College managers are reporting record increases in the numbers of 16 to 19-year-olds they are recruiting this year. But to pay the bills, they say, they must use money earmarked for other tasks such as adult skills training.
Two factors are exacerbating the problem, according to John Brennan, chief executive of the Association of Colleges. First, the Government rightly extended the entitlement to free education and training to all students aged 16 to 19.
But a second and less welcome factor, which concerns principals, is that an "overly prescriptive" approach by the Learning and Skills Council is driving flexibility out of the system.
For Dr Brennan, on the eve of the association's biggest conference so far, it also begs a deeper question: is the Government really shaping coherent post-16 policies and leading public opinion, or just urging colleges, employers and other agencies to work together with limited funds?
On student fees, for example: "The problem is not whether colleges are willing to charge more fees, as most will go down that road. But the underlying reality is that if we try to put up fees substantially people won't pay.
"To achieve a shift in policy and get the funding, we need a culture change so that people see the need to invest more in their learning.
"The Government may recognise this but has signally failed to take steps to achieve it. Colleges cannot do this alone or shift the markets they operate in. The Government must go out and sell the idea that fees are part of normal life. It has done it in HE and only if it does it in FE will we be able to move into a new era."
On 16 to 19 recruitment and efforts to attract more people from hard-to-reach groups, there are similar tensions in government priorities, he insists. "Evidence of the big recruitment rise is as yet anecdotal though I am confident it is widespread. But what has it meant in practice?
"One college recruited above targets set by LSC but in line with their own projections. It turned out the LSC told them to reduce their target, to go for a lower level. Of course, it meant less funding. We do not want this ambiguity. Ministers say everyone aged 16 to 19 will be funded. But the LSC then says you must carry them at your own cost or cut adult provision to keep within spending targets."
The 16 to 19 push is all part of the bigger drive to widen participation, at the heart of which Dr Brennan sees a clash of ministerial aspirations, with schools taking the preferred ground.
"Widening participation has important implications for students and institutions. People who are not participating by-and-large have low levels of motivation and attainment.
"Consider the mix of students: if you move to 100 per cent participation, it changes the nature of the student body and institute considerably.
School sixth forms offer almost exclusively level 3 (A-level) academic qualifications. They are not widening participation but simply siphoning off bright kids.
"If you reflect on the history of the college sector over the past two decades, it is characterised not by smaller specialist units but bigger, more general ones. That is because of pressures on institutions to respond rapidly to changing markets."
A-levels are generally a stable and not very changing market, he says. "But look at FE. We find that information technology is coming off the boil as an area for employment, there is a sudden surge in demand for plumbers, 20 years ago art and design was hardly present, and media studies is the creation of the last decade or so and since has become very much a growth area."
Colleges have also seen a huge increase in demand for work-based training.
"Latest LSC figures show that 23 per cent of provision is contracted directly with colleges and that 45 per cent of young people who do the training get some of their experience through colleges.
"Two years ago, the LSC was saying 15 per cent or so had contracts with colleges. The proportion is rising because small training providers are struggling to deliver what they need to. As the LSC is filtering out the weaker provision, some are going into the colleges. It is the nature of colleges to respond to the changing pattern of needs.
"This is driven partly by the changing labour market into which young people are going, and partly due to wider economic and social changes. But, if you are to have responsive, dynamic systems reacting to needs, you need more flexibility. But the LSC is squeezing out all spare resources."
And that means leaving slack in the system, money to shift around and call on at short notice. "Historically, one way to do that has been to have bigger institutions with the capacity to respond. If you are told to do this much basic skills and that much training, while fulfilling your 16 to 19 demands, the flexibility to cope becomes more problematic."
Ministers and the LSC pin hopes on the skills council's strategic area reviews to sort out who does what. But Dr Brennan is not convinced that any clear government thinking supports them.
"There are important issues which the Government has not in any way explored. More fundamentally, the Government does not have a view on shaping the post-16 sector. There is no vision of what to shape over the next five to 10 years other than local initiatives driven by local factors."
The Government's recent Five- year strategy for children and learners is full of ambiguities, he says. For example, the expansion of city academies to cover 200 schools by 2010 will take many more 16 to 19-year-olds than their predecessor schools.
"As yet, however, there is no clear thinking about what this all means. For one, it's about failure, about schools that have collapsed - it's about replacing them. That is not where we are with colleges. That is not the model we are looking for.
"Beyond that it is not clear what the academies are trying to fulfil."
Nevertheless they would escape much local planning imposed on colleges, he says.
"The AoC is thinking about this as a five-year development. One of the things we want to do is stimulate debate with the members. One of the vehicles we will have soon for doing that is a set of ideas about where the sector should be going.
"In the short term there are the election campaigns, dialogue with political parties, feeding ideas into the FE review and pursuing our lobbying concerns - the way the sector ought to go to deliver ever more effective learning to meet economic need and the wider social agenda."
The wider issues of the academies, specialist schools and new sixth forms reveal further tensions.
"It is another part of the policy framework that is unhelpful and dissonant. Opening up markets for specialists is about competition, though collaboration is what the Government says it wants. If you give a school a sixth form, it affects wider decisions we all make on 14 to 19 flexibility.
"It becomes more difficult. It is competition versus collaboration that puts tensions in the system that the Government does not seem to want to recognise. It says it wants collaboration rather than competition but does not seem to understand the hurdles it is putting in the way," he says.
"This is the sector of choice for 700,000 in colleges, compared with 400,000 in schools, including the entire independent sector. If you are talking about the Tomlinson 14-19 reforms, the major impact is in colleges.
The major debate in the press may be on A-levels and those considering university, but Tomlinson is addressing the needs of the whole cohort that is not necessarily in schools or doing A-level on their way to university.
"We need to recognise that we have short-changed too many of our 16 to 19-year-olds in the past. Still a significant number of the young are exploited as cheap labour with no training of any kind. That is our failure to create learning opportunities to attract them. Tomlinson takes us in that direction."
Next week, the AoC will attract 1,200 participants to its conference in Birmingham. The range of issues for debate is also considerable, he says.
"As well as the 14 to 19 debate, Tomlinson and adult skills training, there are the strategic area reviews, which come to fruition next year. What will they do? How can you make it all coherent?
"Then there's the threat of new sixth forms and the question of self-regulation, the LSC's management of the sector, the FE review, issues around funding after the review and issues about teacher-training standards, the new national improvement body, and reforms to the inspection framework.
"It is a big question about the way the sector is shaped, managed and operated. The college is at the heart of all of these things."
In an ideal world there would be more engagement from employers, he says.
Also, sector skills councils are being created "to cope with the ebbs and flows of the market place and feed signals into the provider system".
Meanwhile, colleges are meeting the demands, Dr Brennan says.
"There is a lot of evidence to suggest that with more flexibility, we can deliver more for employers. I am not claiming we can meet the needs of the entire market but we can do a lot more. We are developing the structures and have the commitment to do this but are trying to do it against a background where they are told funding will be increasingly constrained."