Scottish further education colleges are facing redundancies and potential mergers following a budget increase of only 0.67 per cent in cash terms for the coming year.

Twelve of the 43 colleges have suffered a 5 per cent cut, the maximum under Scottish Office Education Department safety-netting. The Association of Scottish Colleges believes at least eight would have been cut by more than 10 per cent without the safety net.

The volatility in this funding round stems from the SOED moving entirely to a formula based on student numbers. Last year, 60 per cent of college budgets were based on historical levels. These varied considerably depending on the generosity of individual local authorities which funded the colleges before they moved to SOED control three years ago.

Another nine colleges have also suffered cuts, and John Sellars, secretary of the ASC, said redundancies could not be ruled out. There have been dozens of staff losses in the past year when only nine colleges suffered cuts. The Educational Institute of Scotland has warned that it will ballot on industrial action if colleges attempt compulsory severance. Ronnie Smith, EIS general secretary, said the cuts made a mockery of the claim by Scottish Office education minister Raymond Robertson that education had been a budget priority.

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Mr Sellars predicted increasing collaboration between colleges to maintain courses, which could possibly lead to institutional mergers.

Mr Sellars said the Government had stressed that colleges would be expected to expand student numbers in the coming session and achieve 4 per cent efficiency savings. But it would be a priority to convince Government that it was impossible to continue to increase numbers without the resources.

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Craig Brown, principal of Dundee College, which has been worst hit with a cut of more than Pounds 500,000 from last year's Pounds 10.5 million budget, said the college had prepared by shedding more than 30 full-time staff in the past year.