A Pounds 600 million expansion bid from further education colleges for 1996-97, double the amount available, has raised fresh concerns that the sector is setting itself unrealistic growth targets.

Since a significant proportion of FE colleges has struggled to meet this year's expansion targets, it is not clear where the extra student growth is expected to come from. But much of it - some predict as much as 50 per cent - is likely to be attributed to franchised students.

The Further Education Funding Council is deciding whether to favour bids made directly by colleges rather than through franchised provision, which is coming under intense scrutiny from a number of sources. The franchise courses causing concern are those where the FE college takes on the training for a private firm.

The training and enterprise councils, staunch critics of such franchising, have raised a question mark over the legality of funding franchised courses through the FEFC.

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Critics say franchised courses are an exploitation of the funding system. They say that the funding council ends up paying for "phantom students" whose training ought to be paid for by the private sector. Lawyers within the Department for Education and Employment are assessing the issues. The FEFC itself is also setting up an inquiry into the way courses are franchised.

Large numbers of colleges rely on franchise students to make up their numbers and any crackdown could spell closure for some.

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There is also concern within the sector that if significant funds are clawed back this month from colleges failing to meet expansion targets the Treasury may feel justified in a greater squeeze on the further education sector in the next public expenditure settlement.

The FEFC said the expansion funds available - Pounds 334 million above the core element this year - are likely to be targeted in future towards those colleges which have met their expansion targets. Details will be worked out at an FEFC meeting later this month.