Merger of Funding Councils

A CHANGING LANDSCAPE FOR TERTIARY EDUCATION AND RESEARCH IN SCOTLAND

A Consultation Paper on the Merger of The Scottish Further Education Funding Council
and The Scottish Higher Education Funding Council

MERGER OF FUNDING COUNCILS FOR FURTHER AND HIGHER EDUCATION

Ministerial Foreword

Lifelong learning is at the heart of the Scottish Executive's commitment to create a Scotland where enterprise can flourish, where opportunity does exist for all and where our people and our country have the confidence to face the challenges of a global society.

As a country, we invest a significant proportion of our wealth in FE and HE. As a result we have colleges, universities and other institutions of which we can be proud, and teaching and research that is in places world class - nearly 50% of research is rated as internationally competitive in the Research Assessment Exercise (RAE). But there is no room for complacency. The world around us is not standing still. If we are to retain a competitive edge, both economically and academically, and if we are to meet the aspirations of our own citizens - businesses, students, people from disadvantaged backgrounds, people looking for work, or whoever - we have to ensure that the money we are investing is being used to the best possible effect.

That is what our commitment as an Executive to lifelong learning, as set out in our strategy "Life through Learning; Learning through Life", is all about. And the proposal under discussion in this document, the merger of the Funding Councils, should be considered in that context. This is not just a technical exercise. It is a vital part of the work to achieve greater strategic co-ordination and coherence of tertiary education in Scotland that is fit to face the challenges of our age and strong enough to drive the economic success on which the country's prosperity depends.

The new body will provide one strategic organisation for tertiary education in Scotland, establishing a more integrated view of lifelong learning. The new body will have a single overview of, and be able to make decisions about, both further and higher education, thereby maximising the benefit of direct read across from experiences in one sector to the other. By providing a single overview of the tertiary education system it will be able to provide a coherent point of linkage between the objectives of post-school education and Scotland's national economic objectives. The merger will also aid the achievement of parity of esteem for different types of learning and learning providers, recognising the different - and often complimentary - strengths of different institutions.

This consultation paper details our proposals for the new body, and how it will relate to tertiary education providers. We know that our FE Colleges and HE Institutions are among the best in the world, and we want to build on these successes, creating the right relationship between the checks and balances necessary to ensure Best Value from tertiary education while allowing maximum autonomy for these critical providers.

This consultation will run for three months, and we welcome views on the proposals for the new body.

Jim Wallace MSP
Deputy First Minister and Minister for Enterprise and Lifelong Learning.

EXECUTIVE SUMMARY

THE CHANGING LANDSCAPE

In order move towards achieving greater parity of value between further and higher education, and start considering the range of lifelong learning, we intend to bring together the definitions of further education and higher education and refer instead, in broader terms, to tertiary education.

STEPS

In supporting the concept of tertiary education, we propose to create a new overarching category of providers eligible for funding through the new body. These will be Specified Tertiary Education Providers (STEPs). In the first instance, these will be the current HEIs and colleges whose individual titles and designations will not change. However, in future it will be possible for the new funding body to specify other providers for the purposes of funding provision of lifelong learning.

This does not mean that we regard all institutions as being the same, but creates a common classification for all bodies being funded by the new body. We fully recognise the distinctive legal status, character and mission of HEIs and Colleges, and there is no intention to change any of these. Designation as STEPs will not diminish the diversity of these distinctive contributions to tertiary education in Scotland.

HEIs and Colleges have different governance arrangements in place based on differing pieces of legislation. It is not intended to interfere with any of these provisions. This means that Scottish Ministers and the new body will have the same relationship with the individual institutions as they do at present, for example, Scottish Ministers can close a College but not a pre-1992 university - this will not change.

For this reason, we have grouped STEPs into different categories as convenient ways of describing how Scottish Ministers and the new body can interact with them. The sections of the 1992 Act which describe these relationships will therefore remain in force.

ROLE OF THE NEW BODY

One of our main policy intentions is to broaden the role of the new body to ensure that it has regard to the future skills needs of Scotland. In exercising its function, the existing Funding Councils provide funding for the Colleges and HEIs but they also have an important role in regulating, influencing, incentivising, stimulating and supporting activity in the sectors.

We believe that this wider responsibility to use public funding in support of the delivery of Ministerial priorities should be more explicitly recognised. We will expect the new body to take a strategic lead in Scottish tertiary education and research by identifying, encouraging, influencing facilitating and advising on opportunities for strategic development particularly in the following areas:

Responsiveness and relevance of learning provision
Quality of learning provision and research
Coherence of provision and collaboration between providers
Mergers and new institutional models
Progression through learning (including articulation).

RESEARCH

The research base must be fully supported by the new body to ensure that Scotland remains able to attract the best researchers and postgraduate students and thus is also able to compete successfully for research funding. It will also be essential to ensure that the new body continues to increase its support for knowledge transfer, and within that the exploitation of research for the wider benefit of the economy and society.

Scotland continues to be a home for high quality research and the new body will be expected, as now to form strong links with the research community and work closely with its stakeholders to maximise collaboration and partnership in the sector and further enhance commercialisation and knowledge transfer. The draft Bill makes provision for a statutory research committee to support this.

Funding

With this legislation our intention is to modernise the accountability structures that surround our substantial investment in tertiary education in Scotland to make it more coherent and transparent.

We propose that the Scottish Parliament allocate funding for the tertiary sector to the new body in total terms, and that the new body propose an allocation based on Ministerial guidance, for agreement by Scottish Ministers. Ministers would recommend the basis for the allocation of funds which would be high level, and could be by type of institution, as at present, or over time by other criteria, for example non advanced teaching/ advanced teaching/ research, or SCQF levels. The new body will be required to report to Parliament on an annual basis on the activities they have funded.

For the first year or so, we would expect the funding allocation to remain by type of institution - this would be based on existing relative levels of funding to SFEFC and SHEFC. This will allow time for the new body to develop funding systems and minimise any potential for disruption across the sectors. A similar type of arrangement was put in place to safeguard the distribution of funds between teaching and research when SHEFC first distributed funds in 1993.

POWERS AND DUTIES

Like all Non Departmental Public Bodies, the new body will be intended to achieve Best Value for the provision it funds and Ministers will expect the new body to ensure what it funds is fit for purpose.

Scottish Ministers and SFEFC currently have a duty to provide 'adequate and efficient' further education. There is no corresponding duty for HE. We propose to extend this duty on Scottish Ministers and the new body to cover all tertiary education and research.

STRUCTURE

We do not propose to specify any organisational structure for the new body, with one exception. As mentioned above, we believe that, given the strategic importance of research, there should be a Research Committee specified as a statutory committee.

The Draft Bill

The draft Bill attached to this Consultation Paper sets out to modernise the way Scottish Ministers and Parliament relate to the new body and the sector and increase transparency, value for money and accountability.

The draft Bill deals with the aspects of our proposals where we believe legislation is required. However, as detailed above, we have left a significant proportion of the 1992 Act intact. The sections relating to colleges and HEIs, and how the Councils and Scottish Ministers interact with them will, to a large extent remain. To assist readers, Annexes H and I set out what in the new Bill is new or modified in comparison to the 1992 Act and what provisions we intend to leave in force in the 1992 Act.

