Nine out of 10 colleges report that New Deal funding falls short of their costs in a study by the Scottish Further Education Unit. They are required to provide a quality guidance service before students start and while they are at college, as well as run courses tailored to highly individual needs and ensure there is administrative back-up.
John Young and Sheila Clarke of the SFEU state in their report: "The nature of much of the client group places a strain on economic costing, as so many students are demotivated, with discipline and learning problems which need the deployment of extra resources."
The report adds: "Given finite resources, a more appropriate balance needs to be struck between the resources devoted to support and encourage New Deal clients and the resources committed to administrative matters."
The excessive paperwork generated by requirements to monitor timetabling, attendance and time-keeping is said to be out of proportion to the small number of students. "The very fact that we have to deal with New Deal students differently from other full-time students is a major problem in its own right," one college stated.
Colleges also resent the fact that the key factor in judging the success of the New Deal is direct entry into employment. The Treasury has remained adamant that the programme must not be seen as another form of subsidy for the public sector.
The main aim is therefore to steer the unemployed towards employers who receive pound;60 a week towards wage costs and pound;750 for training, which colleges can also provide.
This approach affects the funding colleges receive. They are only paid in full if trainees move from their FE course into a job. Otherwise 10 per cent of their grant is forfeited. Colleges say this penalises them for local economic circumstances or student choices outwith their control.
A quarter of New Deal students are expected to move on to another college course or into higher education rather than a job. Yet the funding system means colleges lose the final tranche of cash - despite the Government's stated commitment to improve skill levels and qualifications. "Colleges feel strongly that progression to education and training should be seen as a positive outcome and a measure of success," the SFEU's report states.
The survey found that, in 1998-99, up to 40 per cent of the New Deal group opted for full-time education and training, half of which is delivered by colleges and lasts for a year. The proportion who ended up in education and training was 20 per cent more than the numbers assumed by the Employment Service, which manages the New Deal.
Around 1,790 New Deal students joined work-related courses in 60 vocational areas during 1998-99 in addition to access and general education courses, according to returns from 41 of the 46 Scottish colleges.
But another 800 unemployed young people who were referred to colleges did not actually turn up. The report attributes this partly to the fact that students should not have been referred in the first place or were referred before they were ready. But one college suggests students were "playing the system", deciding that they could have several weeks on benefit without pressure from the Employment Service.
The SFEU also reports that many trainees dropped out of college because they have to put in a five-day week of 30 hours' attendance, which is not demanded of other full-time students. This "stringent" condition should be reviewed, the report proposes.
Full-time education and training comprises one of four options under the New Deal programme. Colleges can also provide some training for the other three options of work with an employer, the environmental task force and the voluntary sector, which are all six-month placements.
Despite the problems, the report believes the New Deal has had powerful benefits in acting as "a catalyst for significant developments in curriculum design and delivery, especially flexible access to learning programmes".
The initiative has also given colleges a stronger role in their local economies through links with the Employment Service and local enterprise companies.