The Further Education Minister has called for an urgent investigation into why funding for college projects, including Bradford College’s £120 million new campus, has run out.

Sion Simon confirmed that approval in principle had previously been given to projects valued at almost £3 billion by the Government-funded Learning and Skills Council (LSC).

Mr Simon described the situation as “not acceptable” and said ministers had now appointed the former head of the Audit Commission, Sir Andrew Foster, to investigate what went wrong. “I really do understand and I sympathise with the frustrations of colleges in this kind of position,” he said.

“There will be colleges who have invested money, who have borrowed money, even some who have started doing building works.

“It is right to say that the LSC has given in principle approval to 79 colleges which would total nearly £3 billion of Government money and it is clear that that level of expenditure cannot be funded in the current spending round.

“We are quite clear as ministers that that’s not acceptable. We shouldn’t be in that position. This programme has not been managed properly.”

Mr Simon said the Government expected the LSC to ensure that any colleges facing financial difficulties would not be allowed to go into insolvency.

“We are absolutely not willing to see colleges go bust and if there is any college in financial difficulty, they should go to the LSC who we will expect to work with them to make sure that they are supported through any difficulties that they are in,” he said.

Reacting to Mr Simon’s comments, Michele Sutton, principal of Bradford College, said: “We encourage such a review and hope that the College’s plan, which has received support from the LSC throughout the process, will receive the funding necessary to implement.”

Liberal Democrat leader Nick Clegg, who visited Bradford yesterday, said: “It’s a total disgrace. I’ve visited countless colleges from the South West to the North East and I’ve heard the same old story.

“They entered into contracts and were told some funding was going to come from Government and now the Government is saying there isn’t any money. What on earth is going on?”

He added that a tiny proportion of the money used to prop up banks would have funded the college building programme.