A Changing Landscape for Tertiary Education and Research in Scotland

INTRODUCTION

The Vision for Scotland - The Partnership Agreement

In May 2003, the Executive published "A Partnership for a Better Scotland" ¹. This Partnership Agreement reflects the Executive's priorities for the next four years and sets out Scottish Ministers' vision for:
"A Scotland which cares for its people and where opportunities are increasing for everyone, enterprise is rewarded, and where people have confidence in their communities and in public services. A Scottish government that focuses on the issues that matter the most to people, is outward looking and confident, and delivers real sustainable improvements in our quality of life."
The Partnership Agreement sets out an agenda for delivering this vision, and demonstrates Ministers' determination to work with communities to create a Scotland we can all be proud of, focusing on four key priorities:

Growing the economy
Delivering excellence in public services
Supporting strong communities
Developing an ambitious and confident Scotland.

Colleges and HE Institutions (HEIs) have a key role to play in helping to deliver these Ministerial priorities, and to support them in achieving this, the Agreement cements the previous recommendations to merge the Further and Higher Education Funding Councils and "charge them to have regard to the future skills needs of Scotland".
The Lifelong Learning Strategy
The proposal to merge the Funding Councils was initially raised during the Scottish Parliament's inquiry into lifelong learning and was subsequently included as a recommendation in the Executive's Lifelong Learning Strategy, "Life through Learning; Learning through Life" published in February 2003 ². The strategy developed the theme of relevant provision, that is:

Responsive to the needs of employers and individuals
Flexible on the part of providers
Of high quality, and
Coherent, transparent and offers the same opportunities to all.

The Lifelong Learning Strategy states that:
"We will merge SFEFC (the Scottish Further Education Funding Council) and SHEFC (the Scottish Higher Education Funding Council). This merger would make possible greater comparability and transparency in the way that different types of institution and levels of courses are funded in tertiary education. It will also provide an opportunity to ensure even closer integration between the work of the Funding Councils and the Enterprise Networks.
The strategy goes on to define the role of the existing Funding Councils as:
"…to respond constructively to Scottish Executive policy and guidance to:

Distribute and allocate financial resources to deliver effective and efficient provision by colleges and HEIs
Encourage the delivery of quality outputs from colleges and HEIs
Encourage the responsiveness and relevance of provision
Encourage appropriate collaboration between providers, and
Advise the Scottish Executive as appropriate".

Higher Education Reviews

While developing the Strategy, the Executive has also been undertaking a major three-part review of higher education. The overall remit of this review has been:
"To identify how the Scottish Executive Enterprise, Transport and Lifelong Learning Department's investment in the delivery of higher education can most effectively maximise the personal, social and economic benefits of teaching and research over the medium to long term, and support a culture of challenge, innovation and partnership in and beyond Higher Education Institutions".
The first part of the review centred on the operation of the Scottish Higher Education Funding Council ³. This paved the way for a second part which focussed on the wider issues within the sector. The report of this second part - "A Framework for Higher Education In Scotland" ⁴ - was published in March 2003, and set out the Executive's ten year strategy to develop the HE sector. The Framework also undertakes to introduce legislation to merge SHEFC and SFEFC, stating that "This merger will make possible greater comparability and transparency in the way different types of institution and levels of course are funded in tertiary education".
The third phase of the review considered the competitiveness of Scottish higher education in a UK and wider context, including the implications for Scotland of any new funding system implemented in England. The final report of this final stage of the review was published in March 2004 ⁵.
Initial Consultation
Last year, we consulted with key stakeholders on broad policy issues. This consisted of consideration of a discussion paper, and a series of meetings. At this time we asked for view on the role, powers and scope of the new body. The discussion paper was sent to sixteen bodies, and we received written responses from twenty two. We also met with eleven of the key stakeholder bodies.
There was broad agreement on the principles of merger, although some partners raised concerns about our proposal that "We start from the assumption that, unless there is a very good reason to the contrary, any conditions applying to one sector should apply to both". This was seen by some as an attempt to undermine the distinctive roles of different institutions.
This is not the case and we were happy to give reassurances that we believe that the distinctiveness of institutions is a strength of the system, and do not intend to undermine this. In fact, our intention is to enhance this diversity and allow it to flourish by creating a legislative framework which recognises that all partners have an equal and varied contribution to make, and this is reflected in the proposals which follow.
As part of an ongoing pilot approach to consultations, we have also given key partners the opportunity to have a platform within this consultation document. This allows these partners to express their views on the issues that matter to them. We hope this will encourage different views to emerge and be explored an a positive manner and allow the legislation to be robust and flexible enough to meet the needs of Scotland and the requirements of the sector now, and in the future.
There will be a relatively finite group of consultees, and it is therefore proposed that, in the main, the consultation will be electronic. We believe this will allow us to reach all of our target audience without the need for production of a 'glossy' consultation paper.
All of the organisations listed in Annex G will receive an electronic copy of the document. Colleges and HEIs will be asked to place a hard copy of the paper in their libraries. NUS Scotland and all relevant trades unions will also receive an electronic copy. They will be asked to bring the consultation to the attention of staff and students, who will be able to access the document. Staff and students in colleges and HEIs have ready access to ICT, and we believe this will be the most efficient way of reaching all of our main target audience.
The electronic format has several advantages over the paper form, but principally it will allow readers to search and sort by the issues that matter to them, without having to skim through the whole document.
A copy of the paper will also be placed on the Scottish Executive website. Hard copies will also be available (although not in 'glossy' format) for anyone who requests a copy.
We are seeking views on the proposals detailed below. Throughout the consultation document we set out our policy intentions in positive, unqualified terms. This allows us to set out our proposals, but should not be seen as indicating that final decisions have been taken.
We have decided, in general, not to ask specific questions on each particular point, but rather we are seeking views from you on the issues that matter to you. We welcome thoughts from anyone on any aspect of our proposals.
There are however, some areas where we are asking for views on specific questions. These are around the structures and function of the new body, and its culture and day to day operations. These will not have any legislative implications, but will assist in setting the context for the new body.
We are also seeking suggestions on a name for the new body. The draft Bill attached refers to the Scottish Tertiary Education Funding Council. Specific views are sought on the suitability of this name, and whether it adequately covers its greater strategic role, as well as its research responsibilities.
How to respond:
Written responses to this consultation paper should be sent to.
Merger of the Funding Councils Team
Enterprise Transport and Lifelong Learning Department
2 ^nd Floor, Europa Building
450 Argyle Street
Glasgow G2 8LG
By e-mail to : fcmerge@scotland.gsi.gov.uk
Responses to this paper are required by Thursday 15 July 2004.
This paper can be found on the Scottish Executive's web site at www.scotland.gov.uk/consultations.
We will make all responses available to the public on the Scottish Executive website and in the Scottish Executive Library ⁶ unless confidentiality is requested. Any confidentiality disclaimer generated by your computer system in an e-mail will not be treated as such a request. Confidential responses will be included in any statistical summary of numbers or comments received or views expressed. All responses not marked confidential will be checked for any potential defamatory material before being logged in the library or placed on the website.
Further Discussions
To supplement the information collected through written submissions we intend to host events around Scotland during the consultation period to discuss the key issues. These meetings will be held in June, and will be open to anyone with an interest in the merger. They will be held as follows, Dundee - 8 ^th June; Edinburgh - 3 ^rd June; Glasgow - 10 ^th June; and Inverness - 1 ^st June. If you would like to attend, please advise us by email on the address above, stating the venue you want to attend, so that we can make catering arrangements.

