The costs of government and funding council policies on dealing with "failing" further education colleges are "huge and indefensible", researchers have concluded in a report.
The Further Education Funding Council's handling of the crisis at Bilston Community College left the public with a Pounds 65 million bill, says the report.
Bilston was "devastated" by the government's sudden decision in 1997 to withdraw the demand-led element of FE funding, covering the costs of rapid expansion, and to clampdown on franchising in the sector.
The impact was such that by the end of March 1998, the college came within two days of being unable to pay its Pounds 1.3 million payroll, says the report from Keele University education researchers Stephen Whitehead and Paul Goddard-Patel. A "sense of siege" pervaded Bilston as management decided to challenge the FEFC and tried to make up a Pounds 3.5 million cut in funding through additional commercial activities.
In response, the FEFC applied pressure and ordered an audit of Bilston's claims for funding. The auditors, Deloitte and Touche, noted that the college had had to deal with a change in funding rules from 1995 to 1997. The FEFC suggested that Deloitte and Touche withdraw its report and then commissioned audits from other firms.
The researchers conclude that the college was allowed to fail and its management forced to resign "to demonstrate to all that the government meant to be tough on failure and tough on the causes of failure".
The Bilston crisis cost about Pounds 10 million in write-off debts, Pounds 15 million due to its collapse, Pounds 8 million in redundancy payouts, Pounds 1 million in professional fees, Pounds 1 million in takeover costs and Pounds 30 million in safeguarding recurrent funding.
The report says the experience shows that the market ideology introduced to FE by the Tories and continued by Labour in a refined form has been a "huge and indefensible" public cost.