The exercise is being carried out by a club of 15 colleges serving rural, remote and island areas as well as the three former agricultural colleges serving the land-based industries. Together they account for 85,000 student enrolments, employ 4,000 staff and have a turnover of pound;100 million.

While the colleges are highly diverse, they feel that they share similar difficulties in relation to travel, sparsity of population and high fixed costs and should benchmark their activities against each other and share good practice.

The initiative is supported by the Scottish Funding Council’s strategic development fund. Roger McClure, the council’s chief executive, welcomes it and says colleges in similar locations should be able to compare themselves in order “to do more, more effectively for each pound”.

Jane Cooper, the project worker based at Angus College, says there has been a 16 per cent increase in teaching efficiencies in the rural colleges since benchmarking began in 2001. The key, she believes, is how the information - “benchation” - is used. “There is no point in collecting the data if you are not going to do anything with it,” Ms Cooper comments.

Elmwood and Dumfries and Galloway colleges are two of the rural institutions involved, and both claim major strides forward. Elmwood says it has made direct savings of pound;300,000 which has allowed it to improve a range of services and its curriculum, including successful programmes in equine studies and hairdressing and beauty.

Dumfries and Galloway, which has gone through a rocky patch in its relations with the unions over staff restructuring, says the process has allowed it to turn itself around financially, having achieved pound;1 million in savings over two years.

Steve Taylor, the assistant principal at Angus College who manages the project, said that benchmarking, in which he has been involved for 11 years, should be seen as “a change tool rather than a data process”. A wide range of staff should be involved and strong commitment from the top was essential.

Mr Taylor also places emphasis on getting out and about to see good practice at work, not just sitting in offices sifting data.

Mr McClure said the funding council saw the benchmarking exercise as part of its campaign to make every college financially secure by the end of July next year. But, he pointed out in a talk to the rural colleges last month, the campaign “goes on and on for ever”.

A paper from the funding council, prepared for the national review of colleges, says the FE sector is “on course” to achieve financial security by 2006. This is being made possible by a combination of additional funding, management and better use of resources.

Progress towards balancing the books is being made despite severe external pressures. These include increased pension costs, a more competitive market for staff, costs of new legislation on disability, equalities and disclosure, social inclusion policies and changing technologies.

While there are additional funds to help colleges cope with these pressures, the council accepts that these will not cover the full costs.

The council also commends the sector for going beyond the target set for student enrolments. From coming in some 1.73 per cent below target in 2000-01, colleges are now at 5 per cent above. Taking account of price differences, that is said to represent an increase of 8.53 per cent.

A study of the FE sector in the four UK countries in 2001 also indicated that core funding for colleges in Scotland was 13 per cent lower than in England, suggesting that Scottish colleges were operating more efficiently.