The first concern is for the Education Maintenance Allowance (EMA), the means-tested payment of £10 to £30 a week to help young people between 16-19 stay in education. Influential right wing think organisations, such as the Policy Exchange, the Institute of Directors and the Tax Payers Alliance, have lobbied for its abolition. As if that weren't enough to spell the EMA's doom, its costs fall outside of core departmental spending, which means there will be greater scrutiny to cut or severely reduce it.

Around 45% of 17-19 year olds in full-time education receive EMA, a disproportionate number of whom attend FE colleges, so cuts to EMA will be felt hardest by colleges. Evidence suggests that EMA raises the participation rate of eligible young people by an average of about 6%.

The next concern is the proposed programme of benefits reform, the beginning of which was announced within the emergency budget. From 2011/12, Child Benefit will be frozen and a series of reforms will be introduced to Child Tax Credits that will reduce payments to families with joint incomes above £26,000. Whilst the spending review is likely to focus primarily on the Departmental programme spending, it is unlikely that these 2 benefits will come through unscathed for 2011/12 – 2014/15. The best case scenario will be no further reductions to those announced in the emergency budget, although this seems unlikely.

Families with 16-19 year-olds in full-time education and unwaged training are eligible for universal Child Benefit and means-tested Child Tax Credit, and it's their children – those from lower-middle income families – who are most likely to attend general FE colleges. Reforms to these benefits, especially if combined with the abolition of or cuts to EMAs, could tip the balance for parents with combined incomes of £26,000 - £30,000, making it very difficult for them to continue supporting their children in FE.

The upcoming policy response to the Banks Review poses additional threats for colleges. The review concluded that learners and employers will need to contribute more to FE fees. However, the review lacked measures to ensure that, once implemented, its recommendations do not result in a catastrophic reduction in the number of adult learners studying in FE colleges. University students currently benefit from low-cost subsidised loans, but there is no prospect for a similar scheme for FE.

The combination of cuts to participants' disposable income alongside Banks' recommendations for higher individual contributions could severely reduce the number of young people and adults turning to FE. As overhead costs for colleges remain constant, funding cuts will drastically affect the amount spent on teaching and learning. Staff numbers are likely to face cuts and the quality of provision will go down. We could see colleges enter a period of decline from which it will be very difficult to recover.

Colleges are well aware of the prospects for funding and many have started to plan, as best they can, for the foreseeable financial circumstances. However, the impact of policy changes on the demand for their courses is less well understood, and will require far more consideration from both policy makers and providers, before the system can be subjected to the risk of unintended consequences.

LSN will shortly be sending a Spending Review briefing to all college Principals, together with an invitation to one of three October regional seminars for college SMT to discuss how colleges can best operate through the cuts. More information on the seminars can be found here.

John Stone is chief executive of LSN, the not-for-profit organisation focused on making learning work for further and higher education, local authorities and schools, public services, work-based learning and international organisations


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