The student-dr iven funding formula has forced the Scottish Office to provide a safety net for 11 colleges which would otherwise have lost more than 6 per cent of last year’s grant. The additional money, which is not quantified, has to be removed from the FE pot and therefore means the high-performing colleges get less.

This system has been criticised as a “no win, no win” situation. “The funding formula is supposed to reward growth,” Hugh Walker, the principal at Clydebank College, said. “But in reality it does nothing of the kind. ”

Even the apparent winners are unhappy. Tom Wilson, the principal at Glasgow College of Building and Printing, will see his grant rise by almost 6 per cent from April. But he points out that the growth in student numbers, calculated by the SUMs formula (student units of measurement), has been 21 per cent. The increased grant also covers only half the college’s income, 50 per cent of which is generated by non-Scottish Office sources.

Apart from the safety-netted colleges which face severe restraint, three other groups are unhappy - those which will see their grants substantially cut but without the benefit of additional support; colleges with such small increases that they face an effective reduction; and the small, rural colleges whose scope for significant increases in student numbers is limited.

Then, standing alone, is Bell College in Hamilton, whose courses are almost entirely at the higher education level and therefore subject to a Government capping limit.

Some of the 11 worst-hit colleges, such as Fife, Dundee and Inverness, are suffering from having to get into line with everybody else by reducing the historically generous funding they received from their former education authority masters.

Others, such as Perth, say they are simply victims of a dip

in recruitment. But it is this picture from 1995-96: Scottish Office funding is based on student statistics which are two-years old.

Mike Webster, the Perth College principal, said: “This formula makes no allowance for the normal volatility of recruitment, which reflects thousands of individual choices and therefore a healthy college such as Perth with below-average costs suffers because of a faulty system. ”

Perth and the other 10 colleges will have to submit a recovery plan to the Scottish Office before their grants are confirmed; there is no indication of what action will be taken against a college whose plan is judged unsatisfacto ry. But Perth will still not be out of the woods even then since, along with the seven colleges which are members of the University of the Highlands and Islands project, its grant is provisional pending the outcome of a consultant’s report on whether their funding should be adapted.

Mr Webster said it was too early to estimate the impact of the cut. But Iain Ovens, principal of Dundee College which faces the heaviest cash reduction of all, said “the pace of change will have to be accelerated.” The new superannuati on rules, requiring schools and colleges to bear more of the costs of early retirement from April, would put pressure on jobs. Mr Ovens said he hoped posts could be shed without enforced redundancies.

Tom Kelly, chief officer of the Association of Scottish Colleges, is a harsh critic of a funding formula which he describes as “extremely aggressive in forcing colleges to converge to average costs with the result that it leads to instability. It’s the instability which creates the need for a safety net and that is what has to be addressed”.

Mr Kelly, a former senior Scottish Office official, accuses the Government of “not being prepared to stipulate the growth it expects of FE colleges but determined nevertheless to stimulate it in an unrestrained fashion, which then cannot be properly funded”.

He adds: “The Government should decide either that it will buy whatever growth the colleges can provide, or allocate grants for a given rate of growth.

“What we have instead is a less than generous settlement, a total grant of o231 million, which is the same as the current year and therefore less in real terms, to fund a 9 per cent increase in student activity last year. It also compares very unfavourably with the higher education institutions, which have been given a year’s moratorium on having to find efficiency gains.”

The ASC estimates that the 1997-98 grant settlement amounts to o138 for each “weighted SUM,” the unit cost per student skewed to take account of the nature of courses, compared with o151 in the current financial year.

Pressure is now building from the majority of colleges to dispense with the safety net and let market forces take their course. Alastair Tyre, the principal of Langside College in Glasgow, whose SUM count is up 9 per cent against a grant increase of just under 3 per cent, says the colleges “have grown up both educationally and financially since incorporation in 1993 and it’s about time they stood on their own feet”.

The Government appears to have conceded the argument for changing the funding system and the Education Minister announced last week that he was setting up a working group. It will include college representatives and its task will be “to see if the funding formula still meets the needs of a dynamic and efficient further education sector”

The colleges have their answer ready. Janet Lowe, principal of Lauder College in Dunfermline, summed up their feelings: “The Government expects us to do more with less money.”

There are signs ministers may now be prepared to accept the logical consequences of their nominal policy, which is to let colleges respond to the demands of the market place.

A little-noticed line in the education White Paper refers to colleges developing “new relationships with institutional partners”. It acknowledges publicly for the first time that “mergers between institutions are likely.”