A GOVERNMENT threat to tear up an open cheque signed to encourage college growth has rocked further education.
If it goes ahead, colleges will have to find Pounds 84 million to pay for extra students recruited this year - a sum which they had expected to come from the Treasury.
Either individual institutions will have to meet their own costs from next year's budget or they will be absorbed by the Further Education Funding Council, affecting every college.
College heads warned this week that bankruptcies and closures were likely to follow. Loss of this additional cash, known as the demand-led element (DLE), could take about Pounds 100 million per year from the sector in future.
The council has warned all colleges to stop enrolling students for this academic year. Adult education and training courses run with industry will be worst hit.
Roger Ward, chief executive of the Association of Colleges, said it was "probably the most serious problem to face the sector since incorporation".
"Having encouraged colleges to go for growth, the Government cannot say that it is not acceptable and that it will cut off funding."
He warned that colleges may have to abandon courses, which could lead to legal action from students and employers.
Months of work by committees considering changes to the funding methodology and widening participation in further education could also be wiped out, while colleges will have to rethink funding bids for the next academic year, due in within the next two weeks.
This is the first time the FEFC has had to call on the Government's DLE pledge. Until now, it has offset claims from colleges exceeding their target numbers by refunds from those which have failed to make them.
This year's increased claim - the equivalent of about 350,000 extra enrolments and much more than expected - seems due to delays in reporting funding claims, growth in franchised provision and successful expansion.
A letter from the Department for Education and Employment, said the expansion was "far in excess of that envisaged by the department or the funding council" and raised questions about standards, affordability and appropriate balance of costs between taxpayers, employers and private individuals.
But the FEFC said it had warned the DFEE that this year's claim would be substantial. FE "was told to go for growth so it did".
A DFEE spokesman said ministers had not yet taken any firm decision to end DLE.