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Further education leaders were "delighted" that colleges will get an extra Pounds 50 million in 2001-02 to tackle their staff pay crisis.

The Department for Education and Employment said the settlement brought the total increase in funding for FE and sixth-form colleges in the first year of the new spending round up to at least Pounds 423 million, representing a 9.2 per cent real-terms rise. This included Pounds 365 million already announced, plus the additional Pounds 50 million for pay and an Pounds 8 million increase in special grant funding for broadening learning and raising standards.

Education secretary David Blunkett said the "substantial extra support" for FE was on a "something-for-something basis". FE will be expected to recruit and retain high-calibre staff, increase participation and improve standards.

On top of this, FE will benefit from Pounds 150 million a year for education maintenance allowances, worth up to Pounds 40 a week, to help improve staying-on rates. The government's new target is for 80,000 more 16 to 18-year-olds staying in education by 2004, and nearly 60 per cent of young people leaving school or college with A levels or the equivalent.

The DFEE said it would announce in the autumn the first grant settlement for the new Learning and Skills Council, which takes on responsibility for post-16 education and training from April next year.