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Contract should be honoured

United Kingdom Public Sector plc is bankrupt. Strategic reserves are spent and any potential for substantial profit within the system has been privatised. Government exhortations to the private sector to provide voluntary help have failed miserably in education.

Rather than admit their follies, ministers cry "inefficiency", then cut, cut and cut again in the name of "efficiency gains". As long as a public education service exists, it is seen as wasteful. Those working for it must be taught yet more harsh realities of the marketplace.

These are not the views of Opposition spin-doctors but of Sir Michael Lickiss, once favoured by John Major's Cabinet and a chosen adviser on further education and vocational training, and knighted for his services. One of Britain's leading accountants, he became chairman of finance at the London School of Economics and chair of BTEC where he helped to forge a remarkable merger of academic and vocational exam boards to bridge that obstinate divide.

Sir Michael stunned a gathering of college managers last month by announcing that he had thrown in the towel "in disgust" as an adviser to ministers. "I am resigning because I cannot stand anymore," he said. His keynote speech to their conference became a protracted attack on "government incompetence", accusations of damaging U-turns on policy under pressure from the hard right, without sufficient evidence to back their claims.

But his real bitterness came with predictions that little would change. "It doesn't matter who wins the next election. There won't be the money for new policies because this Government has bankrupted the country."

What calls his words to mind this week are the fears (page 1) that the Government may be about to renege on performance payments promised to colleges that have exceeded targets for expansion. The Treasury is growing increasingly anxious over the fact that cash paid as an incentive for colleges to growcomes from an uncapped budget - and the Treasury does not like uncapped budgets and wants it stopped. The strategic reserves are all but spent on Mad Cow disease which, it is reckoned, has absorbed almost Pounds 1billion. But the real disease lies far deeper than the BSE crisis.

The Government cannot load everything in the public sector on the back of business and industry. The private sector pumps Pounds 400million a year in cash and kind into education business links. Relations have improved immeasurably between education and industry over the past decade.

Employers will always moan about standards, but thousands of schools and colleges testify to their generosity, eagerness to get involved in local initiatives and support for curriculum materials that are not just self-serving hype. The days of mutual antagonism and mistrust are over.

But employers need a sound education infrastructure, with good buildings properly funded by the state and staffed by people of high morale. Repeated attempts to get industry to foot the bill have failed, from the humiliating early failure of city technology colleges to attract the desired backing to the latest Public Finance Initiative which is still leagues away from success.

By scrapping, or even cutting, the Pounds 30m cash incentive scheme for colleges to grow, the Government will hit at the very heart of some of the most successful retraining schemes run jointly by colleges and industry. Much of the growth has come from franchised courses, where colleges have often helped companies to reskill their entire workforces.

Colleges know these incentives cannot go on for ever, but they deserve clear notice of any change in the rules. They are owed at least Pounds 22m for last year's successful expansion. If ministers do refuse to foot any part of that bill, they will rightly be seen as hypocritical.

The repercussions will go far wider than further education. Ministers are intent on building many of the college "efficiency" measures and payment by results into school budgets. Their credibility here depends on fulfilling their contract with colleges. They must find the money from somewhere - and not simply by yet again robbing Peter to pay Paul.

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