When honesty isn't the best policy

If colleges educate students without payment from the government, should they be obliged to declare them in official surveys? This is far from an academic question. It is increasingly being chewed over by those who find themselves recruiting thousands of 16-year-olds for whom the government refuses to reimburse them.

Principals are resentful at enabling the Learning and Skills Council (LSC) to add these unfunded students to statistics showing that the government is moving towards its goal for persuading more 16- to 19-year-olds to stay on in education.

On a more practical level, they are considering how non-declaration of unfunded students might help their colleges' finances and boost their league table positions.

"One of the more inventive ideas is for colleges quietly to enrol their unfunded students at the school down the road because the school automatically gets funding," says one principal. "The college would continue teaching the students and pick up money for it from the school."

This would end up costing the taxpayer more, since schools get more money for educating this age group than colleges, though the government has announced it will start to close this funding gap.

The "plan-led" funding method introduced by the LSC last year brought some welcome stability for colleges in fixing their cash allocations for the year ahead. Colleges would not immediately lose money for failing to recruit the numbers of students they had agreed with their local LSCs. But nor would they get extra money for taking any students above their allocated numbers.

Owing to a combination of factors, including the educational maintenance allowance and a demographic bulge in the teenage population, many colleges are finding more 16-year-olds knocking on their doors than the numbers contracted with their LSCs. On average, colleges have taken in 2% more than they had planned for. Some colleges have taken in far more.

Most have felt unable to turn the young people away. Beyond the expectation that every 16-year-old should be able to continue in full-time education or training without paying, the government repeatedly trumpets its determination to put this into effect.

So what can colleges do about it?

Barnsley College is blessed with an MP, Jeff Ennis, who sits on the Commons education select committee and was able to plug its case with his Labour colleague, Ruth Kelly, the education secretary, at her recent appearance before the committee.

The college has recruited 106 16-year-olds above its agreed target this year, Ennis told Kelly. The town has a tertiary education system and only one local comprehensive school has a sixth form. There was no alternative but to enrol them.

Kelly replied that the issue was "the operation and flow of funding between schools and sixth-form colleges in the FE sector", which she would be addressing in a "delivery plan" for the 14-19 age group.

"It's very difficult to understand how a Labour government could have policies that consistently discriminate in more disadvantaged areas," says Barnsley's principal, Joe West. "There's a double blow."

Each of his 3,000 16- to 18-year-old students is funded about £350 less than if they were in a school sixth form. And the absence of local sixth forms means that the college has to take on youngsters it won't get money for, with an inevitable growth in class sizes and a rationing of materials.

Colleges are currently obliged to submit data on students three times a year to the DfES. When students drop out, colleges lose the funding for them for the rest of the year.

"If a college reached its stated target and simply stopped putting into the system any further enrolments, then when students on the system dropped out you could substitute the ones in reserve who aren't funded," West says, stressing that he has not tried this out himself.

City College Norwich currently educates 180 unfunded 16- to 18-year-olds to the tune of £550k, says its principal Dick Palmer. "I could selectively withdraw from the reckoning those students who don't perform that well," he says, stressing like West that this is yet an untried hypothesis.

About 5% of an individual student's funding is linked to his or her successfully completing their course. The college's performance is judged on its overall retention and success rates.

"If we start a course with 10 students and eight complete, that's an 80% retention rate. If six of those eight succeed, that's a 75% success rate. If I say 'Hang on, you're not funding me for two of these students', my retention rate becomes 100%."