But, despite helping to meet key Government priorities of combating social exclusion and promoting lifelong learning, the money is under threat as the EU pot shrinks and competition grows from other bidders such as local authorities.

Colleges largely use the funds to target training on the most disadvantaged parts of the country. This is generally provided from the European Social Fund (ESF) under the EU’s Objective 3 programme, covering all of Scotland outside the Highlands and Islands which has special transitional arrangements (including ESF).

Social fund money accounted for in excess of pound;45 million of last year’s figure, more than double the pound;21 million spent in 1998. The Association of Scottish Colleges, which carried out a survey on behalf of the FE funding council, says: “European funding plays a crucial part in enabling colleges to provide structured and targeted training to a wide spectrum of socially excluded groups. Without ESF support, it is clear that a significant number of individuals would be unable to access any form of lifelong learning.”

The survey shows that 80 per cent of students supported by the programmes had no qualifications when they entered college and the same proportion required help with literacy and numeracy (compared with 30 per cent in 1998).

The funding council is reviewing how colleges can show the value added to their work by ESF funds, in particular the share of student activity the funding supports. More widely, the parliamentary European committee has also launched an inquiry into the implementation of EU funding.

There is concern that the money available for Scotland, outside the Highlands, is being reduced from pound;98 million for Social Fund projects last year to pound;70 million, and then cut in half again next year. This reducd amount is intended to support all European projects under the category, not just those in colleges.

Figures for 1996-97 showed that on average EU funding accounted for 5 per cent of colleges’ income, ranging from 15 per cent in Fife College to 0.2 per cent in Barony College.

The more limited sums in the future will be allied to much tougher scrutiny from Europe on their use. A meeting in Brussels two weeks ago brought together Scottish colleges and universities with EU employment and audit chiefs. As a result, the Scottish Executive is to draft guidance on how the further and higher education sectors cost and operate ESF projects. The ASC believes Scottish colleges will struggle to maintain their existing 15-20 per cent share of EU funding.

There are also fears of a knock-on effect on mainstream college finances and therefore staff jobs. Andrew Haddon, head of finance at Borders College, says new targets for student numbers assume growth based on previous student activity, which includes EU-funded programmes.

“We have indicated to the funding council that the targets set are very demanding, and uncertainty exists around our ability to hit the activity targets as a result of potential removal of EU funding to support students,” Mr Haddon said.

He is also concerned that colleges will in future have to bid on a national basis instead of money being allocated regionally. Borders is likely to lose out because it is in an area that does not have the student numbers or the extent of urban deprivation experienced elsewhere.

John McCearney, general manager of the West of Scotland College Partnership, says the reduced funding allied to increased competition for the money will be a major challenge.

The more competitive position does not just reflect less cash, Mr McCearney says, but also the fact that colleges will have to be much more strategic in their bids and work in partnership with a number of other agencies.