MINISTERIAL POWERS OF INTERVENTION
Purpose
1. To review the case for Ministers retaining powers to intervene in the affairs of incorporated colleges in Scotland.
Background
2. There are 43 further education colleges in Scotland. Of these 39 are 'incorporated' under the Further and Higher Education (Scotland) Act 1992; 2 are maintained by education authorities; and 2 are run by private trusts.
3. Ministers have powers to intervene in the affairs of the incorporated colleges. In particular, the 1992 Act gives Ministers powers to [1]:
· establish, merge or close colleges
· change the name of a college
· issue a direction to a college board of a general or specific character (which must be complied with)
· remove any or all members of a college board where there has been mismanagement, and then appoint new members
4. All incorporated colleges are charities. The Charities and Trustee Investment (Scotland) Act 2005 will, when relevant provisions are in force, generally require charities to be entirely independent of Ministers. Organisations must pass the 'charity test'. If an organisation's "constitution expressly permits the Scottish Ministers or a Minister of the Crown to direct or otherwise control its activities" then it will fail that aspect of the test [2] unless Scottish Ministers make an Order under section 7(5) to disapply it. Alternatively, Scottish Ministers may by order under section 102(a) modify any enactment to prevent the organisation failing the test. In other words, the Ministerial powers of intervention can be removed.
5. The purpose of this review is to consider whether Ministerial powers of intervention should be removed.
6. The 2005 Act gives the Office of the Scottish Charity Regulator (OSCR) the responsibility of determining whether an organisation meets the charity test [3]. It would therefore be for OSCR to consider which of these powers enable Ministers to direct or otherwise control the activities of colleges.
7. For the purposes of the review, the powers to direct college boards and to remove college board members were considered as these powers are the most likely to fail the charity test.
Existing Use of Powers
8. Ministerial powers of direction are used at present to provide criteria for the disimbursement by colleges of bursaries and Educational Maintenance Allowances to students. These powers are currently the most efficient way of administering these funds.
If Ministerial powers of direction were removed, there are potentially alternative means of achieving this, but any alternative process is likely to be more complex and time consuming.
It is unclear presently whether any alternative process would still constitute 'control' in terms of the 2005 Act. Further work would be required to establish exactly what would be possible, and what the wider implications would be.
9. Other than for student support purposes, the powers of direction are considered to be an action of last resort, in that they would be used in extremis as a final measure to assert the will of Ministers when others avenues have failed. Since 1993, when colleges were removed from local authority control and Ministers assumed these powers, they have never been used as an action of last resort.
10. Ministers powers to remove a board member of a college have never been exercised.
Lack of Use
11. It has been suggested that since the powers have never been used as an action of last resort, they are not required for this purpose. For example, Ministers' powers were not exercised when there were problems in 1999 with the governance and management of Moray College.
12. On the other hand it has been suggested that their lack of use does not mean that have not had an effect - their very existence may have had a bearing on boards and could have deterred them from taking certain actions.
13. Although the powers have not been exercised in relation to colleges, comparable powers of Ministerial direction exist in other fields of public life. In 2003 Ministers issued a direction requiring the relocation of the headquarters of Scottish Natural Heritage (SNH).
Although the status of SNH is different to that of colleges, it is an example of a direction being issued in extremis when there were irreconcilable differences between the views of a board and the views of Ministers.
College Autonomy
14. It has been put that the existence of Ministerial powers of intervention undermines the autonomy of colleges as ultimate authority for governance does not rest with the college board but with Ministers. Moreover at a time when a new funding council for both colleges and universities is about to be established, government should, so far as possible, have a similar relationship with institutions in both sectors.
As Ministers do not have these powers of intervention in respect of universities, there is no case for these powers in relation to colleges. Indeed, they could be a potential barrier to the development of hybrid institutions.
15. In contrast, it has been suggested that the significant difference in both the mission of colleges, which have a far greater responsibility for the communities they serve (both geographical and otherwise) and in the proportion of income derived from the Scottish Parliament [4], could be considered to constitute a legitimate expectation of greater public accountability.
