The real increase in funding for FE for 1997-98 is Pounds 23m, according to the Further Education Funding Council, which says the rise represents a cash standstill for the sector next year.
The settlement depends on a further rise in student numbers and continued efficiency savings, which the FEFC claims will cause "great difficulties for many colleges".
The difference in the funding figures is partly explained by ministers' decision to remove more than Pounds 11m from the FEFC's allocation on the basis that the same amount will be available to colleges from Euro funding pots. A cut of a further Pounds 6m represents the net saving ministers calculate the sector will make as a result of proposed pensions changes - a figure that could change depending on the pensions consultation.
Colleges are likely to greet the calculations with deep scepticism, with few convinced that European money - always earmarked for specific projects - will truly fill the funding gap.
Both the Association of Colleges and the FEFC acknowledged that the settlement for FE could have been harsher during a tough public spending round.
The funding council interprets the gross funding increases of Pounds 40m for 1997-98 and for 1998-99 as a response to pleas for concessions in the light of swingeing cuts to capital cash in last year's settlement.
Plans announced last year for efficiency gains in the sector of between 6 and 7 per cent a year have been eased to average gains of over 5 per cent annually for the next three years - a reduction the FEFC said would still hit many colleges badly.
The settlement also endorses last year's assumption that student numbers in FE will expand at around 2 to 3 per cent a year between 1997-98 and the end of the century.
According to FEFC calculations, standstill funding in 1997-98 will be followed by two years of cuts: 0.6 per cent cut in 1998-99 and 1.4 per cent the year after.
Overall, that will represent a reduction in the allocation to the FEFC of Pounds 61m by the end of the century, although that figure does not take into account more cash the Government may claw back after next year, claiming colleges can make up the difference with European money.
AOC chief executive Roger Ward said the settlement contained "more bad news than good" for the sector. The association was disppointed that the deal had not been more generous in the light of the efficiency gains made by colleges, he said.
The AOC endorsed the FEFC's calculation that the real funding increase for 1997-98 was Pounds 23 million, once clawback was taken into account.
However, the organisation expressed "modest hopes" that ministers would listen to its plea for leniency over proposals to make colleges foot the pensions bill for early retirement. Realistically, the only likely concession would be a longer timescale on the changes.
Labour FE spokesman Bryan Davies said the overall funding cut by 2000 meant "no let-up in the pain for colleges".
For training and enterprise councils, feared sweeping cuts in Youth Training cash failed to materialise. Funding for YT and Modern Apprenticeships will rise by Pounds 22m next year, though TECs say the increase will not keep pace with growing popularity of the programmes.
David Cragg, chief executive of Birmingham TEC, said the settlement met expectations, and welcomed continuing freedom to use Modern Apprenticeship cash for a range of age groups.