Cash will be shared between 41 institutions that halted building work after funding fell through

The Learning and Skills Council has confirmed it will make £34m available to compensate colleges for money spent on halted building work.

The money will be shared between 41 colleges that suffered as a result of the funding debacle surrounding the LSC’s £5bn further education college renewal programme. The support is aimed at preventing colleges from suffering severe financial difficulty or insolvency as a result of the crippling costs of their abandoned schemes, and follows a statement made by the LSC last September.

Geoff Russell, chief executive of the LSC, said: “We recognise that a number of colleges have experienced significant difficulties as a result of writing off these development costs. Ministers agreed to mitigate these difficulties and undertook a review of the costs incurred by colleges to identify such issues, as well as to assess the appropriateness of expenditures. The additional money we are now providing draws a line under the capital funding issue.”

However, the Association of Colleges said that the £34m amounted to “less than 20%” of the amount that colleges spent on projects that were eventually shelved.

Julian Gravatt, assistant chief executive of the Association of Colleges, said “Colleges have acted with typical innovation in response to this problem and have scaled projects down in order to deal with new economic circumstances. Some colleges will borrow more in order to support essential investment, but they cannot fill this gap on their own. A small amount of extra government funding – separate from help for Colleges with immediate financial problems - would lever new college investment and allow them to deal with urgent problems in their own estates while providing much-needed facilities.”