A plan to cut bureaucracy and spend an extra pound;40 million a year on front-line teaching has cost pound;55m in its first year.

Redundancies, buildings costs and human resources consultants have wiped out any gains for the first year of the Learning and Skills Council’s Agenda for Change programme, according to the funding body’s own estimates.

The one-off expense, revealed in the LSC’s annual accounts, has contributed to administration costs rising by a fifth, and a deficit of pound;80m. But the LSC said it is deliberately running down its banked cash, which stood at Pounds 206m last year, to ensure that the money it receives goes to colleges rather than being stockpiled.

And it said that over 18 months, the costs of restructuring would be paid off, and the money would be used to create more places for teenagers, adult learners or disabled students.

Under Agenda for Change, nearly half the jobs in the council’s headquarters will be cut, and the 47 local offices rationalised. But its nine regional offices will be strengthened to support even smaller local teams, which will account for a third of LSC staff.

These would be divided among 148 local partnership teams, and 35 economic development teams. The latter will focus on employment and regeneration.

Micro-management of FE would be replaced by a supporting role, the LSC claimed, and funding would become simpler as a result of the changes.

The pound;40m savings would fund courses for an extra 12,000 teenagers, or 80,000 adults.

But the accounts show that the 1,300 job losses will cost the LSC nearly Pounds 34.8m, equating to almost pound;27,000 per person.

Closing some offices and refurbishing others cost pound;17.7m while a further pound;3.2m was spent on HR consultants to help manage the redundancy process and assist staff in retraining.

Andrew Lloyd, from the Public and Commercial Services union, said that previous job cuts had failed to deliver the promised savings, as spending on agency staff and consultants soared.

He said: “We are worried about our people losing jobs which will go to agency staff at one end who are being exploited, or overpaid consultants at the top end. Our deepest concern is that the organisation is not going to be fit for purpose at the other side of these job cuts.”

There were too few ethnic- minority staff in the restructured funding body, he said, and several jobs were overstretched.

Each contract manager would have to handle budgets of pound;100m, he said, while equalities and health and safety staff were too few - despite 11 deaths on LSC-funded schemes in the last 18 months, he claimed.

David Russell, the LSC’s director of resources, said the new local structure would be more effective in supporting learners, employers, colleges and training organisations, as well as providing more student places.

“Having made savings from a very difficult process, that money needs to be spent on front-line education, not on back-office or operational issues,”

he said.

Colleges have also criticised the LSC for taking financial risks which they would not be permitted to take. One college source said of the funding body’s deficit this year: “If the LSC were a college, it would be in financial category C.”

But Mr Russell said the LSC had in fact drawn pound;350m less funding from the Government than it was permitted, and could have eliminated the deficit if necessary. It was part of a plan to reduce the funding body’s cash in the bank from pound;200m to a more reasonable pound;75m, he said.