An extra #163;270 million for new buildings in FE was announced in the Chancellor’s Autumn Statement, as government research revealed that more than a third of colleges have substandard campuses.

The Department for Business, Innovation and Skills (BIS) said that up to 800,000 students may be taught in outdated or temporary buildings. Four per cent of buildings are judged to be “inoperable”, while a further third are described as “poor”. Half of all colleges have some buildings that are substandard.

With the additional funding announced by George Osborne, capital spending on colleges will rise to #163;550 million over the next two years.

The figures reveal the impact of the collapse of Labour’s Building Colleges for the Future programme and the subsequent reduction in capital spending. By 2012, only 23 per cent of college buildings should have remained to be renovated, instead of more than a third. The entire FE estate would have been rebuilt by 2016 if investment had continued at the planned rate.

FE minister Matthew Hancock said the government could not be certain when this target would now be achieved, although he said that the latest funding announcement “will be a good step towards solving that problem”.

“Partly it depends on how much private and college investment we get,” he added. “We expect a minimum of two-to-one. It’s good news for FE that the capital has been allocated. It shows the government wants to make sure that FE operates in the best possible buildings.”

BIS also commissioned an evaluation of the impact of spending, which found that each #163;1 million spent on buildings increased recruitment by between 62 and 86 students a year.

Spending on large projects, which were particularly prevalent during Building Colleges for the Future, also helped to make colleges more financially independent. Colleges with a capital injection of #163;60 million or more saw their dependency on public funding fall by 5.5 percentage points - equivalent to more than #163;1 million at an average-sized college.

But the researchers did not see a predicted effect on success rates, retention and achievement, although they said that widening participation and increasing overall numbers may obscure an impact on learning. An earlier study by the same research organisation suggested that #163;1 million of capital spending would improve success rates by 0.1 per cent, and that the impact on recruitment would be larger, at 111 students for the same investment.

The skills funding statement reveals that overall funding of FE and skills will rise by 2.8 per cent to #163;4.1 billion next year - but the increase in capital funding masks a 9 per cent drop in the core adult skills budget. Student numbers are expected to drop by 60,000 in the first year of adult FE loans.

“Colleges face tough choices about how to prioritise quality while continuing to meet the demands placed upon them in the face of significant pressures on adult funding,” said Julian Gravatt, assistant chief executive at the Association of Colleges.

Ministers have also lifted a ban on funding courses such as health and safety in the workplace and food hygiene, which are seen as key for employability, and proposed new traineeship programmes for 2013, which will offer English and maths, work preparation and work experience, along with flexible vocational options.

Despite Lord Heseltine’s recommendation, most of the money will continue to be routed through the Skills Funding Agency, with Local Enterprise Partnerships limited to the Employer Ownership of Skills pilots, which gain an extra #163;90 million, and allocation of European Social Fund money.