Colleges will also receive pound;88 million for capital investment to improve their facilities, a significant increase which is up from pound;66 million this year. The details were announced this week in the annual grant letter to colleges.

The total sums have not all been allocated to colleges yet and, if they receive tuition fees from students of the order that the funding council assumes, the gross amount for teaching will increase from pound;437 million to pound;473 million, an 8 per cent rise compared with a 5 per cent hike for this year (although a sum of pound;7 million to cover increased pension contributions was not included in that calculation for this year).

Roger McClure, the council’s chief executive, commented that this was the third year of growth for the FE sector.

For the first time the grant includes an element of almost pound;14 million to support school-college collaboration, a key Scottish Executive policy. This will fund growth in college activity, fee waiver grants for school pupils and training.

In another first, money has been set aside to increase the number of students in areas with below-average participation in FE. This will amount to pound;4 million a year over three years for colleges in Lanarkshire, Dunbartonshire and mainland Highland.

Colleges serving large numbers of students in remote and rural areas will also get a boost of an extra pound;6 million in 2006-07, which is 7 per cent up on this year. Each of the 14 colleges involved will receive pound;213,714 and pound;34.29 per head for each qualifying student.

The major unallocated sum is pound;17 million in improvement grants, which covers a range of categories from strategic development and e-learning to support for the review of Higher National qualifications and the Scottish Further Education Unit.

Mr McClure said he was “reasonably optimistic” that the FE sector would meet the deadline of the end of July to achieve financial security. But he agreed it was “hard to say” whether the two colleges still causing concern, Inverness and James Watt, will move into surplus by that date.

Both colleges were predicting “modest” deficits, he said, although previous forecasts at Inverness had proved unreliable. Colleges tended to get into difficulties if they “took their eye off the ball” and failed to take action where numbers in particular courses were starting to decline.

But Mr McClure cautioned against unrealistic expectations. “I hope people will not say that, unless every single college is showing a surplus, this will be seen as a failure for the sector. That would be a very harsh judgment.

“If only two colleges are showing a modest deficit, I for one would not lose sleep over it and would regard it as a break-even position for the sector in accounting terms.”

Inverness is undergoing yet another slimming exercise to shed 25 jobs, the third such exercise in a decade. It had hoped that the reduction of 28 jobs to save pound;500,000 last year would be the last time the college had to make staffing cuts.

James Watt aims to trim more than 100 academic staff to achieve a surplus, triggering strike action.