BACKGROUND

The Further and Higher Education (Scotland) Act 1992
The Further and Higher Education (Scotland) Act 1992 ⁷ removed further education colleges (FECs) from the management and control of the local authorities (with the exception of Orkney College and Shetland College). The 1992 Act made provision for the incorporation of further education colleges as autonomous institutions and set in place a framework for establishing a separate SFEFC to fund FE colleges. In 1993, responsibility for funding the FECs transferred from the local authorities to the then Scottish Office, which continued to fund them directly until the establishment of SFEFC in 1999 ⁸.
The 1992 Act also established SHEFC and brought together most higher education institutions (HEIs), including the 'pre-1992' universities, previously funded through UK-wide arrangements, into a single, unified HE sector in Scotland. It set out the powers and duties of the Scottish Ministers, the Funding Councils and, in the case of HEIs, the Privy Council. It made provision for:

Institutional mergers, closures, changes of name
A mechanism whereby FECs could be re-designated as HEIs
Additional institutions to be designated as eligible for funding by SHEFC ("designated institutions") and for new HEIs to be established, and
HEIs other than the 8 pre-1992 universities to achieve powers to award their own degrees.

Parallel reforms were implemented for England and Wales through the Further and Higher Education Act 1992.
The need for change
It is clear to Ministers from the evidence of a number of Scottish reviews and inquiries into lifelong learning that the time is right to merge the Funding Councils. The current funding models relate to the type of institution rather than the level and nature of learning provision. SFEFC funds programmes undertaken in FECs, and SHEFC funds programmes undertaken in HEIs.
The new body will provide one strategic organisation for tertiary education in Scotland, establishing a more integrated view of lifelong learning and ultimately creating a more coherent system for learners. The new body will have a single overview of, and be able to make decisions about, both further and higher education, thereby maximising the effectiveness of public investment in tertiary education will also allow greater sharing of experience and learning between further and higher education.
By providing a single overview of the tertiary education system it will be more easily able to provide a coherent point of linkage between the objectives of post-school education and Scotland's national economic objectives. The merger will also aid the achievement of parity of esteem for different types of learning and learning providers, recognising the different - and often complimentary - strengths of different institutions.
Current funding
For both HE and FE in Scotland, current funding is by type of institution, rather than level of course. However, from the learners' perspective, there is no neat dividing line between what is provided by HEIs and what is provided by FECs. For example, around a quarter of students studying HE courses do so in an FE College, mostly on vocational courses at HNC/D level. We therefore need to think in less stratified ways about how, where and by whom provision is offered. It has been suggested by some that the rigidity of the institutionally based funding models inhibit flexibility, collaboration and innovation and may mean we are not as successful as we could be in widening access and diversifying the student body. New types of collaborative arrangements, such as the Crichton Campus and UHI Millennium Institute, are being developed that bring together FE colleges and HEIs to stimulate and meet demand for learning.
Taking the rapidly changing environment into consideration, it seems clear that if Scotland is to flourish then the current Further and Higher Education (FHE) landscape and funding arrangements need to adapt if they are to continue to stimulate lifelong learning and meet individual aspirations, and to be in a position to respond effectively to national priorities in relation to, for example, an appropriately skilled workforce.
Staffing
As the two Funding Councils already have a common staff, which facilitates close working and some synergies between the Councils, the efficiencies of shared working have already been met. However, these synergies are necessarily limited at the strategic level by the statutory requirement to have two separate Funding Councils, each with their own distinct statutory powers and duties and resources. It is therefore not a purpose of this merger to reduce the staffing levels or running costs of the two Councils. Schedule 1 of the draft Bill sets out the requirements for the new Council including references to staff, Council membership, committees etc.

LEGISLATING FOR MERGER

The planned merger of the Funding Councils is an opportunity to look again at legislation which underpins the tertiary education landscape in Scotland, and ensure that any new legislation is fit for purpose and enables Scotland's needs to be met without new legislation in the future.
The legislation required for the new body will, to a large extent, replicate existing provisions. For example in thinking about the way the two Councils are constituted, we have borrowed heavily from the existing model. There will, however, be areas where we are proposing changes. Annexes H and I set out what in the new Bill is new or modified in comparison to the 1992 Act and what provisions we intend to leave in force in the 1992 Act.
When SHEFC underwent a Policy and Financial Management Review (PFMR) in 2001-02 the positive contribution of the Council to the support of the sector was widely cited. Its approach to its role was seen as appropriate and its status as a non-departmental public body (NDPB) was valued. In his guidance to SFEFC for 2004-05 the Minister for Enterprise and Lifelong Learning announced that a PFMR of SFEFC would be conducted during the year and would be, "limited in scope, drawing on existing information, and will be conducted in tandem with discussions relating to the merger of the Councils."
An important output from the PFMR of SFEFC will therefore be to inform the structure and functions of the new body and the culture and method of its day-to -day operation.
In this context, we would be interested to hear what lessons you think we might learn from the operation of SFEFC and its joint executive and how might these shape the future direction of the new body?
Diversity
We recognise that FECs and HEIs are autonomous institutions with distinctive characteristics and missions and we believe that this diversity is essential for the continued success of Scotland's society and economy. While this diversity is key to what we want to achieve, we strongly believe that except in those areas where there is a very good reason to the contrary, the legislation should create an environment where the Council has the same powers and duties over all institutions. We believe this will assist the new body in developing relationships with the different tertiary education providers which it funds

THE CHANGING LANDSCAPE

Views about further education and higher education - and how and where best they should be provided - have changed fundamentally over the past 10 years, and the pace of change is accelerating.
The Further and Higher Education (Scotland) Act 1992 includes definitions of "further education" and "higher education". Although these definitions are important, for example in defining eligibility in areas such as student support, definitions in legislation can sometimes create barriers to change in the future.
These existing definitions raise some concerns at the boundaries, for example, higher vocational education (higher national certificate and higher national diploma courses) currently falls within both definitions and there are further issues of dual definitions between further and secondary school education.
The majority of HNC/Ds are delivered through FECs, but some are delivered through HEIs. Some FECs offer degree level programmes under external validation arrangements, as do those HEIs without degree awarding powers.
The existing Funding Councils have put in place internal arrangements to develop policies that will encourage synergies between the sectors, including a joint committee structure, various other joint initiatives and reviews, and a joint corporate plan. These arrangements - along with the increasing number of links between individual institutions in the two sectors in their own right - are contributing to a coherent system of tertiary education, learning, training and research in Scotland.
When describing the new sector in order to reflect more accurately the reality of provision and to move toward greater parity of esteem between, and treatment of, further and higher education, we intend to bring together the definitions of the further education sector and the higher education sector and refer instead, more broadly, to tertiary education. To support the various provisions set out in the draft Bill, Section 2 sets out a single definition of tertiary education based on merging the existing legislation (sections 6 (FE) and 38 (HE) of the 1992 Act).
In doing this, we do not wish to remove the existing definitions of FE and HE altogether. This is a signal of intention to change how we think about and fund lifelong learning, and we do not expect any immediate structural changes to take place, other than the creation of the new body, as a result of the Bill.
We are also aware that these existing FE and HE definitions are used in many other important pieces of legislation, such as that governing student funding arrangements. For this reason, we do not intend to repeal the existing definitions in the 1992 Act.
We have considered using the Scottish Credit and Qualifications Framework (SCQF) ⁹ as the basis for defining tertiary education and associated levels of provision, but were persuaded by arguments put forward during the initial consultation that the SCQF model is not mature enough at this stage. However, we would want to emphasis its importance in providing a common language, and facilitating articulation routes, and would expect to see its continued development and support by the sector.

