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One in five further education colleges are "in poor financial health", and the government's withdrawal of demand-led funding this year is likely to make things worse, the National Audit Office told Parliament this week.

Demand-led funding was axed for this academic year as the expansion in further education, at 30 per cent growth since 1992, was higher than planned.

At July 1997, 93 colleges, or 21 per cent of the total, had financial problems, and "the withdrawal of demand-led funding may increase this number", the report warned.