David Collins, LSIS chief executive, said that in the year since his appointment, the FE improvement service has saved millions by handing contracts to colleges and training providers rather than consultancy firms such as KPMG and PricewaterhouseCoopers.

He said the service had to remove some consultants who were earning pound;150,000 a year for working “less than half time” and put a 10 per cent cap on management charges for its contracts, reducing bills by pound;18 million. “That was a challenge for the KPMGs of this world,” Mr Collins said.

It also saved pound;750,000 a year by moving out of its central London offices and sharing with Lifelong Learning UK, the sector skills council for FE, for just pound;50,000 a year. Staffing was cut from 180 to 160.

The changes came after its budget was slashed by pound;80 million to about pound;64 million.

LSIS has also been defending itself against media reports that it faces closure while it attempts to recruit Mr Collins’ successor in time for his retirement next year. With the consultants largely gone, 60 per cent of the improvement body’s work is carried out by current FE practitioners. But Tribal Group remains contractor for the improvement advisory service because it said it could meet that requirement.

Mr Collins said: “We are getting a lot more institutions involved and it’s certainly been more cost-effective. We are getting better value for money.”