An entire campus is to be shut down in the most dramatic consequence yet of the mismanagement of the college capital fund.
Brooklands College in Surrey has announced that its Ashford campus will have to close after it was left with pound;11 million of debts, run up in the process of preparing a bid for funding new facilities worth pound;96 million.
The Ashford campus was formerly Spelthorne Sixth Form College, which merged with Brooklands just two years ago on the college's understanding that financial support for rebuilding its campuses would be forthcoming to create a new, more vocationally orientated curriculum.
Martin Doel, chief executive of the Association of Colleges, warned that many colleges faced cutbacks because of the capital failure.
He said: "The college sector as a whole is likely to write off pound;200 million in costs in its 2008-09 accounts. The consequences of this will become apparent in the next few months as individual colleges take decisions to close sites, restructure departments and drop loss-making courses.
"We recognise there is no simple solution, but we do think that it is very important for the (Learning and Skills Council) to deal promptly with the issue of colleges in serious capital-related financial difficulties."
The announcement comes just weeks after the Government rejected calls by MPs to reimburse colleges that became indebted by carrying out preparatory work to bid for money which, it emerged, had already run out.
Instead, the Government merely promised to prevent bankruptcy. As Sion Simon, FE minister, said earlier this year: "We will expect the LSC to deal urgently with their situations. We are absolutely not willing to see colleges go bust."
Shane Chowen, the National Union of Students' vice-president of FE, said students were now paying the price for ministers' refusal to reimburse colleges.
He said Brooklands' plight also calls into question ministers' pledge that no college would be allowed to go bankrupt, since the process of merger followed by the capital fiasco has effectively led to the disappearance of a sixth-form college.
"If colleges are having to scrap provision because they don't have the facilities to deliver it, it sends a really bad message to lots of students," Mr Chowen said.
Brooklands plans to close Ashford and to end A-level provision at its main Weybridge campus in order to preserve vocational courses not easily replicated elsewhere.
In a statement, it said talks were in progress to secure places elsewhere, particularly for those whose A-level courses would be cut short, and to provide support for students who would need to travel in order to study.
"We also know that funding for FE colleges in the coming years will be reduced overall and will be very tight for all colleges. The future of funding is quite clear and that is why we are not hesitating and making these difficult decisions now," it said.
Surrey County Council, which will take over funding 16-19 provision in the area in April, reacted with alarm at the prospect of finding places for more than 1,000 extra students.
Contrary to the image of a prosperous commuter belt, this part of the county has a high number of young people not in employment, education or training (Neets), and the council fears having to "pick up the pieces of a financial disaster".
Peter Martin, the council's cabinet member for children and learning, said: "The proposed closure of the Ashford site is most serious. I want a meeting with ministers to prevent a severe impact on the future careers of so many young people.
"Over 1,000 students in an area with higher-than-average Neets on Heathrow airport's doorstep have now lost the opportunity for modern vocational learning facilities . through the Government's breathtaking incompetence."
Mr Martin echoed the objection of Grimsby Institute of Further and Higher Education, which has threatened legal action against the LSC, that going ahead with 13 more projects, rather than compensating colleges which had spent millions on preparatory work, was unjust.
"In Brooklands' case, this is tantamount to abandoning young people who live in Spelthorne," he said.
But a council spokesman said it did not have the money to support the college financially. Instead, it is hoping to prevent the students from falling out of education by encouraging local employers to provide jobs with training and offering transport to the remaining campus in Weybridge.
An LSC spokeswoman said that Geoff Russell, the chief executive, had agreed the college needed a new estates strategy to ensure its future.
"The LSC is still working with the college on developing this strategy," the spokeswoman said. "When an agreement is reached, it will also ensure that disruption for learners is minimised and the availability of local provision maximised."