The Scottish Credit and Qualifications Framework (SCQF) brings together all Scottish mainstream qualifications into a single unified framework and aims to:

Allocate credit and levels to all assessed and quality assured learning
Signpost people of all ages and circumstances to appropriate education and training over their lifetime, and
Help employers, learners and the public understand how qualifications can improve the knowledge and skills of Scotland's workforce

In supporting the concept of tertiary education, we propose to create a new overarching category of providers eligible for funding through the new body. These will be Specified Tertiary Education Providers (STEPs) and are covered by sections 21 to 28 of the draft Bill. In the first instance, these will be the current HEIs and FE colleges funded by SHEFC and SFEFC. However, in future it will be possible for the Scottish Ministers to specify other providers for the purposes of funding provision of lifelong learning.
All existing colleges and HEIs will be specified as STEPs on the day which the legislation comes into force and will retain their existing names and status. Current arrangements for the creation of new institutions and the merger or renaming of existing institutions will continue unchanged. It is expected though that over time potentially new models of tertiary education providers will emerge and that institutions will be able to change their names.
This new definition, does not mean that all institutions should be regarded as being the same, but creates a common classification for all institutions being funded by the new body. We fully recognise the distinctive legal status, character and mission of different HEIs and colleges. Designation as STEPs will not diminish the diversity of these distinctive contributions to tertiary education in Scotland.
Our HE institutions operate in UK-wide and international markets. Universities and other HEIs, for example, have traditionally focused primarily on teaching, scholarship and research, including the advancement of knowledge, testing the boundaries of understanding and advancing new, and sometimes controversial opinions. They have also provided education and training for the professions such as medicine, dentistry, the law, the ministry, engineering, and attract students from far beyond their immediate locale.
Colleges of further education have traditionally had a local focus, providing a wide range of non-advanced and vocational programmes, from standard grades and Highers to City and Guilds and higher national diplomas for employers, from language courses for non-native speakers of English to leisure classes. They promote social inclusion, increasingly attract students from further afield including internationally, and play a role in the transfer of knowledge and in developing innovative approaches to training and learning.
The draft Bill will include a list of all STEPS. STEPs are grouped into four different categories and the initial list of STEPs is attached at Annex B, and is included as schedule 2 in the draft Bill. The categories are convenient ways of describing how Scottish Ministers and the new body can interact with them. These are incorporated colleges, non incorporated colleges, designated higher education institutions and ancient and chartered universities
Scottish Ministers will also be able to specify other providers as STEPs and therefore make them eligible for funding through the new body. The legislation will specify basic conditions with which they must be able to demonstrate compliance and sustainability before becoming eligible to be specified as STEPs. These are detailed at Annex A.
STEPs will need approval from Scottish Ministers to change name. This is a change for incorporated colleges, and brings them into line with Designated HEIs. The Ancient and Chartered Universities will be required to give Scottish Ministers notice of intention to close, but Scottish Ministers will continue to have the power to close other STEPs as currently provided for in the 1992 Act.
Similarly, there is no intention to change any of the powers of the Privy Council in relation to higher education institutions specified in the 1992 Act, for example, those in relation to the power to award degrees.
Scottish Ministers will continue to have the power to designate any STEP as a higher education institution. Designation as an HEI will be a condition for eligibility to receive RAE-related volume/quality funding derived from UK-wide peer-review assessments of research carried out in higher education institutions. We will make this clear in any memorandum attached to the legislation. We will not, however, exclude colleges from receipt of "research" funding as there may be benefit in supporting their activity in knowledge transfer. HEIs will also come under the remit of the QAA with regards to quality assurance and enhancement.
In most respects both FECs and HEIs are free to determine what programmes to offer, and whether to offer them part-time, full-time, by distance learning, or in partnership with other institutions or employers. This autonomy is essential in allowing institutions to react quickly to national and local needs and ensures flexibility and relevance in terms of modes and types of provision.
Under the current Act, HEIs enjoy a significant degree of academic freedom. Section 42 (3) of the existing Act prevents Scottish Ministers from framing terms and conditions of grant by reference to particular courses of study or programmes of research. This restriction also extends to the selection and appointment of academic staff and the admission of students. We intend to extend this to all STEPs.
However, Scottish Ministers are currently reviewing teacher qualifications in FE Colleges, and Scottish Ministers may give guidance to the new body which would include a provision which would require lecturing staff to gain an appropriate teaching or professional qualification within a prescribed period of time.
We are also proposing to add a power in the new legislation which will allow Scottish Ministers to invest additional funds - beyond the grant funds available to the new body - to expand capacity in particular courses or areas of study to meet Executive priorities in specific areas such as teacher education or the healthcare professions.
Scottish Public Services Ombudsman
The Partnership Agreement states, "We will give students in Further and Higher Education the right to refer matters to the Ombudsman when institutional mechanisms fail them". As we acknowledge in the consultation paper on the Ombudsman proposals 'A New Complaints Landscape for Further and Higher Education', since the consideration of academic matters is an integral facet of the independent nature of further and higher education institutions, we believe it would be necessary to exclude the substance of such complaints from the Ombudsman's remit.
Scottish Ministers regard it as important that all users of publicly funded services have the right to independent scrutiny of the treatment of any complaints they have about such services. Scottish Ministers are currently considering the response to the consultation paper on the Ombudsman proposals. Their conclusions will be considered in the drafting the final Bill, including making it a condition of STEP status that providers put in place and publish arrangements for the consideration of student complaints and identify the Scottish Public Services Ombudsman as the final arbiter of complaints.

ROLE OF THE NEW BODY

The existing Funding Councils provide funding for the Colleges and HEIs but they also have an important role in regulating, influencing, incentivising, and stimulating activity in the sectors. We believe that this wider role in supporting the delivery of Ministerial priorities should be more explicitly recognised and sections 9 to 20 of the draft Bill set out the key roles and requirements of the new Council.
We will expect the new body to take a strategic lead by identifying, encouraging, influencing, facilitating, and advising on opportunities for strategic development of the tertiary education sector, particularly in the following areas:

Responsiveness and relevance of learning provision
Quality of learning provision and research
Coherence of provision and collaboration between providers
Mergers and new institutional models
Progression through learning (including articulation).

In supporting the achievement of these objectives, the new body will have a duty to have regard to the future skills needs of Scotland. This will require them to take a national and sub national view and work with appropriate partners to ensure that tertiary education in Scotland is:
Comprehensive in coverage, both geographically and subject based - meeting the needs of learners, employers and society

Accessible to all - including for learners with special needs
Quality assessed with independent review.

