'Colleges should merge to survive cutbacks'

John McClelland, chair of the Scottish Funding Council (SFC), also said principals should not compete but needed to work together to remove duplication of courses.

Colleges should investigate income-generating measures such as using premises for commercial uses and providing more courses for private business, he added.

Speaking to principals at the annual conference of Scotland's Colleges in Dunblane yesterday, Mr McClelland said: "We would encourage mergers. We are not actively pursuing more mergers, but we do believe one or two mergers would be appropriate in specific circumstances in the sector."

A "super college" is currently being created in Glasgow by merging the city's Nautical, Metropolitan and Commerce colleges. Mr McClelland encouraged colleges to form federations so they could share facilities and resources.

He said: "It also allows the opportunity of investment where three or four colleges could afford the capital investment that one could not, and would give colleges more weight in dealing with stakeholders such as universities."

He also said college principals should look at providing more courses commercially to generate income. He added: "There is a huge amount that could be done to offer training to private businesses."

Colleges have been forced to cap places and some have even had to scrap January intakes after record numbers of applications in recent years caused by the recession in the jobs market.

At the same conference, former deputy first minister Jim Wallace, now Advocate General for Scotland, warned cuts were looming.

Chancellor George Osborne last week unveiled an emergency Budget of swingeing cuts to public services across the UK.

Lord Wallace told college principals yesterday: "Public spending will fall in Scotland. The Spending Review, reporting on 20 October, will announce the actual figures for the UK government departments who spend in Scotland, as well as the Scottish Parliament's Budget.

"This future spending reduction will change the parameters for partners like yourselves. Realism will be vital."

He warned tough times lay ahead for colleges which he said had a vital role to play in the economic recovery.

However, college union leaders warned learners must take priority in any merger.

A spokesman for the EIS union said: "While FE colleges – in common with other education establishments – are facing difficult financial times ahead, this does not mean they should feel compelled into hasty mergers for purely financial reasons.

"Any prospective merger should be based principally on educational grounds, with the best interests of students and staff as a primary concern."