In a sustained opposition attack on the Assembly government's post-16 policy, the problems at Coleg Gwent were said to be symptomatic of the crisis facing the whole FE system.
But Jane Davidson, education and lifelong learning minister, accused Plaid Cymru members of "living in the land of make-believe".
Coleg Gwent is losing 35 jobs as it restructures course provision across its five campuses, and tackles a pound;661,000 deficit amounting to 1.5 per cent of its pound;42 million annual budget. Thirteen of Wales's 25 FE institutions are in debt to the tune of pound;3.5m.
Claire Russell, the college's PR manager, said: "Demands change over time and we have to keep pace with change if we are to deliver an acceptable service. Our proposals are intended to benefit most students and staff by freeing up valuable resources to support them."
But local Assembly member Peter Law (Labour, Blaenau Gwent) claimed course cuts would lead to poverty, deprivation and exclusion in his constituency.
He said: "This is a case for ministerial intervention - the situation at Coleg Gwent is a disgrace. There should be a public inquiry and the board of governors at the college should be asked to resign."
Janet Ryder, shadow education minister (Plaid Cymru, North Wales), accused Ms Davidson of "hiding behind education quangos". She also claimed that pay rises for lecturers designed to bring them up to the salaries of schoolteachers had come from core budgets rather than extra funding.
"This is a minister who doesn't listen to the professionals in the field who are telling her they are under severe financial pressure. There must be an open public inquiry into Coleg Gwent, whose position is symptomatic of colleges throughout Wales."
Jocelyn Davies (PC, South Wales East) told the Assembly that course cuts at Coleg Gwent's Pontypool campus would restrict A-levels to fewer than a dozen subjects. "It will be virtually reduced to a hairdressing and construction college," she warned.
But Ms Davidson insisted the government had a clear vision for post-16 education.
"ELWa's (the post-16 funding agency) programme expenditure for 2004-05 stands at pound;508m - there has never been a higher level of support," she said.
"Colleges are independent corporations and it is for their governors to manage resources. Short-term surpluses and deficits may arise and it is for governors and managers to plan prudently."
FE Focus 1