We will also expect the new body to work closely with STEPs and appropriate partner bodies to continue to support research and knowledge transfer and ensure that Scotland remains fully competitive within the UK and internationally.
Responsiveness and relevance of learning provision
The lifelong learning strategy and the higher education framework both emphasise the importance of improving the responsiveness of providers to demand from learners and employers and look to improve the ability of learners and employers to make informed choices, with the help of bodies such as Futureskills Scotland, learndirect scotland and Careers Scotland.
The Strategy sits alongside A Smart, Successful Scotland ¹⁰ and its conclusions derive in part from a substantial internal analysis of our position on skills: the Vocational Education and Training Review. It is directed at the full range of players in lifelong learning, but for the Enterprise Networks it effectively elaborates on aspects of A Smart Successful Scotland.
Success in the innovation of new products and processes is required for Scotland to be an internationally competitive knowledge economy. An important factor in achieving this success is a workforce with appropriate skills. The quality of generic skills and mix of vocational skills available in the Scottish labour market is also an important factor in productivity growth. However, defining the appropriate skills required in Scotland is more complex.
In delivering national priorities, the new body will collaborate with partners such as Scottish Enterprise (including Futureskills Scotland and Careers Scotland), Highlands and Islands Enterprise, Trades Unions and Sector Skills Councils so that learning provision responds to skills needs (see sections 17 and 18 of the draft Bill). This may include joint planning and delivery of learning provision and research.
In allowing the new body to fulfil its duty to provide adequate and efficient tertiary education and a competitive research base, the following organisations will have a duty to give the new body such information as they may require for the purposes of the exercise of any of their functions:

A Scottish local authority
The governing body of any STEP
The governing body of any other institution which provides tertiary education
Scottish Qualifications Authority
Scottish Enterprise (including Futureskills Scotland and Careers Scotland)
Highlands and Islands Enterprise
Any local enterprise company
Scottish University for Industry [learndirect scotland]
Communities Scotland, and
Such other organisations as Scottish Ministers may determine.

The new body will also play an important role in stimulating colleges and institutions to be responsive to the needs of learners and employers. Where appropriate, it will play a co-ordinating role to ensure coherent and responsive provision at the local, regional and national levels. This will include ensuring that STEPs take account of outputs from local community partnerships, and that they contribute effectively to such local partnerships, including Community Planning and Local Economic Forums.
However, in recognising and responding to economic priorities, it is important we do not lose sight of the need for the sector to be able to respond to learners - as individuals with personal aspirations - as well as cultural and social priorities. Indeed, learners should be at the heart of the tertiary education system.
Quality of learning provision and research
Under section 15 of the draft Bill, the new body will be responsible for ensuring quality assessment and enhancement for all the learning provision that it funds. This will be a general duty, specified in the same way for both sectors. While the duty will be standardised, we expect that the current arrangements - with the Councils contracting with HMIE and QAA - will continue under the new body in the foreseeable future, particularly given the expertise that has been built up by both HMIE and QAA. However, this will be a matter for the new body.
Of central importance to this is that quality assessment and enhancement is best driven forward on the basis of robust self-evaluation by colleges and HEIs themselves. This is a key element in the development of parity of esteem, reinforcing institutional autonomy and the maturity of the relationship between the new body and the sector. For this reason processes for ensuring quality assurance and enhancement will be a condition of STEP status as detailed in Annex A.
We will expect the new body to assure the quality of the research base in Scotland by continuing to participate in UK-wide assessments of research quality and by providing the majority of its funding for research on the basis of quality assessment results.
Coherence of provision and collaboration between providers
As today's changing environment places greater emphasis on institutions being more flexible and innovative, and making the best use of their allocated resources, it is essential that institutions work well individually and collectively, and build strategic relationships not only within Scotland's borders, but throughout the UK and internationally.
The higher education framework clearly recognises the value of encouraging greater collaboration and dialogue between key partners and the benefits that this can bring to a country of the size and scale of Scotland. We believe that productive collaboration can contribute to a tertiary education system that is outward looking, responsive to learners and contributes effectively to the economy and society. The new body will continue to stimulate collaboration - where there are potential strategic benefits to be gained - and identify opportunities for collaboration up to and including mergers of STEPs.
Recent examples have shown that best value can be enhanced through cross-institutional and cross-sectoral provision, ranging from institutional mergers to various forms of collaboration and joint working. In higher education, these examples include the creation of a Scotland-wide Institute for Excellence in Social Work Education, the Synergy ¹¹ partnership between the Universities of Glasgow and Strathclyde, and many other collaborative projects funded by SHEFC through the Strategic Change Grant and from Strategic Research Development Grant awards.
Following their Area Mapping exercise ¹² which looked at supply of and demand for further education in Scotland to inform its consideration of adequacy and efficiency issues, SFEFC has been working with colleges to develop area-based strategic planning. Although not in all cases a collaboration initiative, there are good examples of collaboration emerging and this project is progressing into 2004-05.
There are currently a number of high profile and successful examples of collaboration between further and higher education, for example, UHI Millennium Institute; the Crichton Campus partners in Dumfries; and Fife College and the University of Abertay Dundee.
We expect that the new body, within a more flexible system, should make it easier to fund innovative models such as these, while maintaining its overall level of fairness and objectivity in allocating funds. For example, UHIMI has unique relationships with its academic partners. In the current mechanism, most UHIMI academic partners receive funding for FE provision from SFEFC, while HE level courses are now funded through UHIMI by SHEFC.
It is important to restate here that the method of funding individual colleges and HEIs is, and will remain, an administrative matter for the new body, however, our goal is to create a framework which will allow decisions about collaborative activities to be made in a way which will allow tertiary education to optimise our use of resources.
UHIMI and Crichton Campus: new approaches
UHIMI and Crichton Campus are both examples of the recent development of new approaches to the delivery of tertiary education in Scotland. In both cases existing providers have come together within new structures to both stimulate and meet demand in geographic areas where there was a strategic need for such development. At UHIMI and Crichton the academic partners involved are dealing with both SFEFC and SHEFC. Whilst these relationships have been managed well to date we see benefits in removing this complexity and giving the new body a focus on the development of both further and higher education. The UHI Millennium Institute was designated as a higher education institution in April 2001. The following paragraphs outline the relationship between each funding council and both UHIMI and the partners at the Crichton Campus.
UHIMI
The UHI is an educational partnership of colleges, research institutions and a network of over 50 learning centres across the Highlands and Islands. As a designated HEI the UHI receives funding from SHEFC. In 2003-04 the UHI was allocated 14.7m by SHEFC for all teaching provision, including widening access grants and taught post-graduate provision. In addition the UHI was allocated 0.37m from SHEFC's Main Quality Research Grant and 0.17m from the Research Development Foundation Grant.
Of the 12 academic partners within UHI, 8 are colleges funded by SFEFC. Collectively they were allocated some 20m in recurrent funding for 2003-04.
Crichton Campus
The Crichton Campus is a multi-institutional FE/HE campus which offers opportunities at undergraduate and postgraduate levels and for continuing professional development. The current partners are the Universities of Paisley and Glasgow and Bell College (all HEIs receiving their funding from SHEFC) and Dumfries and Galloway College (a further education college receiving its funding from SFEFC).
The campus started in 1997 following a successful bid to SHEFC's Strategic Change Grant for 1.8m. Subsequently this was supplemented by an award of a further 0.5m from SHEFC's Strategic Change Grant and the specific allocation of a total of 150 FTE (full-time equivalent) funded student numbers, as well as general funding from the partner institutions.
Mergers and new institutional models
Through sections 26 and 27 of the draft Bill, Ministers will continue to have powers to merge Colleges, and to merge a designated HEI with one or more other HEIs. Because policy has been to support institution-led proposals, Ministers have not initiated mergers; their policy has been to consider applications voluntarily submitted by partners who wish to merge. Indeed, Ministers have a quasi-judicial role in approving mergers, which requires them to consider any objections. Since 1992, nine institutional mergers have been approved ¹³, all of them HEIs. No proposal for mergers by FECs has come to fruition. Ministers currently have no specific powers to initiate cross-sectoral mergers.
Mergers are most likely to succeed where they are driven by a belief in their value shared by the organisations concerned. However, in fulfilling its strategic role, and in pursuing best value for public money, the Scottish Ministers will have the power to request that any STEP investigate the feasibility of a merger. We have not proposed any change beyond that at this stage, but would welcome views on how best this area could be taken forward to encourage and facilitate cross-sectoral mergers.
Ministers have powers to create new HEIs. These have been used twice since 1992, to create Glasgow Caledonian University (at the request of two merging partners who were concerned to ensure that the merger was seen as a partnership of equals) and to create UHI Millennium Institute (UHIMI). During this time, Bell College of Technology has also changed its designation moving from an FEC to become an HEI. Ministers also have powers, unused to date, to create new FECs.
Progression through learning (including articulation)
Under existing mechanisms, Scotland has demonstrated its ability to develop innovative provision to improve articulation, resulting in an increasing percentage of entrants to higher education institutions coming through further education colleges with advanced standing.
Through the SCQF and SCOTCAT, Scotland has been at the forefront in Europe in developing credit and qualification frameworks, which facilitate and support successful articulation where it is appropriate.
There will be no additional specific powers in the proposed legislation to support the development of articulation. The existing powers allow a wide range of actions, and provide sufficient flexibility, to promote articulation between the sectors. For example, the existing Councils currently jointly fund the Wider Access Regional Forums, as well as a set of projects on mapping, tracking and bridging being conducted by the Scottish Advisory Committee on Credit and Access ¹⁴.
The new body will continue to encourage STEPs to work together to ensure effective articulation routes for students who wish to progress into and through higher education.

