The millions of students who have been through the nation's colleges since 1993 collectively left the economy ?28 billion richer last year.

For every pound invested by government in colleges, the taxpayer sees a return on investment of ?1.70, according to an economic analysis commissioned for Colleges Week to measure further education's impact.

The combined socio-economic benefits and savings achieved by colleges yields the taxpayer a better rate of return than if they had invested the cash in the stock market, according to Economic Modelling Specialists Inc. (EMSI), a US-based company.

David Collins, president of the Association of Colleges, which commissioned the EMSI study, said: "As we mark the first Colleges Week, this research shows clearly that England's further education colleges are a sound investment from multiple perspectives.

"Colleges enrich the lives of learners and increase their lifetime incomes and they benefit taxpayers by generating increased tax revenues from an enlarged economy and reduced demand for taxpayer-supported social services."

Colleges affect local economies through their purchases and the wages they pay their staff. But because a significant wedge of the college funding comes from students and the taxpayer, the net economic impact of colleges in these particulars is assumed to be zero.

The added skills and qualifications of the students leaving college every year translate to higher incomes and increased business output, which in turn creates more public investment, lower tax burdens and better job opportunities.

EMSI calculated the number of qualifications students got from a sample of 55 colleges over the past 15 years.

It converted these skills to higher incomes. "Compared to those with no formal qualifications, workers with a level 3 qualification receive ?6,400 more in annual earnings, or about ?196,400 over the course of their career."

EMSI calculates that the accumulated contribution of past and present FE students who are still employed is roughly ?28 billion in added income to the England economy.

"This is approximately equal to 2% of England's 2007 gross domestic product," the study concludes.

Costs that society avoids also include health savings, for instance from avoided medical costs and workplace losses associated with reduced smoking, obesity, and mental illness.

There are crime savings, including avoided expenditures for security and insurance, stolen or damaged property, victim services, and law enforcement. And there are unemployment benefit savings, from a reduced number of claims for jobseeker's allowance.

The skills secretary, John Denham, said: "Colleges are not just a foundation of the country's economy, but also an investment in the nation's future.

"The government will invest ?4.7bn in further education and training this year and it's vital that we understand not just the role they play in unlocking an individual's talent, but also how pivotal they are in building strong communities ? economically and socially."