For the last five years, government ministers have come to the Association of Colleges conference to make a nine-figure spending announcement. pound;500 million here, pound;600m there, it’s been difficult to keep up with the numbers. Over the years, enthusiastic spinning of the same budget has dented the confidence of listeners that they are genuinely hearing something new.

The change in the Government’s approach explains why, this year, there hasn’t been a big budget announcement. Last year, Charles Clarke announced a pound;1.2 billion increase in the Learning and Skills Council (LSC) budget for a three-year period running to 2005-6. This year ministers haven’t had anything to add because they think it has already been said.

Down at college level, the position looks a little different. The three-year budget from the Government to the LSC has recently been converted into three-year funding allocations for colleges. These have been filtering out to colleges since September and show that there is little new money to meet government targets. The first priority is to provide places for 16-18-year-olds. Once this has been done, some local LSCs have no new money for anything else.

The message to colleges has been stark. If you want more money for adult learning and skills, get it from reallocation or clawback. Reallocation means finding it from your own budget. Clawback means hoping that other colleges miss their targets.

Clawback has been a standby for funding councils for almost a decade.

Growth has been funded at Peter’s college by taking money away from Paul when he slips up. Reallocating money between colleges over time is a necessary part of spending money efficiently but it is worrying how important college failure has been to keeping the LSC’s budget balanced.

In-year clawback - taking the money away as soon as colleges miss targets - is particularly destabilising because it takes time for colleges to reduce costs and get rid of staff. The LSC recognises this and says it will end in-year clawback in 2004-5. But this only begs the question of where the money will come from.

Reallocation is the new tool in the box to close the budget gap. If only colleges would spend less on non-priority learning, goes the thinking, then they would have the money they need for the priority groups. Sounds reasonable enough until you look at the implications. There are one million college learners on basic skills and level 2 courses each year but two million doing something else. National qualifications rarely figure in skills training for employers.

Most evening classes in IT, languages and other practical skills fall outside the priority areas. The decision that anyone with a level 3 qualification is not a priority relegates teachers, nurses and other graduates to the end of the queue. Daytime courses for pensioners and adult returners fall down the list. Reallocation of funds within colleges will affect all these courses by reducing the government contribution and raising fees.

There are risks involved in the policy which is why the skills strategy suggested testing fee changes to take place during 2004-5. Following this, a national fees framework will be put in place for 2005-6. In the long term, it is unquestionable that better-off adults should pay more for their learning. This is particularly so if graduates start paying more for degrees. In the short term, that is worrying.

In the short term, the programme of consultation, testing and implementation has been put at risk by a fix to close a budget gap in 2004.

Colleges are being told they should cut courses and raise fees so that money can be spent where it is really needed. What message does this send to those being asked for more money? “Pay more for what you’re getting now”. This is quite different from the offer to university students that top-up fees go directly to the universities who charge them. Where HE fees are additional, FE fees are substitutes. And where HE students get deferred payment and income-contingent loans, FE students get no help. Tax relief and learning accounts were abolished years ago.

Faced with this message, adults are as likely to walk as to pay up.

Colleges recruit all sorts, including the well-off, but when 50 per cent of households have less than pound;500 a week to spend, fee increases will not be treated lightly. Double a pound;50 fee and your college may be ok.

Double a pound;250 fee and you might lose your class. And this year’s low priority evening class might be next year’s skills gap.

Fees matter but they won’t solve all problems. The size of fee income generated by colleges is small in comparison to the LSC budget. Probably pound;250 million this year compared to pound;8 billion. Small shifts by the LSC could require large jumps in fees. And if the LSC does not have enough money for its priorities, perhaps this is an issue for government rather than adult learners.

Julian Gravatt is director of funding and development at the Association of Colleges