Ninety jobs are to go at Rotherham College of Arts and Technology following the failure of a recovery plan worked out last year. The majority of the redundancies are expected to be compulsory.

Principal John Molyneux, has taken early retirement and Colin Scott, chairman of the corporation, has been replaced as the financial crisis deepened this week.

The Association for Colleges also warned this week that more job losses are in the pipeline. It said the last Budget had cut spending per FE student by 20 per cent and imposed a 63 per cent reduction on the capital available to colleges.

Rotherham College is already the subject of a recovery plan after getting into serious difficulties last year, and has failed to achieve cash targets for the current year. It is now shedding 90 jobs in a bid to remain afloat. Managers admit the majority of the job losses will be compulsory redundancies and industrial action is being planned by lecturers.

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Graham Pears, acting principal, said the college had "failed to take necessary actions" to ensure the recovery plans set out by the Further Education Funding Council came into effect. As a result the gap between income and expenditure was widening daily. "This is a serious and embarrassing situation for us as we are already embarked on a recovery plan because of last year's difficulties," Mr Pears said.

"The college's spending on salaries is too high and we must take Pounds 1.5 million out of our employee costs which is a substantial reduction. Compulsory job losses are inevitable." The college had already borrowed heavily to finance early retirements.

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Growth targets for this year were missed, possibly by as much as 10 per cent, according to Mr Pears, and funding council assistance is being sought. Steps would be taken to minimise the impact on students although more "open learning" was likely as a result of the cuts.

Sue Taylor, local secretary of lecturers union Natfhe, said there had been a unanimous ballot for all-out action at the college to prevent compulsory redundancies and to save the college from closure. "We are simply spiralling into decline and shedding about a third of our staff is a major assault on the college," she said. "We have been working under this arrogant style of management for two years now as the college lurches from one crisis to the next."

Ms Taylor said it would be a terrible loss to the local community if the college closed but already student numbers were being affected by the crisis. "We are having to combine classes. We lack resources. I just don't think people will want to come here," she said.

The AFC said that the Department for Education and Employment had adopted a flawed method of further education funding which had been overlooked amid the debate over higher education cuts.

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A submission will be presented to the DFEE as the basis of a campaign to persuade ministers of the importance of maintaining investment in further education.