An adjournment debate in the House of Commons about a diving company which might go under because of a funding row seems unlikely to make splash headlines.

But the dispute involving Plymouth Ocean Properties, two colleges and the Further Education Funding Council threatens to make waves for all colleges.

It centres on the definition of academic and vocational courses, as set out in schedule 2 of the Further and Higher Education Act. Courses which are deemed to be vocational are funded by the Government but those said to be essentially recreational are not. If the funding council is found to have interpreted the Act wrongly then the controversial distinction between the two could vanish.

Plymouth Ocean Projects runs courses under franchise agreements with Mid-Kent and South Devon colleges. It says it has lost more than Pounds 500,000 because the FEFC has told the colleges it will not pay for leisure courses.

The company has lodged a formal complaint with David Blunkett, Education and Employment Secretary, who can intervene if he thinks the council has acted unreasonably.

Last week education minister Dr Kim Howells criticised the way the affair had been handled. He told the Commons: “I am shocked at what appear to be several instances of a lack of communication and of coherent interaction between the FEFC and the colleges in question.

“This is one of several cases that show that there should be more careful monitoring of what contracts are allowed and of the interpretation and understanding of the legislation involved.”

It is unprecedented for a minister to criticise a non-departmental public body in this way.

The definition of diving courses is problematic because they are arranged in tiers, individuals must succeed at one level before rising to the next. The funding council has refused to fund open-water diver and advanced open-water diver courses, on the grounds that they are recreational. It has allowed other tiers to be funded because they “gave progression” to a vocational qualification.

If the funding council is found to have acted unreasonably, then it might have to fund other recreational courses, such as flower arranging or line-dancing.

Dave Walsh who runs Plymouth Ocean Projects Ltd has taken legal advice and threatened a judicial review. He is proposing to take legal action against the council and separately against the colleges.

The colleges agree with his interpretation of the situation but he would have to sue them because the contract is with them.

Some of the confusion arises from a circular which the council published in August 1996 which says that it would not expect recreational or introductory courses such as “open-water diver” to meet the funding criteria.

However, in 1995 a DFEE official wrongly advised that the FEFC would fund such courses. The council allowed funding for that year but then revised its position.

Within the diving world there has been widespread interest in the case. Mr Walsh’s company has antagonised a number of his competitors. They agree that the courses are recreational and intended simply to prepare people for holiday diving. They see the Plymouth company as wrongly using public funds to provide subsidised diving training for a recreational pursuit. A number of those companies have lost students and as a result have to go under.

Some diving centres were advertising courses for only Pounds 99 and telling prospective applicants to sign up saying they wanted to be a diving instructor, so that their training would be subsidised.

In 1953, the British Sub-Aqua Club was formed, an amateur group which teaches diving at all levels. It is recognised by the Sports Council and is a non-profit-making organisation.

Mike Holbrook of the BSAC said: “We agree with the FEFC that these are leisure-based courses. You don’t get public funding for learning to drive, it’s that kind of equivalent. There is clearly no intention for most of these people of going on to become instructors. Nor is the industry large enough to support any more instructors.”

In February the National Audit Office report on the funding council looked at the question of franchising. It noted then that there was an increased risk of paying for training which was ineligible for funding council money.

College deals with industry - franchising - increased value for money and participation but involved risks. It was decided new controls should be introduced. The NAO is carrying on looking at this aspect as part of its routine audit and will, like all the other participants, anxiously await the minister’s decision on whether or not to intervene.