Scottish colleges will receive a “relatively modest” 3 per cent increase in grant for the coming session - which will put the brake on pay demands. But there is good news for capital investment.

The Scottish Further Education Funding Council’s annual allocation - announced today (Friday) - sees a pound;12 million increase to pound;408 million for 2004-05.

The small rise follows years of growth in student numbers and funding. It reflects guidance from Jim Wallace, Lifelong Learning Minister, that there should be “no increase in planned student numbers for 2004-05”. Esther Robertson, the council’s chair, said this would allow the new funding levels to provide colleges with “stability and flexibility”.

The increases range from 5.1 per cent for the unincorporated Shetland College to 1.8 per cent for Newbattle Abbey College in Midlothian, one of the smallest which is not covered by the council’s funding formula.

Among the mainstream colleges, rises range from 4.3 per cent for Langside College in Glasgow to 1.9 per cent for North Highland College in Thurso and Dumfries and Galloway College.

Martin Fairbairn, the council’s deputy director with responsibility for FE funding, pointed out that the 3 per cent average grant rise was above the Treasury’s 2 per cent inflation target. “The council is conscious that colleges will have to meet inflation and face cost pressures,” Mr Fairbairn said.

The 1 per cent beyond inflation will have to meet increases in pension costs, higher charges from the Scottish Qualifications Authority and the requirement on colleges to achieve financial stability by the end of July 2006. Furthermore, colleges cannot use the full pound;408 million to meet teaching and other operating costs: these are covered within the main recurrent grant of pound;345 million.

This, too, is earmarked for specific purposes - pound;45 million will compensate for waiving fee grants to students, pound;11.8 million reflects the greater costs of teaching and retaining students from disadvantaged backgrounds, pound;10 million is an incentive to attract new students, pound;4.6 million is to support colleges in remote areas and there is a pound;3.5 million “achievement element” to boost student success rates.

The major windfall for colleges is a sum of pound;38 million to improve college properties and buildings, an increase of more than 80 per cent on this year’s pound;21 million and a figure which is guaranteed for 2005-06.

This additional investment in capital funding was particularly welcomed by Roger McClure, the funding council’s chief executive. “Good, fit for purpose buildings and facilities are very important for colleges’

work. They are necessary to ensure that students receive up to date education and training that is relevant for employment,” Mr McClure said.

A total of 12 major capital projects are planned over the three years to 2006, of which eight are in the priority areas of Glasgow and the west of Scotland.

Other ring-fenced sums include pound;5 million for ICT, pound;5.2 million for strategic developments, pound;3 million for wider access collaboration with universities and pound;2.6 million for quality measures.

In addition, the amount for student bursaries and support goes up from pound;61.2 million to pound;64.8 million. For the first time a sum has been set aside for educational maintenance allowances which are intended to persuade more young people to stay on at school or college. This is set at a provisional pound;8.9 million for 16 year olds in 2004-05.