The Association of Colleges said the Government had failed to take into account the scheme’s real costs.

Colleges tendering for New Deal cash have had to bid within Government-set price bands. The cash is intended to cover tuition and extra costs including student travel.

Education and Employment Secretary David Blunkett announced this week that major transport companies, including the Supertram system in his Sheffield constituency, would offer half-price fares to New Deal clients.

But one FE college principal said travelling costs will vary hugely, depending on the area a college serves and whether it has good public transport. “Any college which has a big rural hinterland and dispersed population is going to have a travel problem,” he said.

He estimated it would cost an average of pound;2 a day for a student to travel to and from college. He said: “That’s pound;10 per week times 26 weeks, pound;260 out of a total of pound;1,700 is an enormous amount - and you almost certainly will not get away with just pound;2. It could be pound;5 a day or more.

“We are saying there’s no guideline about travel costs in the specifications. And if you actually build up the costs around what things are really going to cost to provide, you find you have not very much left.

“We originally tendered a higher price because we felt it wasn’t reasonable to expect tenderers to absorb what could be one third of the money to go on travel to and from college.”

In parts of remote Devon and Cornwall, the Employment Service has been negotiating with bus companies to agree discounted fares for New Deal clients. Fourteen colleges in the region are part of a consortium which has successfully bid to run New Deal schemes.

Paul Lucken, director of training for Prosper (formerly Devon and Cornwall TEC) which is part of the consortium, said: “There are beginning to be some positive changes like bus companies saying we can offer subsidised rates. We have clear indication from the Employment Service that their priority is making sure the client can get access to the New Deal options. They do have a discretionary fund available at local level, though obviously they can’t guarantee that because it’s a fixed sum of money.

“But on a national level one of the key concerns is that there appears to be no difference in the allocation of resources to rural areas.

“One might have expected that rural areas might have seen a higher cost per client, to reflect the higher travel cost. I’m not sure that’s apparent in the way the Employment Service distributes the funds.

“So if you’re in Birmingham you’ll get the same amount as if you’re in rural North Devon.”

John Brennan of the Association for Colleges said travel costs pose a serious problem for colleges. “The pricing for the whole scheme is fixed by the Government without any consultation with any of the potential providers,” he said.

“They’ve simply said there’s a band within which we expect the prices to fall - and if you don’t bid within that band, you’re unlikely to get a contract. It may well be that some of these ancillary elements do eat up a very large proportion of the costs. The real costs of delivery are not at all clear to anybody, and it’s only as a result of getting some real experience of the clients coming through that people will understand what the real costs are.”