The Scottish Government is considering reversing a UK move to reclassify further education colleges as part of central government, removing them from the private sector.
The decision was taken by the Office for National Statistics because of the degree of ministerial control over college borrowing. It means that their debt will count towards public sector borrowing, at a time when the Government is trying to slash the deficit.
Colleges, as independent corporations, had previously been classified as part of the private sector, despite their reliance on public funding.
In a letter to college principals, which has been seen by The TESS, Michael Cross, deputy director of the Education and Lifelong Learning Directorate, says that "there should be no immediate financial implications for colleges".
But he added: "We will be urgently considering with HM Treasury any longer-term impact which may result from the reclassification. That will include whether the reclassification might in any way add to the future financial pressures, including on borrowing, which colleges may face."
Scottish ministers fear that placing colleges firmly in the public sector, albeit for accounting purposes, will be seen as having the potential to erode the independence of colleges.
This is evident in Mr Cross's letter which tries to reassure FE principals that "the future success of colleges rests significantly on their ability to operate with the maximum degree of autonomy, and with the minimum of interference by ministers."
There is already a review taking place, involving college chiefs, the Scottish Funding Council and union and student leaders, on whether there is scope to remove further ministerial powers over colleges. Mr Cross said this review would now consider "what legislative and other changes might be required to provide Scottish ministers with the option of seeking a future reversal of the current reclassification."
Scotland's Colleges is to seek legal advice on the implications of the move, particularly in regard to the charitable status of colleges. That, and the millions of pounds in tax and rates relief which comes with it, could be at risk from anything which appears to increase direct ministerial control over colleges.
A spokesman for the organisation said it would be holding discussions on the issues with other colleges associations next month, since they affect all FE institutions throughout the UK.