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Could this be chance to rewrite the bitter past?

On the evening before he was due to address the Association of Colleges conference last November, Education Secretary Charles Clarke called in the trade union negotiators.

He was, he said, about to announce an extra pound;1.2 billion over the next three years for colleges. He made it clear that, in his view, colleges now had enough to pay staff an adequate increase to avert a strike. It was a nod and a wink to the unions. If the AoC could not agree a settlement now, Mr Clarke would want to know why.

The next day he spelled out his message to colleges. They were to use the money to "address the structural pay difficulties". Yet as late as last Friday morning one union negotiator was saying: "It looks as though the AoC has dropped the ball." If it had, it picked it up.

Though there is a glimmer of hope in the Government's document, Success for All, the confrontational habits learned in the last bitter decade could reassert themselves. The document envisages pay negotiations remaining local, and the Government has not given up on its ferociously unpopular addiction to performance-related pay.

Incorporation in 1993 seemed designed to set college staff and their managements at each other's throats. Managers loved the new power and autonomy it gave them, and the freedom from the micro-managing instincts of some local authorities.

It was less obvious to them how much misery was to be caused by the financial squeeze that went along with their new autonomy.

The then chancellor Norman Lamont, in his autumn statement in 1992, called for a 25 per cent increase in student numbers in three years. Ten per cent of a college's budget was to be linked to achieving these growth targets and would be forfeited if they were not achieved.

Colleges accumulated huge budget deficits. The FE sector accumulated a deficit of pound;250 million in its first four years and cast around for a way out of the mess.

It did what businesses do when in trouble, and what the Government seemed to want it to do. First it went for mergers so as to get economies of scale. In 1993, there were more than 500 colleges. There are now 357.

Second, it cut back on what it gives students and now spends a third less per student than in 1993. Third, it tried to get the work done cheaper, which meant sweating the staff.

Today, FE employs one of the most underpaid, casualised and exploited workforces in Britain. Lecturers' pay is on average 12 per cent below that of school teachers, and support staff pay is 15 per cent behind their comparators in local government.

Many individual colleges have not met even the remarkably ungenerous nationally recommended pay awards, and seem to view even cost-of-living increases as an optional extra.

The AoC estimates that lecturers' pay is about pound;2,600 a year less than it would have been if colleges had implemented its national pay recommendations. FE lecturers earn on average pound;3,000 less than schoolteachers. The average salary for full-time teaching staff was pound;22,769 and pound;19,116 for fractional part-time staff. This compared with the average classroom school teacher's of pound;25,000.

Two-thirds of support staff earn less than pound;13,000 per year and 20 per cent earn under pound;10,000. And there are fewer people teaching more students. In 1995, about 1,500 full-time and 8,000 part-time lecturers were made redundant. In the past six years, more than 22,000 full-time lecturers have been made redundant or have taken early retirement as an alternative to redundancy, according to lecturers' union Natfhe.

About a quarter of all teaching is done by temporary or agency staff. Many colleges stop lecturers from getting annual increments and progressing up the pay scale by fixing a lecturer's salary at a particular point, or within a narrow band on the pay scale.

The idea was to appease a government which was demanding more for less and to flex managerial muscles. The Colleges Employers Forum, which became the AoC, chose a confrontational stance which it believed would find favour with the Government.

There was another way, and sixth-form colleges, which were incorporated at the same time, found it. Choosing not to join the CEF, they set up their own Sixth Form Colleges Employers Forum, which still exists, and which until three years ago did not allow pay levels to fall below that of schoolteachers. Then they did, but the latest settlement has closed the gap again.

Modernisation was never an issue, says Sue Witham, head of the forum's secretariat, and nationally-agreed pay rates have always been applied. "Our members wanted that national machinery to hang together," says Ms Witham.

Of course, sixth-form colleges have not been immune from chill economic winds either. Class sizes used to be 15-16. Now 20 or more is not uncommon.

There are more contact hours. A new clause in the contract specifies that teachers can be expected to work two evenings a week to run classes. But Ms Witham insists: "Our principals wanted to negotiate, to work with the staff. They have always tried to take their staff with them."

The CEF chose the other route. Leaned on by government, in turn it leaned on teachers. The strategy has not worked. More than half the colleges are operating at a deficit and three times as many are now officially considered financially weaker than in 1994.

But to try to make it work, some college managements have conducted a decade of morale-sapping warfare with their staff and the unions.

Successive governments, as well as leaders of the CEF and then the AoC, have demanded what the former education secretary David Blunkett used to call "something for something" - fundamental changes in working practices normally described by government spokesmen as modernisation - in return for better pay.

Those changes have all taken place, and lecturers are entitled to demand that the employers' side of the bargain should now be kept.

Union negotiators believe that the system is at breaking point. Barry Lovejoy, Natfhe's national FE official, says: "Since incorporation, working conditions have been modernised to death, compared to pay which has regressed to well below schools.

"The 1990s was the 'pile them high and teach them cheap' era. The sector was starved of funds. More than 22,000 full-time jobs were lost and replaced with casual labour, with the remainder working under new contracts often imposed by confrontational management.

"The result was years of strife, huge increases in working hours and plummeting staff morale. Let us hope we can convince college employers to seize the opportunity to invest in their staff for the long-term benefit of the sector. A start was made this week (but only a start)."

Chris Kaufman, of the Transport and General Workers Union, who chairs the unions' negotiating team, believes that the AoC must assert itself: "It cannot speak with an authoritative voice. It is like wading through treacle."

He and Christina McAnea, senior national officer of Unison, represent the support staff. Ms McAnea says: "You cannot have continuing efficiency savings and improvements in standards if you do not deal with the problem of pay for support staff."

Managers are just as worried as those they manage, according to Peter Pendle, general secretary of the Association for College Management. He says: "Our members have to deal with all the problems associated with a low-paid and demoralised workforce."

And managers themselves were often victims of low pay. "The salaries of managers need modernising just as much as those of other staff."

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