FUNDING

The creation of the new body allow us an opportunity to modernise the accountability structures that surround our substantial investment in tertiary education in Scotland to make it more coherent and transparent and make possible greater comparability in the way that different types of institutions and levels of courses are funded in tertiary education. This is also an opportunity to review the way funding is provided to the new body by Parliament. Currently, the Scottish Parliament allocates funding to SFEFC and SHEFC to distribute to colleges and HEIs respectively.
This method of allocation means the funding of HE provision is split across two bodies since around a quarter of students studying HE courses do so in FE colleges, mainly at HNC/D levels.
We propose that the Scottish Parliament allocate funding for the tertiary sector to the new body in total terms, and that the new body propose a broad allocation based on Ministerial guidance, for agreement by Scottish Ministers. Ministers would recommend the basis for the allocation of funds which would be at a high level, and could be by type of institution, as at present, or over time by other criteria, for example non advanced teaching/ advanced teaching/ research, or SCQF levels.
For the first year or so, we would expect the funding allocation to remain by type of institution - this would be based on existing relative levels of funding to SFEFC and SHEFC. This will allow time for the new body to develop measurement and funding systems and minimise any potential for disruption across the sectors.
A similar type of arrangement was put in place to safeguard the distribution of funds between teaching and research when SHEFC first distributed funds in 1993.
To ensure proper Parliamentary scrutiny of funds, we are proposing that the new body produce an annual report on the activities it has funded, which they will be required to lay before the Parliament.
Currently the two Councils only fund FE colleges, universities and designated HE institutions. The new body will only fund Specified Tertiary Education Providers. All existing FE Colleges and HEIs funded by the two existing Councils will be specified as STEPs. Sections 4 and 5 of the draft Bill address the allocation of funds to the Council, while sections 11 and 12 cover the administration of funds and the funding of STEPs.
The allocation of funding to individual STEPs will be for the new body, and we expect the new body to consult on how these allocations should be made.
Student Support
There are currently different schemes for student support operated by different bodies. For example student support for students in HEIs and higher education courses in Colleges is delivered through SAAS, and for students in Colleges through SFEFC. We do not intend to change any of these provisions, but want to give the new body a general power to provide any type of financial student support to colleges and institutions including grants and loans. It is proposed that the details of the types of support that the new body may give will be specified in a separate SSI.

POWERS AND DUTIES OF THE NEW BODY

Despite the similarities between FECs and HEIs there are significant differences in the powers and duties that the Funding Councils, the Scottish Ministers and other agencies exercise over them. These differences reflect the different histories and purposes of colleges and HEIs.
Like all Non Departmental Public Bodies, the new body will be intended to achieve Best Value for the provision it funds and Ministers will expect the new body to ensure what it funds is fit for purpose.
Under current legislation, Scottish Ministers and SFEFC have a duty to secure "adequate and efficient" provision of further education, but there is no corresponding duty for higher education. This will be extended to cover all tertiary education and research in Scotland, and will continue to be the duty of Scottish Ministers and the new body.
In discharging their duty of providing adequate and efficient tertiary education and research the Scottish Ministers will continue to have regard to the requirements of persons [over school age] who have learning difficulties.
Scottish Ministers are consulting separately on the question of school pupils in Colleges ¹⁵. The school/college review consultation paper asks whether the powers of FE Colleges to engage with various age groups of school pupils should differ. It also asks whether there should be some form of statutory duty on incorporated colleges (and education authorities) to encourage school/college collaboration, and if SFEFC (or the new body) remains the principal source of funding for school enrolments in FE whether this should be incorporated into its duties.

RESEARCH AND KNOWLEDGE TRANSFER

Scotland has a world class reputation for research, with nearly 50% of its research classified as internationally competitive. A key feature of the Executive's strategies is to harness more effectively the benefits of this research for Scotland's economy and quality of life. It will therefore be essential to ensure that, under the new body, the research base is supported to ensure that Scotland remains fully competitive within the UK and internationally. It will also be essential that the new body continues to identify effective mechanisms for the support of knowledge transfer and the exploitation of research for the wider benefit of the economy and society. The new body will need to work closely with its stakeholders to maximise collaboration and partnership in the sector and further enhance commercialisation and knowledge transfer.
It is important to distinguish between research and knowledge transfer. Knowledge transfer is a pervasive activity that occurs in both FECs and HEIs and flows from teaching, research and the other activities undertaken by these institutions.
On the other hand, undertaking high quality basic research is a fundamental mission for most higher education institutions. From this research often flow ideas and discoveries which have commercial potential. While there is still great scope for expansion of commercialising activity, Scottish HEIs exceed the UK average on various aspects of this activity, including spin-out companies, licensing and patenting of intellectual property. They are supported in this by a host of initiatives through Scottish Enterprise/Highlands and Islands Enterprise and the Executive. The recently formed Intermediary Technology Institutes ¹⁶ will be a highly important stimulant to Scotland's HE sector in developing commercially useful research.
Continued investment in these activities is a strategic priority, and to safeguard this investment there will be a statutory requirement on the new body to establish a Research Committee (section 11 of schedule 1 in the draft Bill).

