Principals could face a double blow to their college finances after cuts to 16 to 19 funding, worth hundreds of thousands of pounds, were announced, along with a possible cap on Train to Gain spending.
After two years of underspending, the workplace training scheme is now overstretched, and the Learning and Skills Council is expected to announce new limits on recruitment later this month.
It could mean some colleges are told to slash their Train to Gain recruitment plans mid-year, despite staff costs already having been incurred, while others may not be guaranteed payment for all the people who have started courses.
Contracts for training could be reduced in-year by sums ranging from pound;500,000 to pound;1 million to pay for over-recruitment elsewhere, some principals report.
Ioan Morgan, principal of Warwickshire College, said: "Colleges were told that with Train to Gain, as they were with capital, there was a bottomless pit and that they should keep spending. Now there's no guarantee they will get the money. It's just running out."
The LSC told principals that 16 to 19 funding would be an average of 2 per cent lower next year, meaning a cut of nearly pound;200,000 for an average college, at a time when demand from students was expected to rise because of the recession.
The shortfall has arisen because the LSC budgeted for no growth in numbers of teenagers staying on in full-time education this year and next. But with few options in the labour market now, schools and colleges expect to have more than 30,000 extra, unfunded students.
David Collins, president of the Association of Colleges and principal of South Cheshire College, was hopeful that colleges and schools could pressure the LSC and the Department for Children, Schools and Families to find more money. He said: "It would seem to be a no-brainer to pay to have a 16-year-old in college rather than being at home and receiving unemployment benefit."
Without full funding for each student, colleges fear the September guarantee of offering a place to every 16 and 17-year-old is at risk and they may have to turn students away, raising questions about plans to raise the age of compulsory education or training.
Colleges also said it would be unlikely that they could continue to subsidise the underfunded 14 to 19 diplomas, and that the level of additional learning support was too low for them to admit all suitable students with special needs.
"This is unacceptable in a sector committed to equality and diversity," Dr Collins said.
The announcement of the adult education allocation has been delayed, raising fears among principals that it will be cut as well.
An LSC spokeswoman said the overall funding for over-16s would be pound;6.5 billion next year, a 4.3 per cent increase that would allow for places for 1.5 million teenagers. That figure includes apprentices, where recruitment may fall as companies close or stop hiring. So it may give ministers scope to move unused apprenticeship funding to 16 to 19 full-time education budgets.