Starting pay for lecturing staff new to the sector was pound;12,573 per year during Labour's first year in government, compared with a starting salary of pound;12,873 for schoolteachers in the same year.
By 2002, FE lecturers were worse off than their school counterparts by an average pound;3,013 a year, with an annual salary of pound;14,582 compared with schoolteachers' pound;17,585 per annum.
Barry Lovejoy, head of colleges at Natfhe, the lecturers' union, said the Government had failed for several years to address what he saw as Conservative policy mistakes.
"It is regrettable that there was a lost opportunity for so long, but we welcome the additional funding that means what is lacking can start to be rectified over the next three years," he said.
"We are pleased that they now recognise the importance of pay in sorting out the problems of the sector and hope this approach continues in further spending rounds. There is no doubt it has led to increased demoralisation in FE. The starting salaries are a good start but a lot more work needs to be done to get parity with schoolteachers with salaries over pound;30,000."
He said pay had originally been held back because Labour refused to remove the 1 per cent annual cut in funding that was introduced by the Tories in 1993 as an "efficiency" measure.
Employers and unions constantly warned ministers that it would damage efforts to bridge the pay gap.
"We should learn lessons from that period pre-1997 and 1997 onwards. We cannot see a return to that regime," said Mr Lovejoy. "FE is central to Labour's strategy of social inclusion and skills development and we are pleased there is more of a recognition that this is the case."
With the abolition of the 1 per cent annual cut this year and the Government's commitment of pound;1.2 billion over the next three years, a start has been made to reduce the gap. College lecturers with qualified teacher status will receive an pound;18,500 starting salary if the deal between the unions and the Association of Colleges is approved in the ballot of Natfhe members this week. Support staff are guaranteed a pound;5 an hour minimum wage, and new teachers in schools will start on pound;18,105.
But most teaching staff in colleges, many highly qualified and experienced, will remain adrift in terms of pay because they do not hold qualifications recognised by the Government. Even in the new scale, the pound;3,000 gap between college lecturers and schoolteachers re-emerges within a couple of years.
Peter Pendle, general secretary of the Association for College Management, said: "We know that the gap has increased and that is why all the unions have been campaigning so hard for the extra funds.
"It's not just lecturers - it's an issue for all staff in the sector. With the extra money announced by Charles Clarke last year we hope we can reverse that trend and ensure that the gap for all staff is closed."
ACM research has shown that managers can expect an extra pound;6,000 per year for doing the same job in the private sector.
"We have to recognise that, when a government gets elected, it has priorities and this Government made it totally clear that, when it was elected in 1997, its priorities were under-fives, primary and secondary education," said Mr Pendle.
"We have got to ensure that as those issues have been addressed the funding and salary crisis in FE is addressed and I think the Government has recognised the need for that."
A DfES spokesman said: "In November the Secretary of State announced a major invest-and-reform strategy - Success for All.
"We believe the extra resources will enable general FE colleges to address structural pay issues and to narrow substantially the pay gap with schools by 2005-06."