SCOTLAND’S new Lifelong Learning Minister went out of his way last week to damp down expectations of future largesse for the further education colleges.

In his first ministerial speech on FE, Iain Gray told the annual conference of the Association of Scottish Colleges that the 50 per cent cash increase in FE funding since 1998 to pound;420 million is “highly unlikely” to be repeated.

This remark puzzled college principals and board chairs, since none had been expecting another 50 per cent hike. The speculation was that Mr Gray was taking out an insurance policy against criticism of more modest increases in the future.

“In terms of whether additional resources can be found for the sector from the major review of spending currently under way in the Scottish Executive,” he said, “I would urge caution.”

Bob Kay, chairman of the ASC, told him: “We appreciate you couldn’t promise another 50 per cent extra - but 25 per cent more would do nicely.”

Indeed on Wednesday afternoon, the day before his speech, the minister was locked in discussions with colleagues involved in the spending review. He pointedly noted the severe pressures on spending - health, transport and care of the elderly “to name only three”.

But, under questioning from ASC leaders, Mr Gray gave an assurance that he is making the case for FE in private which had been put to him at the conference. He agreed that colleges are central to delivering the Scottish Executive’s policies on lifelong learning, improved skill levels, social inclusion and access to education for disadvantaged groups - “and that these have resource implications”.

He realised the financial position in the FE sector is “tight” and that the Executive had asked colleges to do a lot with the money they had already been given. “I will fight your corner as strongly as I can,” he told his audience, but colleges had to demonstrate value for money.

In a spat with Howard McKenzie, principal of Jewel and Esk Valley College, Mr Gray said the college should look to the way it was handling its problems. Jewel and Esk is in the minister’s Edinburgh Pentlands constituency and students have written to him criticising the management’s approach.

Mr McKenzie had pressed Mr Gray to say how he could justify a 1.5 per cent “consolidation” funding increase for 2002-03. That would mean delivering 6 per cent less student activity at a time when the market was growing by 10-15 per cent. “I am going to have to exclude over 300 of your constituents, including more than 100 first-time voters,” he declared.

John Burt, principal of Angus College, who is tipped to be drafted to head a team in the Scottish Further Education Funding Council dedicated to help turn around colleges in difficulty, told Mr Gray that “alarm bells” had started ringing for 2003-04. Below inflation funding would not help meet additional costs from national insurance increases, pension contributions and pay demands.

Despite his gloomy predictions, Mr Gray kept to the by now regular ministerial practice of announcing money - a pound;10 million one-off sum to be used this year “primarily on expensive capital equipment”. It is also intended for equipment to help the disabled.

He said he was responding to complaints from many employers “that students are not as familiar as they should be with the environment in which they will work”. This is often because teaching is done on obsolete or second-hand equipment, he was told.

Mr Gray also trod a familiar path at ASC conferences by expressing concern at college funding problems. Despite the pound;7 million announced last year for “restructuring” and the progress made to reduce deficits, he continued, “there remain severe concerns about the overall financial health of the sector, and of a number - too large a number - of individual colleges”.

He pointed out that the recent annual report by the Auditor-General on his financial review of the colleges indicated it could take up to 10 years to clear the backlog of deficits. “That is really not a position we can countenance,” Mr Gray said. “Urgent work must be done to secure faster remedies. It is in no one’s interest that this should be a long drawn out process.”