MPs have recommended taking Pounds 600 million a-year in child benefit from parents and handing it to their teenage children to spend on further and higher education.
The Education and Employment Select Committee has urged the government to examine the possibility of replacing the child benefit paid to parents of 16 to 19-year-olds in full-time education with a system of student support grants.
Launching the report on further education yesterday committee chairwoman Margaret Hodge MP said: "These (grants) should be paid to students rather than their parents. They would give young people a real incentive to continue to learn."
The Institute of Fiscal Studies said that the abolition of child benefit for parents of children in this age group would save Pounds 700 million a year gross. Taking into account deductions to compensate those parents on benefits would leave around Pounds 600 million net.
The select committee's 79-page report comes as the government begins making final decisions on its comprehensive spending review, due to be published in July.
Sue Dutton, acting chief executive of the Association of Colleges, said:
"The evidence from the report suggests that the government will have to scrutinise its approach to child benefit carefully because the priorities of the future are different to the past. Further education is seriously underfunded and this clearly needs to be remedied in the CSR."
The select committee report says colleges need an extra Pounds 500 million over the next four years, with a minimum Pounds 220 million next year. And it wants to see efficiency savings reduced to 1 per cent a year, buildings improved and funding for an extra 430,000 students by 2002. There is no explicit mention of diverting money from higher education loans and tuition fee income.
The report urges the government to make means-tested loans available to further education students studying work-related courses. It also recommends that: The government should use funding as a "planning tool" to ensure strategic priorities are met
The Further Education Funding Council's role in ensuring adequate and sufficient college provision should be strengthened
The FEFC should ensure that colleges do not increase their higher education provision at the expense of traditional roles
Colleges should be funded at a converged rate but that any system must ensure flexibility
London colleges should receive extra money
Funding should be harmonised in schools and colleges for 16 to 19-year-olds on similar courses
Course franchising must further colleges' task of increasing participation and extending access not just maximise income
The government should provide clear guidance about the criteria for college mergers
There should be a clampdown on college mismanagement and sleaze. The appointment of an independent clerk as ombudsman for each college governing body and a national ombudsman to investigate complaints is recommended.
There should be support for credit accumulation and transfer.