Conditions of Grant
16. Any payment of grant by the Funding Council may be "subject to such terms and conditions as the Council considers it appropriate to impose" [5]. It has been suggested that the likely purposes of Ministerial intervention - to respond to misgovernance and to ensure the delivery of Ministerial policy - can be fully achieved through the imposition of terms and conditions in the offer of grant. The threat of the withdrawal of funding would be sufficient to ensure compliance.
17. On the other hand, it has been put that terms and conditions cannot be imposed retrospectively, so unless they were very wide in their application they may be of limited immediate value.
Also the actual withdrawal of funding would have significant implications for students and staff of the institution concerned. Ministerial action which could obviate the imposition of financial penalties could be a more preferable course of action, particularly if the college were already in financial difficulty.
The threatened withdrawal of funding is also likely to lend itself more readily to legal challenge than the exercise of a Ministerial power of intervention.
Consideration
Lack of Use
18. We consider that the lack of use of the powers does not necessarily mean that there is no need for the powers. Decisions about their use depend very much on the circumstances of the individual case, including political considerations by Ministers. Therefore past experience is not a definitive indicator of future action.
19. We note in this regard the Auditor General's observation about the existing powers of Ministers [6].
20. The example of the relocation of SNH is cited above, and while we do not believe that the specifics of the case are particularly relevant to the college sector, it does demonstrate that boards may not always consider in good conscience that they can deliver Ministerial policy without explicit direction to do so.
21. It is difficult to test the supposition that the existence of the powers has had an effect, though they clearly provide a context for the consideration by colleges of Ministers' views.
College Autonomy
22. There does not exist at the moment - nor will there be after the funding councils are merged - a homogenous model for governance arrangements either within the college and university sectors or across them.
We do not consider it was the intent of Parliament that the merger of the funding councils would necessitate the removal of Ministerial powers of intervention otherwise there would have been such provision in the Further and Higher Education (Scotland) Act 2005. We also note that there is no call in this instance from the college sector for colleges and universities to be treated alike.
The Association of Scottish Colleges reflecting the general views of the college sector want Ministerial powers of intervention to remain.
23. We are unaware of any evidence to suggest that the existence of Ministerial powers is a barrier to boards assuming full responsibility for the affairs of their colleges, particularly since they have not been used and they are considered to be an action of last resort. As there is no provision in the 1992 Act for hybrid institutions to be incorporated as FE colleges, we do not consider that the governance arrangements of incorporated FE colleges should impact on their development.
Conditions of Grant
24. We know that Ministerial directions are sometimes described as the 'nuclear option', i.e. they are generally not used because the threat of their use is sufficient. However, we consider that the potential impact of the withdrawal of funding could have far greater impact on student learning than a Ministerial direction. A direction could ensure continuity of learning, while the realisation of a threat to withdraw funding could severely disrupt it. While we would hope that this would not occur and clear heads would eventually (and always) prevail, we cannot discount the highly unlikely given that the main rationale for the powers of direction is to deal with extreme situations.
Conclusion
25. It is one thing not to exercise powers that you have; it is entirely another to rue the loss of powers that you had.
26. We are not persuaded that Ministers powers do not remain potentially useful in extreme circumstances. To limit them further or indeed remove them seem to us to be imprudent. We therefore consider that there remains a case for Ministers to keep their powers to intervene in the affairs of incorporated colleges in Scotland, perhaps sometimes as an option before 'last resort', given our comments above about the possible impact of a withdrawal of funding.
Recommendation
27. We recommend that the Working Group submit this report to the Core Group under the name of the Working Group.
[1] Ministers powers to decide on how the assets of a college, once closed, should be disposed is not considered here to be a power of intervention because it meets the charity test as they must be disposed for a charitable purpose.
[2] section 7(4) of the 2005 Act refers
[3] The Executive aims for OSCR to assume its new powers and responsibilities by the end of April 2006.
[4] For example, comparing the latest year for which figures are available, in 2001-02 HEI income from funding council grants was 42%, in 2002-03 FE college income from funding council grants was 70%.
[5] section 12(2) of the Further and Higher Education (Scotland) Act 2005 refers.
[6] The Auditor General's report on Governance and Financial Management at Moray College, published in June 2001, concluded that "the power of Scottish Ministers to remove or replace members of college boards is currently limited".