The Government has performed a spectacular U-turn by threatening to halt funding for pioneering work with top companies offering training for hundreds of thousands of workers.
Ministers withdrew commitments to pay for more than 350,000 training places (many created in deals with some of Britain's best-known companies, such as Tesco or Marston's brewery) despite endorsement from the Education Secretary Gillian Shephard.
Schemes paid for by the expansion fund have been actively promoted by the Government in its Competitiveness White Paper and Lifetime Learning policy document last year. But this week the Department for Education and Employment threatened to withdraw the cash to save around Pounds 85 million a year, throwing colleges into panic and jeopardising the very links with the private sector which are at the heart of Government policy.
Labour condemned the situation as a "shambles" and the Association of Colleges warned it was the most serious crisis in further education since colleges were made self-governing in 1993, and that it could leave colleges bankrupt and destroy efforts to meet the Government's training targets.
The crisis concerns a Government commitment to provide funds for unlimited expansion - known as demand-led funding- if colleges exceed their recruitment targets. Principals have used this money to pay for a string of so-called franchise deals, sub-contracting training to outside firms or voluntary groups. Many colleges can offer on-the-job training for the first time under such deals, Halton College in Cheshire uses the funding to help pay for on-the-job training for 10,000 Tesco workers nationwide in Britain's biggest training initiative between a college and a private company.
Principal Martin Jenkins said: "At a single stroke this one decision could put back three or four years of development . . . It seems to undermine a lot of the Government's own policies."
The Lifetime Learning document said more needed to be done to promote "new partnerships with community and voluntary organisations and with employers. " It said colleges could "continue or develop imaginative partnerships with employers while securing effective use of taxpayers' money."