Earlier this term Pounds 23 million which the Further Education Funding Council was paying colleges to run part-time vocational courses was transferred to the Employment Department.

Training and enterprise councils, which were meant to use it to fund youth credits, say they received little or no extra cash while many FE principals believe the money is back at the Treasury. Many TECs and colleges, in any case, estimated that the sum involved in the scheme was nearer Pounds 80million Talks were continuing between the FEFC, the TEC national council and two Government departments to try and sort out the cash conundrum as FE Update went to press. The FEFC is also keen to establish whether it may continue to fund some part-time courses for 16-year-olds, including part-time A-levels, not fully covered by youth credits.

With colleges warning that thousands of part-time students could become “disenfranchised” by the new system, the mix-up has placed a further question mark over the role of TECs at the same time as the TEC-funded training for work programme for unemployed adults has also been cut.

To confuse matters further, full and part-time work-related FE which was previously TEC-funded became FEFC responsibility from April 1.

During their five-year lifespan TECs ( local enterprise companies or LECs in Scotland) have played a central role in developing new training schemes, including, this year, youth credits and modern apprenticeships. Although most training continues to be provided by colleges, employers or private companies, it is almost unthinkable that the Government would attempt to launch any initiative without channelling the money through TECs.

Jim Aleander, principal of West Nottinghamshire College, said he generally enjoyed a good relationship with his local TEC. He believed most colleges were happy to see the introduction of youth credits following a series training credit pilots in some TEC areas. Yet the dispute over the money which was supposedly transferred to the Employment Department meant his college was almost certain to reduce the number of work-related courses. “It’s not too strong to say that the future of part-time vocational education for young people in this country is under threat this year,” he said.

Pat Richards, chief executive of North Nottinghamshire TEC, said the TEC was determined to make youth credits work even though the money it had received was less than the corresponding sum which the FEFC had been paying to colleges. Local colleges and the TEC were agreed that neither party was to blame for the mix-up, she said.

“Quite clearly someone or somebody at the national level has misunderstood the way that the calculation should have been made,” said Mrs Richards, who chairs the TEC National Council’s funding and contracting group. “A deal was struck between the Employment Department and the Department for Education, we believe, on the basis of incorrect figures and an incorrect understanding of what is available.”

Vocational courses which include a large workshop or practical element, such as engineering, construction and catering, are likely to be the first to be squeezed. Meanwhile, school-leavers who are issued with credits will be able to choose whether they “purchase” training from an FE college or a private training provider.

Patrick Lavery, principal of Southampton Technical College, said the evidence from the training credit pilots suggested that colleges would lose a lot of income to private companies. He is also concerned some youngsters will not qualify for youth credits and might see their courses disappear altogether. “Potentially there are a group of students who don’t appear to meet the criteria set by the TECs,” said Mr Lavery. “It seems an unnecessarily cumbersome way of funding training.”

John Brennan, director of policy at the Association for Colleges, said the situation varied across the country. “The TECs devise their own rules for credits. It’s not clear nationally what is in or out.”

The FEFC insists it is talking to the TECs and the Government and has no intention of leaving part-time students without training. In a letter to The TES, Employment Minister James Paice said part-time study which falls outside courses covered by youth credits would be funded by the FEFC.

Mr Paice also claimed the money transferred to his department had not been lost but had been passed to TECs. Yet within each TEC budget it is almost impossible to identify which money is for youth credits or modern apprenticeships and which is intended for other training.

Mike Nixon, chief executive of North London TEC, said his overall budget for youth training programmes had increased by five per cent. He did not know how much was supposed to cover youth credits. “When you get into Government funding it is very complex as to where the line was drawn before and where it is now,” he said. “I’m not sure we all know how much money we are getting.”

There is no doubt that youth credits will expose FE colleges to market forces even more than at present. Roger McClure, the FEFC’s director of finance, said colleges would continue to attract funds by gaining extra students but there would be greater uncertainty.

“One of the underlying issues with a voucher scheme is how you protect colleges from large fluctuations in income,” he said. “Even those who are the greatest promoters of the free market in education wouldn’t find it acceptable for colleges to go bankrupt.”

Colleges in north London have set up a “compact of co-operation” with their local TEC. Mike Nixon meets principals once every two months. “It’s essential to get on with our colleges,” he said.

The colleges recently received a total of Pounds 900,000 from the TEC-run “competitiveness fund”. The majority will be spent on a media training and development network run by a consortium of six FE and one sixth-form college in north London.

Mr Nixon suggested that the performance of TECs and colleges should be compared by, for example, looking at the number of people who gain National Vocational Qualification level two through youth credits and through direct college provision. “A detailed debate on comparative success rates would be beneficial for youngsters,” he said.

Yet private training companies which were expecting to provide courses for the unemployed have been alarmed by the cuts, which coincide with performance-related funding for TFW programmes. This means three quarters of the cost of each training place is only reimbursed by TECs if a trainee gains a qualification or meets other targets.

Westminster Training, which last year enrolled 180 trainees on four TFW courses, has pulled out of the programme because the money it would have expected to receive for each trainee was too low. “It would have been commercial suicide,” said contracts manager Gary Woolvett.

Instead the company is providing courses for the community action programme run by the Employment Service. “I would rather deal with them than TECs, ” said Mr Woolvett. “TECs come across as very unhelpful. They are more interested in meeting their targets than with the quality of training.”

Colleges and other training providers in south London are still owed an estimated Pounds 6 million following last year’s collapse of South Thames TEC. At least one provider, the Greenwich Training Company, will be forced to make staff redundant after writing off the money it is owed.

John Routledge of South Thames TEC Voluntary Sector Forum, which is also working closely with colleges and private companies, said meetings were continuing to try and sort out how much money is owed to creditors.

The only secured creditor was the Employment Department which may try to claim up to Pounds 3 million from the collapsed TEC’s assets. “The Government has demonstrated that it will allow TECs to follow normal insolvency procedures. Anyone who has contracts with a TEC should be aware of that risk,” said Mr Routledge.

Yet colleges and other providers have little option but to work with TECs if they are to remain involved in a whole range of training schemes.

Michael Austin, chairman of the Association for Colleges, said TECs could fairly claim that the financial problems over youth credits and training for work were not their fault as they were dependant upon Government funding.

The problem was that, by taking on responsibility for youth and adult training, they often appeared to be little more than an arm of the Government. “Their role has become dominated by meeting targets instead of funding private initiative-generating organisations. Their effectiveness has been compromised, ” he said. Chris Humphries, TEC National Council policy director, said TECs were involved in large numbers of enterprise activities but the media chose to concentrate on disputes over budget cuts.

Arguments over youth credit funding were no more than a hiccup and should not affect long-term relations between TECs and colleges. “Clearly TECs are not responsible for cuts in budgets at a national level. Nor are they responsible for the distribution of these budgets regionally.”

He added: “What TECs have to take responsibility for is how they apply the cuts at a local level. The popularity of someone charged with implementing someone else’s cuts is bound to suffer.