College chiefs could be forced to raid budgets set aside for needy students in order to pay for school reforms in the Education and Inspection Bill 2006.
The warning comes from the college employers who are already lobbying MPs for changes and a tightening-up of the "ambiguous" wording in the Bill, which has its second reading in the Commons next week.
Four main areas of concern to colleges are the creation of new sixth forms and increased school diversity, new regulations on transport costs, 14-19 curriculum reforms and the merging of the inspection bodies.
The first area of concern is the dominant role local authorities will play in the creation of new sixth forms. The Bill proposes abolition of the school organisation committees, with LEAs taking responsibility for the creation of new sixth forms.
The Learning and Skills Council says it is happy with the arrangements since it would be consulted and would have a right of appeal to an adjudicator.
However, the Association of Colleges is concerned that FE's interests could be marginalised. Julian Gravatt, AoC finance director, says: "It is not clear how the individual needs of colleges will be taken into account."
Plans to increase the range of provision 14-19 also need sorting out, he says. The Bill requires LEAs to "increase diversity of provision" post-16. Again, the LSC is happy that it has a right of appeal. "But the LSC may not be as vocal on an issue as other parties. We have already seen this in the academies. The LSC was happy to see the Brunel Academy set up despite strong opposition from the colleges. Now the academy's future is in doubt, we are left with a mess."
The Bill also proposes that the LSC should fund 16-19 transport. "The council will be expected to fund extra expenditure through existing budgets at a time when spending is very tight." This, Mr Gravatt says, will let cash-strapped councils off the hook. "With growing pressure on local authorities, the first thing to get squeezed is transport for sixth formers."
Tyneside was proposing a cut in transport and Norfolk had to climb down under pressure from students.
"If they go to the LSC in future, it is unclear where the dosh will come from," he said.
Colleges put big money into transport, not only in rural areas where the travel costs are obvious but also in deprived towns and cities.
"Both colleges I worked for in London (Lewisham and City Lit) spent half their access budgets on transport. Much of the pound;200 million LSC learner support budget goes on transport. If there are no duties on sixth forms, it puts even more pressure on the LSC. So there will be less money to help people with higher fees."
The AoC has similar concerns over the 14-19 reforms. While it welcomes the move towards an improved student entitlement, it says more detail is needed over how the reforms will be paid for.
Local authorities will have powers to make schools consider collaboration with colleges to provide the 14-19 diplomas and to make sure they are paid for.
Mr Gravatt says: "The powers are great but where is the money? It is a wider programme and potentially expensive, just when the LSC is turning the screws on courses in the current funding round."
A fourth area of concern is over the merger of the inspectorates - Ofsted, the Adult Learning Inspectors and childcare service - to form a single inspectorate.
"We are very worried that the wider ALI services are effectively being abolished and these are not being met by the legislation. We are going to have one gigantic group covering everything from nurseries to training facilities in nuclear power stations."
There is potential for good reforms under the Bill, Mr Gravatt says: "We are about giving young people more choice. But it should be choice of subjects within an area rather than a choice of narrow institutions.
"With the FE and skills white paper due later this month, the AoC will be pressing for any necessary amendments to the Bill in line with the recommendations," he says.
Rob Wye, LSC director of strategy and communications said: "The requirement to collaborate is not isolated to the LSC and local authorities. The Bill seeks to break down the boundaries between providers of pre and post-16 education.