A total of Pounds 151 million has been allocated to 40 colleges and other FE providers in 1996-97 - a cut of 1.5 per cent on this year. Colleges recruiting over agreed targets will get only 40 per cent of the standard rate for the extra students.
Colleges are paying the price of a successful drive by the Further Education Funding Council for Wales to eliminate extreme differences in institutions' costs.
They have also grown too fast for the cash available. Enrolments went up by 9.8 per cent this year, the Government paid for only 4.7 per cent.
Welsh colleges have both grown and cut costs faster than their English counterparts. Student numbers in England grew by an estimated 6 per cent for full-timers and 7 per cent for part-timers, an FEFC report this week shows.
But John Andrews, chief executive of the FEFC for Wales, warned that continued unit cost cutting could "destabilise" slower-growing institutions, driving some out of business.