Principals of four colleges are set to sue the Employment Department over crippling debts resulting from the collapse of South Thames Training and Enterprise Council.
They were this week seeking seeking written counsel's opinion after legal advisers said they did have a possible case over the department's handling of the collapse and its refusal to accept financial liability. If they succeed, it would have wider implications for government departments and their responsibility for other quangos such as the Further Education Funding Council.
The TEC went under with almost Pounds 7 million debts, making private training providers bankrupt and leaving thousands of young unemployed people without places in one of Britain's economically most depressed areas. Four colleges - Lambeth, Lewisham, Southwark and Woolwich - were left with debts of almost Pounds 2m on unpaid contracts. The backlash has forced them double the number of redundancies planned this year. Lewisham's lay-offs have risen from 25 to 50. Hundreds of hopeful trainees will be turned away this autumn.
Geoff Pine, principal of Woolwich College, said: "We are advised that since the TECs were set up and nurtured by the department to use public money for training, they cannot be seen as separate companies in the broader sense. "
The four also argue that the TEC was never bankrupt and challenge the Government to come clean. In a letter to all college principals in England and Wales this week, they say: "The present insolvency of the TEC is entirely created by the DE claiming back Pounds 8 million of past payments made by South Thames TEC - payments the DE claim were unsubstantiated."
The legal action is part of a national campaign to force the TEC debate back onto the national agenda. The principals have also written to all MPs for the region, pressing them to raise questions in the Commons. It comes just one week after publication of a joint FEFC-TEC guide to better relations between TECs and colleges, a report the four say has struck "a sour note" in South London.