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Financial crisis? We haven't seen the worst yet

Like buses, financial problems seem to come along in groups of three. Unlike buses, they are never welcome.

This week, two more financial problems appeared on the tail of the capital funding crisis. The first is the likely cut to college funding next year. This comes in two parts: a cut to 16 to 19 funding, down some 2 per cent; and a likely cap on Train to Gain spending. Together they mean tens of thousands of unfunded students next year.

It seems that the 16 to 19 shortfall is down to the Learning and Skills Council's failure to budget for growth in teenage numbers in full-time education.

At the risk of sounding facetious, exactly how does the LSC do its forecasting? It is obviously a more scientific process than casting the runes, so why are the end results so far off the mark?

We have been clearly heading for a full-blown recession for more than a year now. To even the most casual observer, trouble in the economy means fewer jobs, which means people opt to stay in full-time education for longer.

Meanwhile, the likely cap on funds for Train to Gain risks taking further education into the realms of farce. At first the scheme was attracting little interest from employers, so the Government took millions from the budget and gave it to higher education. Now, in the depths of a recession that was trailed for months, employers are, not unexpectedly, interested in a state-subsidised training scheme, and suddenly the budget is overstretched.

The second financial problem comes in the shape of a college staff pay claim of 6 per cent. There should be no dispute with the moral case proposed by FE staff for a rise of this order. Lecturers tend to be paid less than school teachers for doing essentially the same job, and their average earnings rose by 22 per cent in the last decade, half the rate of the public sector as a whole.

The moral case is strengthened further by the 23 per cent rise in principals' pay over the past five years. Against an average rise of nearly 5 per cent a year for principals, the unions' claim for 6 per cent this year seems reasonable.

But a pay rise of this order is surely unaffordable for many, if not most colleges struggling to absorb costs associated with the stalled capital funding programme and now facing the prospect of paying for thousands of students for whom they will receive no state funding.

Sir Andrew Foster's report this week laid bare the poor management of the capital programme. It would seem that financial control is an issue affecting other LSC funding streams. It needs to get a grip on FE funding urgently.

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