A full-scale review of spending on colleges has been put on ice because of government threats to axe the extra cash for growth.
The moves by the Further Education Funding Council are bound to antagonise low-spending colleges which have pleaded for a swift reform of the funding methodology and "fairer" distribution of cash.
The committee had only just completed its review when the Treasury and the Department for Education and Employment moved to pull the plug prematurely on growth cash, paid to colleges that recruit beyond their tough targets.
Ministers were considering a face-saving compromise as The TES went to press. But even if one is reached, it will merely transfer the problem to next year. The college commitments to the summer carry with them a bill of up to Pounds 100m for 1997-98.
If ministers refuse to guarantee this extra cash, the FEFC funding methodology will have to be rethought from scratch.
Helena Kennedy QC, chair of the review committee, told The TES: "We decided it was not an appropriate moment to go to the sector on this." Wider consultation would have to be put on ice, she said. She would continue with the review regardless, she added.
Optimism was growing this week that some form of compromise could be hammered out, following a campaign by the Association of Colleges in which ministers have received hundreds of letters of protest. There was speculation that the Treasury might be persuaded to part with as much as Pounds 60 million.
But colleges are still in the dark about the causes of the crisis. The FEFC insisted that the threat to withdraw demand-led funding for college expansion came as a surprise at the council's meeting on January 23, although colleges had been warned last summer that its withdrawal was a "risk factor".
Senior figures in the AOC are sceptical about the council's role in the crisis, and have been asking how the Treasury was left a bill for growth so far in excess of projections.
There is also intense anger in DFEE circles that the funding council made the crisis public and warned colleges to freeze expansion, before a decision on the budget was made.
Ministers have been at pains to stress that the issue is still under consideration, although that has not deflected angry claims that the department has reneged on its commitments.
But the funding council is adamant that the department was kept informed of the likely size of the bill for expansion.
The shadow further education minister, Bryan Davies, said: "Action is required immediately. Colleges need to know how they can manage during the summer term. Every college in the country is establishing its plans for recruitment for September. These strategies are being developed now.
"We cannot pretend that somehow an incoming government that will come into office during the summer term at the earliest can rectify the situation. "
Part of the FEFC's fundamental review of funding was analysis of how effective the demand-led element was as a way of introducing low-cost growth without jeopardising quality.
Ms Kennedy is also chair of the FEFC committee charged with widening participation in the sector. Her report, also out this week, calls for two immediate steps to improve provision for a wider range of adults and those disaffected with education.
In line with her proposals, the FEFC has set aside Pounds 1m a year for two years to promote partnerships among colleges and adult education centres. The committee also wants new "learning pathways".
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