Individuals, employers and communities have all benefited from the rise in standards, the development of better systems and the investment in facilities and quality.

The sector has proved itself ready and fit to tackle the key challenges facing the English education system. What can be done to keep more young people in education at 16? How can higher education be opened up to all social classes? Who can help employers raise skill levels? Where can older adults learn?

The answer to each of these questions involves colleges - not as the whole solution but as key partners. Working with schools to improve 14-19 education. Working with universities to widen access and expand part-time opportunities. Working with employers on skills. Working to offer adults part-time and evening classes.

The potential is there but there is a gap in aspirations. The words are often right but the money doesn’t follow. This is clear from the two announcements about money at last week’s Association of Colleges conference.

On Thursday, Mark Haysom, chief executive of the Learning and Skills Council, said the LSC would reshape its budget to release money for its priorities.

As much as pound;250 million will be internally transferred to pay for the growing numbers of young people, apprentices and basic skills learners that the LSC must fund.

Added to the pound;630 million increase already budgeted for 2005-6, this will go some way to meeting the multiple demands on the LSC’s money. Over the next few months, the LSC starts talks with colleges about the 2005-6 funding allocations.

Mark Haysom’s message was clear. He’s found some extra money by shuffling budgets around but the priorities are non-negotiable. Young people, adult apprentices and low-skilled adults matter.

If colleges want to develop courses for anyone else, they need to look for fees and employer contributions. If this proves impossible, the courses won’t happen. And if it proves more difficult than expected to release the Pounds 250m, then cuts can be expected.

No matter how difficult 2005-6 promises to be, 2006-7 is likely to be worse. This is clear from the grant letter published last week.

Charles Clarke mentioned the letter in his speech to the conference but didn’t expand on the subject. He reported that the LSC budget would rise to pound;10m by 2007-8 but didn’t mention that the annual increases would barely cover inflation. The 2006-7 budget is only 2.8 per cent higher than 2005-6.

The grant letter says that the allocation to the LSC is enough to fund growth in student numbers while also sustaining average levels of funding in real terms. It is difficult to see how.

In 2006, the numbers of young people in education will be rising as a result of government efforts to encourage them. Education Maintenance Allowances have made a difference this year but, by 2006, systems will have settled down and awareness will have risen. Government forecasts imply a 2 per cent annual growth in the number of young people in full-time education.

This alone is enough to put the LSC budget under severe pressure in the next two years but it is not the only area of growth. Converting the employer training pilots into a national programme could alone cost millions because the pilots only cover one-third of the country. As with any new scheme, the longer it is in place, the better it is known and the more expensive it can become. Quite how the LSC will cope remains to be seen.

Charles Clarke and Mark Haysom made much of fees in their speeches. Some colleges will benefit from policies to increase fees but it is difficult to see how the college sector as a whole can gain.

Most learners in colleges do not pay fees and there are no plans to change these entitlements. Significant increases in income will only come if colleges can implement large percentage rises in fee levels or if they take on different sorts of learners. Neither option looks feasible or attractive for a sector committed to wider participation.

The budget choices facing the LSC and colleges over the next four years result directly from political choices. In the run-up to a general election, the Government will be defending its record in education. Schools and universities are hot topics. Major reforms are scheduled for 2006.

In setting its 2006-7 budgets, the Department for Education has put schools and universities first. There will be more money for each school pupil and each university student at a time when funding levels and courses in colleges may be cut.

If the financial pain was shared across the education sector, college staff might grin and bear it. As it is, the Government has missed its best opportunity to make social and economic progress because of short-term political considerations. There was optimism at the AoC conference about what colleges could do. There will be disappointment that the Government has not opened its eyes to it.

Julian Gravatt, Director of Funding and Development, AoC