GOVERNANCE, ORGANISATION AND MANAGEMENT

Incorporated FECs and HEIs have in common their autonomous status. They are independent self-governing institutions, responsible to their governing bodies for their organisation and management, including admission of students and selection, pay and conditions of staff.
The new body, along with incorporated colleges will continue to be covered by relevant provisions in the Public Finance and Accountability (Scotland) Act 2000 (PFA). Section 25 of the draft Bill sets out the conditions for inspection of accounts of STEPs.
The PFA requires them to comply with any applicable guidance issued by the Scottish Ministers which includes relevant guidance in the Scottish Public Finance Manual (SPFM). The SPFM is mainly designed to ensure compliance with statutory and parliamentary requirements, promote value for money and high standards of propriety, and secure effective accountability and good systems of internal control. Bodies subject to the requirements of the SPFM have a duty to secure best value which, among other aspects, assists in embedding the principles of good governance and helps to bring public sector organisations on to a common standard.
HEIs are not covered by this legislation, and we do not think it is necessary to extend the scope of the Act to cover them. However, there are elements which we intend to extend to all STEPs. These are considered to be so fundamental to good governance and accountability that we have included them as part of the basic criteria for ensuring STEP status. Details are given at Annex A below, and include the need to demonstrate good corporate governance, involving staff and students, and appoint a non executive Board of Governors.
For the purposes of the Bill, we have used the term Board of Governors. However institutions have many different names to describe their governing bodies. Colleges currently use the term Boards of Management, and in HEIs the terminology varies depending on the constitutive charter or Order of Council. In various HE Institutions the Board of Governors is known as the University Court, the Governors or the Governing Body. There is no intention to impose restrictions on how the governing body chooses to be known. The requirement is simply that there should be one.
There is also no intention to interfere with existing arrangements for constitution/make up of the governing body. Currently colleges are covered by the 1992 Act, some of the provisions of which will remain, and the HEIs by various legislation including Universities (Scotland) Acts 1858-1966.
The Chief Executive of the new body will have a right to request attendance at a special meeting of the Board of Governors of any STEP, a request with which the institution will be obliged to comply. This power is set out in section 13 of the draft Bill. We envisage that this right would only be exercised in extraordinary circumstances.
For Colleges, a Review of Governance and Accountability in the Further Education Sector reported in 2003. The proposals for change contained in the Report represent a programme for modernisation designed to ensure the best possible future standards of governance and accountability in Colleges building upon existing good practice within the sector.
Ministers announced the outcome of the review in the form of a Report of the Ministerial Review of Governance and Accountability in the FE Sector, which was published on 28 March 2003 ¹⁷. The proposals for change contained in the Report represent a programme for modernisation designed to ensure the best possible future standards of governance and accountability in the FE sector building upon existing good practice within the sector.
Scottish Ministers are consulting separately on amendments to the governance arrangements for colleges. It is not intended that this will extend to HEIs.

CONSULTATION PLATFORMS

This paper extends a new approach to consultations by the Scottish Executive by giving some key stakeholders interested in its subject-matter, a platform within the paper to help shape the consultation process.
Most consultation papers detail the Executive's views (and plans) and seek respondents' views either generally or in respect of specific questions. Sometimes the Executive does not have a firm view and options are spelt out in the paper. In this case, the consultation paper and associated draft Bill clearly articulates the Executive's position, and the purpose is to gauge respondents' reactions to it. What is common to both approaches is that the consultation paper is the principal means by which the Executive delivers its views as a means of eliciting the reactions of others to those views. The Executive then awaits receipt of the (sometimes diverging) views of the consultation paper's client groups and other respondents, considers these, comes to a conclusion, then articulates its considered view.
The current process does not strike us as a particularly dynamic form of consulting. We believe we could improve upon this by giving the key stakeholders interested in the subject-matter of a consultation paper a platform within it to help shape the consultation process. We consider that if the contributions of the key stakeholders are published alongside the Executive's consultation proposals, there could be a more informed, rounded, understanding of the issues. This would enable respondents to add more to the process. We believe that the new approach would help us better engage in constructive dialogue with outside organisations - a key plank of the Executive's "Changing to Deliver" agenda.
We recognise that our stakeholders have issues of accountability within their own organisations to consider. These early contributions does not prejudice their considered, formal response to the consultation paper. It was for participants in the pilot to consider how best to fill their allocated space within the consultation paper. The extent to which, and the way in which, they contributed is a matter for them. The Executive has exercised no editorial control on content.
The following are the Consultation Platforms provided by some of our key partners.
Association of Scottish Colleges
ASC welcomes this consultation as an opportunity for colleges to deliver better service to students with reduced administrative burdens. The proposal to merge the funding councils should simplify responsibilities and secure coherence, quality and parity of esteem for lifelong learning opportunities for everyone.
To achieve this aim, the new funding body must be empowered to support colleges to:

plan and deliver lifelong learning provision that meets local
student demand and employer requirements;
be responsible and accountable for appropriateness of curriculum, standards, employment of staff and the use of public funds;
deliver the priorities determined by Scottish Ministers for the use of available funds.

A key principle is the need for decisions to be taken as close as possible to the point of delivery. This should enable savings in the running costs of the new funding body with the maximum proportion of funds being used for lifelong learning, while strengthening the institutional autonomy of colleges.
It is also vital that funding arrangements for colleges should be sustainable and realistic. ASC accepts that it is for Scottish Ministers to determine, and the Scottish Parliament to approve, the volume and priorities for public funds. The new funding body must recognise and reward the central role that colleges play in delivering both further andhigher education to a wider range of students.
CBI Scotland
The further and higher education sectors in Scotland both make a huge contribution to our economy. Developing vocational and academic skills, helping individuals return to learning, and conducting basic and applied research all play their part in boosting our wealth creation ability.
Business wants to work in partnership with both sectors, and to see their distinctive contributions to wealth creation maximised. In principle we agree with Ministers that a single Funding Council should encourage transparency, and parity of esteem across the sectors. We would not, however, want the creation of a single Funding Council to lead to 'mission drift' within individual institutions.
Business does want to see a single Funding Council promote:

Innovative collaboration between institutions to meet the needs of employers, learners and communities
Efficient use of resources across the sectors
The relevance of learning to life and work opportunities
The needs of learners and employers as the customers of institutions, in terms of the flexibility, responsiveness and clarity of provision.
The research excellence of our universities

