive down the morale of lecturers - already at rock bottom.
"Performance-related pay rewards individual success stories. You can't have a high-quality system that rewards the few while the pay disparities among the many go untouched."
Peter Smith, general secretary of the Association of Teachers and Lecurers, said extra money had to be directed to the "front line of education".
"What is concerning is that FE and sixth-form colleges desperately need a funding injection but not to fund performance-related pay. They need the cash if they are to survive at all."
Mr Brown said the New Deal programme was succeeding in getting young people back into work. Long-term youth unemployment, which rose to 500,000 in the 1980s was 50,000 today. He said the programme, which began to cater for the young employed, would be a permanent deal for all long-term unemployed.