Page last updated at 14:50 GMT, Thursday, 19 March 2009

Colleges face 170m projects loss

Building site at South Thames College
South Thames College was told money had been ringfenced

Colleges in England have indicated they face losing more than £170m because of delays in getting funding they say was promised for refurbishment.

Some 144 building projects are on hold while funding is being reviewed by the Learning and Skills Council (LSC).

Further Education Minister Sion Simon said the government would not see further education colleges "go bust".

But he said they should turn for help to the LSC - the organisation they say has caused the problem.

Responses to an Association of Colleges survey from 137 of its members show at least £170m would have to be written off if their capital projects did not get the LSC backing they were expecting.

Some of the sums to which the colleges are committed are relatively small but 24 are between £2m and £5m, and 17 are more than £5m. The total could be far more.

'Extraordinary incompetence'

Asked what extra costs they would incur if their projects were delayed or staged over five years, the answers again covered a wide range but added up to £241m at the very least.

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Mr Simon conceded to the BBC that the LSC had given approval to funding that, it was now clear, could not be met.

As a result the government has asked trouble-shooter Sir Andrew Foster, a former chief executive of the Audit Commission, to investigate the situation.

He said: "I really do understand and I sympathise with the frustrations of colleges in this kind of position."

He added: "It is right to say that the LSC has given in principle approval to 79 colleges which would total nearly £3bn of government money and it is clear that that level of expenditure cannot be funded in the current spending round.

"We are quite clear as ministers that that's not acceptable. We shouldn't be in that position. This programme has not been managed properly."

Barnsley College principal Colin Booth
Barnsley principal Colin Booth is contemplating financial disaster

He said any colleges who were concerned they were in a precarious financial position as a result of the shortfall should not hesitate in contacting their regional LSC office.

"We will expect the LSC to deal urgently with their situations. We are absolutely not willing to see colleges go bust," he added.

The shadow innovation, universities and skills secretary, David Willetts said: "Sion Simon's comments show that the government clearly hasn't got a grip on the situation.

"We have minutes [of meetings] to prove that departmental officials attended meetings where the funding crisis was discussed, and that there were serious concerns about the programme as far back as October.

"Now 144 colleges have had their building projects frozen, millions of pounds have been lost, and some institutions are facing bankruptcy.

"Yet the minister offered no reassurance that the government would ensure the colleges' survival, and just passed the buck to the Learning and Skills Council. This is not acceptable."

Insolvent

One of those that says it might go bust is Barnsley College, in South Yorkshire, which is half demolished with rebuilding work due to begin in May.

Its principal, Colin Booth, said it looked as though the contractors would have to make people redundant.

He said the situation could end up making the college technically insolvent because it had taken out a bank loan on the basis that there would be a £60m building as an asset - so if the building was not there, its liabilities would exceed its assets.

Others are in a similar position, facing insolvency with students packed into temporary accommodation.

In light of Mr Simon's remarks the college said it would be writing to its regional LSC - which had been very supportive - but the final budget came from the LSC nationally.

A spokeswoman said that what seemed to have happened was that the basic adding up of the funds being committed had not been done.

"We are absolutely gobsmacked that such a basic administration fundamental has not been followed when you are talking about this amount of public money."

The Learning and Skills Council, which has approved eight projects, has said that "it has always been perfectly clear that full funding and final approval was not guaranteed and that colleges were proceeding at their own risk".

It is trying to work out how to prioritise all future projects, and to understand what has already been spent by the colleges involved.



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