A single Funding Council must also have regard to the importance of particular provision, some of which may be relatively high-cost, to individual business sectors.
COSLA
We welcome the review and hope that from it will emerge an organisation that can support a more flexible, transparent funding system bringing better results for the delivery of national and local priorities, especially economic development and social justice.
To bring this about we would want to see the funding council to enable further education institutions to build on the already valuable work they presently carry out within Community Planning Partnerships. Additionally though, we would want to see the facility for the funding body to provide funding for structures set up by CPPs to address identified, local priority issues that FE institutions are unable to deal with, perhaps because low numbers cannot justify their involvement.
Additionally, we suggest that new and innovative approaches should be considered for how the sectors of education work with each other. In this we would include school age education and the way this relates to the FE and HE sectors. The use of the SCQF, even though it is still in its infancy, can prove to be an effective tool in making the qualification structure, and through this the links between the education institutions, simpler and more customer-focussed.
Federation of Small Businesses
Skills are now recognised as one of the key drivers of productivity, and the FSB welcomes the proposed merger of SFEFC and SFEFC, as we believe it should lead to better integration of Further and Higher Education, and facilitate better links between both these sectors and the business community.
Traditionally, small businesses have had closer links to FE colleges than with universities, and there is a perception that FE is more focused on delivering the skills needed by business. There are questions to be asked about the relevance of many degrees to the work environment and the usefulness of many of the skills learned in a traditional degree course. This is not just an issue for business, but also for those young people leaving university to enter the job market, and the creation of a joint funding council should bring more focus to this issue.
For too long the FE sector has been the poor relation in post-school education, and the merger should encourage people to attach greater value on the work done by the sector. It may also help to challenge the perception that anything other than a university place is a 'failed' educational outcome for our young people.
Given the large investment in HE and FE every year, and the increasing pressure for more money, it is vital that the new funding body clarifies the sectors' roles in delivering the Executive's strategy for economic growth to ensure the maximum return on this significant public sector spend
NUS Scotland
NUS Scotland is the representative body of students in Scotland. We represent over half a million students across further and higher education.
This consultation is a historic opportunity to take forward the lifelong learning agenda and move toward a merged sector.
The new body must be able to deliver a high quality tertiary education sector that is learner-centered, transparent and accountable. It should deliver funding in a fair and efficient manner with funding based on the level and nature of learning rather than by type of institution.
A merged Council should deliver its main objectives in a learner focused manner. For students, FE and HE do not exist as separate and defined sectors. Students recognise that there are different courses that will result in different qualifications, and look for a course that suits their needs at an institution where they wish to
study, regardless of whether it is funded by WSUMS or FTE's. Students are often confused as to why courses that are comparable do not attract comparable funding. Students believe that funding should be driven by student needs, and should serve the learner, and not arbitrary funding mechanisms. A merged
funding Council should deliver on this basis and should address the fact that the experience of an HE student in FE is very different to that of a HE student at a university.
The new body must be able to address the inequalities and anomalies that occur throughout tertiary education and be able to think cohesively about the role, purpose and future direction of tertiary education, while recognising the autonomous and individual nature of institutions. Learners deserve sector that is integrated and cohesive in its strategic approach.
Scottish Enterprise
What is education for? Yes, it is to help people grow up rounded, have a desire to understand and an ability to analyse. But if it does not also - and I repeat, also - prepare them for work, we are selling those people short and dealing a blow to our economy. For most of us a decent job, or a series of decent jobs, is one of the fundamentals to having a good life.
Public spending per person on education and training has long been higher in Scotland than in the rest of the UK. A greater proportion of our population has higher level qualifications than the GB average. Yet our economic performance persistently lags the UK. What does the further and higher education system have to do reap a greater economic benefit from this investment?
More than 90% of employees have the skills they need for their jobs. But the persistent complaint of a core of Scotland's employers is that some employees lack softer skills -like the ability to work in a team or to deal with customers. How can the education system become as effective in imparting softer skills as it is in imparting technical skills?
Scottish Further Education Funding Council and the Scottish Higher Education Funding Council
We believe that the new legislation should provide an enabling framework which allows the colleges and institutions that the new body will fund to deliver an effective tertiary education system and respond flexibly to changes over time. Such a framework should be underpinned by broad principles:

to build parity of esteem for learners, the legislation should treat the FE and HE sectors the same wherever practicable;
the autonomy of universities and colleges should be protected, since well-led and responsive autonomous institutions are best placed to respond quickly and effectively to the changing needs of students and employers;
mechanisms such as policy and management guidance from Ministers and conditions attached to grants are effective and more flexible methods for achieving particular priorities and setting out functions than detailed legislation; and
the legislation should not embody very specific and short-term concerns in a way that might be irrelevant and constraining in the future.

We welcome the merger and believe that it will provide a tremendous opportunity for Scotland to develop further its distinctive education system for the benefit of learners and researchers and, through them, for the benefit of the nation.
The Scottish Science Advisory Committee (SSAC)
The proposed merger of the Scottish Funding Councils offers the potential to initiate a level of greater coherence and connectivity across tertiary education. This should promote better linkages between the further and higher education sectors such that their complementarity can be exploited more efficiently. However, the SSAC would wish to seek assurances that this would not compromise the diversity of the sectors or the distinctiveness of individual institutions. Proper assessment mechanisms must be implemented to ensure that mission creep is avoided and the roles of FE and HE must not be duplicated or confused. In this way, a suitably wide range of opportunities can be retained at all vocational and academic levels to meet the broad needs of students and employers. The overall strategic objectives of tertiary education should convey with clarity an unambiguous message that a joint Council can support proportionately the FECs and HEIs to meet the changing needs of Scotland.
A merger will facilitate innovative and inter-connected routes of funding. From the SSAC viewpoint of supporting excellence in teaching, research and knowledge transfer, it is vital that any changes in organisational structure do not lead to funding reductions for the university science base, which underpins Scotland's desire to be a leading knowledge-based economy. Scotland's universities must be operating at the cutting edge of research, where intellectual property can be generated and exploited. The SSAC believes strongly that the joint Council must establish a dedicated Board that would be primarily concerned with supporting university-based research in Scotland.
STUC
The STUC is Scotland's Trade Union Centre, and is pleased to contribute to the debate on the shape and responsibilities of the new merged funding council for further and higher education. Representing over 630,000 working people and their families, the STUC speaks for trade union members in and out of work, in the community and in the workplace. Through our affiliates in the education sector we represent thousands of workers in tertiary education including academic and support staff.
The STUC believes the new body should have a broad remit, incorporating planning and funding roles. The planning role should ensure quality, consistency and good working practices in both HE and FE sectors within the democratic structures of the Scottish Executive and Parliamentary processes. The body should ensure institutions adhere to, fair employment practices including promoting equal opportunities and conducting equal pay audits. For the merger to be successful the new body requires adequate resources, and should distribute funding to achieve a comprehensive range of provision that meets all needs, social, economic, cultural and educational.
The STUC is concerned at, and opposed to, the long term implications of proposals to extend the range of learning providers eligible to receive funding, believing Scotland is well served by its publicly accountable FE colleges and HEIs. The STUC reiterates its opposition to education being considered a tradable commodity and opposes its inclusion in the General Agreement on Trade in Services (GATS).
The STUC believes it is essential that there is transparency in terms of powers, and, for democratic accountability, that the overall funding power is with Ministers and Parliament.
Universities Scotland
Universities Scotland believes that there is value in merging the funding councils only if the following conditions are met.
The importance of diversity must be recognised, and the distinctive identities and missions of higher education institutions and further education colleges respected and nurtured. Merging the councils should not lead to merging the sectors.
The burden of regulation should be minimised, recognising that higher education institutions
2. enjoy a high reputation internationally, contributing significantly to Scotland's standing in the world,
3. have mature structures for governance and management and for assuring quality and standards,
4. raise a large and increasing proportion of their income from non-governmental sources,
5. are major drivers of economic growth and wealth creation through the supply of graduate skills and research outputs;
6. and that the foundation for these successes is their institutional autonomy, which enables them to be enterprising, innovative and creative.

172. The main function of the new body must continue to be funding, not planning.

173. The proposals in the consultation paper do not satisfy these conditions and could damage the effectiveness of Scottish higher education. Therefore, Universities Scotland will prepare a detailed response suggesting substantial changes.

OTHER MATTERS

Transitional arrangements

This paper, and the draft Bill which accompanies it, have made no proposals for transitional arrangements. It is important that provisions are put in place to ensure a smooth transition and to avoid destabilising the sectors, and we intend working with the existing Councils over the coming months to ensure that robust plans are put in place. We are keen to hear views on how best this could be achieved.
Name
We are seeking suggestions on a name for the new body. The draft Bill refers to the Scottish Tertiary Education Funding Council, and we would welcome comments on this, or suggestions for improvement.
Conclusion
It is not our intention to include any other statutory obligations on institutions, but the new body will be expected to ensure best practice in all aspects of governance in the sector, including human resources management and effective student representation, and these aspects are included as part of the basic criteria for STEP status.
The new body should be forward-looking and able to support Scottish tertiary education and research to maintain and enhance its well-deserved international reputation. Respondents to this consultation are invited to make suggestions about further areas where we could use this opportunity to develop tertiary education in Scotland.

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The Scottish Government

Consultations

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