The quango in charge of college funding is at loggerheads with officials from the Department for Education and Employment amid fears that the move could lose the sector up to pounds 30m. College principals claim that axing extra funds for growth will place further strain on a sector already facing severe financial difficulties after meeting tough Government-set expansion targets.
They warn that removing money intended as an incentive for colleges to create new demand for training, from industry and the public, will damage efforts to help Britain reach ambitious education and training targets set for the millennium.
The pot of money under threat is available to successful colleges which fulfil their student recruitment goals but which want to expand further. Introduced three years ago and worth tens of millions annually, the pot has so far effectively been an open cheque underwritten by the Treasury.
However, a sharp increase in the number of claims on the fund in the past financial year is thought to have caused alarm among ministers, prompting threats to reduce the cash available or remove it altogether.
If the pot is abolished, the colleges quango, the Further Education Funding Council (FEFC), could be told to real-locate existing funds to help the sector meet continuing tough growth targets. However, the FEFC insisted that this year's budget settlement for further education did no more than allow the sector to stand still.
Colleges had been warned by the FEFC that the growth fund could eventually be reviewed, but there was no suggestion that it would disappear before 1998-1999. Under proposals now being considered, it could be withdrawn from April.
Further-education colleges, which currently educate more than three million full-time and part-time students, have increased their rolls by 6 per cent a year since 1993, when they became independent of local authority control.
But the strain of expanding, while also making 20 per cent efficiency gains, is beginning to show, with almost 300 colleges slipping into the red last year. The proportion of colleges in real financial difficulty, rose to around one in eight.
A spokeswoman for the Department for Education and Employment confirmed that discussions were going on with the FEFC, but said the Government envisaged "continuing growth in the sector".
Roger Ward, chief executive of the Association of Colleges, called any move to reduce or abolish the fund a "disaster", claiming it could lose colleges tens of millions of pounds each year. "The sector was inspired by the Government to expand on the understanding this money was available," he said.
"We have fulfilled our part of the contract and it is inconceivable that ministers should renege on theirs."
A college principal and marketing director who were sacked after reports that they were running a pub while on sick leave are considering challenging their dismissal at a tribunal.
Neil Preston, the pounds 90,000-a-year chief executive of Stoke-on-Trent College, and the assistant director Helen Chandler, were sacked without notice on Christmas Eve following an investigation by a special committee of governors. They could win a cash settlement if the procedures used to dismiss them are found to be unfair.
The college is to sack 200 staff after uncovering a pounds 8m shortfall in its funds caused by failing to hit its recruitment targets.