The Scottish Government

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REVIEW OF SCOTLAND'S COLLEGES

WORKING GROUP: THE DIFFERENCE COLLEGES MAKE

BACKGROUND PAPERS

Purpose

1. To provide the background papers that were commissioned at the Group's workshop meeting in July.

Papers

A - Pensions

B - Skills

C - Partnership Working

D - Tailoring Support For Learners In Scotland's Colleges

E - European Funding

F - New Demands /Growing Expectations on Colleges

Reviews Team:

Review of Scotland's Colleges

September 2006

ANNEX A

PENSIONS

Background

In recent years there has been a significant above inflation increase in the pension contributions required form employers both for the Scottish Teachers Superannuation Scheme and Local Government Pension Schemes. Although this is indicative of general pension contribution increases faced by all sectors, if colleges are forced to meet these increased pension costs without a related increase in Government funding we could potentially jeopardise the high quality of provision that currently exists in the sector.

Evidence

The Scottish Funding Council conducted a survey of current and forecast pension contributions and contribution rates. The results of this survey were published in Circular letter SFC/46/2006. The key findings were:

· average college pension contributions are expected to increase by 143% over the period from 2000-01 to 2007-08 (£16.8 million to £40.8 million), equating to an increase of around £85,000 per college per annum.

· Contribution costs increased at a faster rate than salaries over the period 2000-01 to 2004-05 and the forecasts indicate that this will continue in the medium term.

· Employers' pension contributions formed 5.6% of total salary costs in 2000-01 and are forecast to increase to 9.9% of total salary costs by 2007-08;

Additionally, although perhaps in the longer term, we should be aware of the implications of the Lord Turner's proposals for the reform of pensions. It has been reported that this could increase spending on pensions from 6.3% on UK national income to 7.7%

Impact

At a time when financial security is still an important issue for the sector there is clearly a concern that the additional cost pressures associated with pensions could undermine this agenda and, as mentioned above, jeopardise the quality of college provision.

Additionally, colleges require high quality staff who are appropriately rewarded, recognised and developed. The increase in pension contributions risks college resources being skewed towards pensions at the risk of other priorities unless additional funding is made available

Presentation in spending review advice

It is likely that submissions to the spending review will be viewed in the context of, "what will this additional investment buy?" Additional funding to help with pension costs will not necessarily "buy" anything extra but we need to make it clear that such an investment will help to minimise risks to financial security, college provision and college's ability to recruit and support high quality staff.

Also, although we have to acknowledge that increasing pension costs is an issue that affect virtually all businesses in the UK involved in pension schemes we need to emphasise the important of supporting the college sector. For example, references to the First Minister's Lecture at Stirling University on the Futures Project where he says that "Education is one of the jewels in Scotland's crown" and "……..our greatest national asset - education and learning - is as vital, if not more vital than ever before….." would be helpful.

It would also be useful, though, for any additional funding not to be ring fenced as a separate budget. The most logical way to address the pension pressure would be to secure additional funding to increase the Council's unit of resource (WSUM price) above inflation and therefore the core funding for the colleges. This would give colleges the flexibility to use the increase in funding as they see fit to address pension pressures without the need to report separately on a ring fenced allocation.

ANNEX B

WHAT DIFFERENCE CAN COLLEGES IN SCOTLAND MAKE OVER NEXT 3-5 YEARS IN TERMS OF SKILLS?

Purpose

To identify the opportunities for Scotland's Colleges to meet the future skills needs in Scotland.

Background

Following the publication of the draft report 'Unlocking Opportunity' which has been written to gain a better understanding of the breadth of colleges' activities and the difference that they make to learners, the review group has been asked to undertake an additional piece of work to identify the opportunities and pressures for colleges in Scotland over the next 3 - 5 years. This paper lays out the opportunities in the area of skills for Scotland's Colleges.

Key Statistics

Evidence on Skills Deficiencies in Scotland

The following emerge from recent research as key skill priority areas in Scotland:

1. The skills needs of growing businesses;
2. The skills levels of people in jobs that require low levels of skills and qualifications;
3. The work readiness of school leavers;
4. Skill deficiencies in 'soft skills'
5. Sector specific skill needs.

1. The skills needs of growing businesses

Recent research by Futureskills Scotland has shown that a significant proportion of growing businesses (defined as private sector establishments with fewer than 250 employees in which turnover increased in the previous year and in which employment is expected to increase in the coming year) say that they are facing challenges in recruiting and retaining employees with the skills they need.

The latest Scottish Employer Skills Survey (SESS) carried out in 2004 found that growing businesses in Scotland:

· Are twice as likely than other firms to expect 'attracting appropriately skilled staff' to be a challenge that they will face (with 12 per cent of growing businesses stating they felt this was a challenge);

· Have markedly higher rates of vacancies, hard-to-fill vacancies and skill shortages than other employers.

This could indicate a potential future problem for Scotland's economy. These growing businesses, which will be key to economic growth in Scotland, are likely to have new and probably greater skill demands in the near future, and there are early indications that these might not be met by the existing system.

Evidence from the Skills for Business Employer Survey (2004) [1] also supports this. Whilst this survey shows that employers in Scotland tend to be more satisfied with the education system than is the case in other parts of the UK, they are also more likely to report changing skill needs.

Nearly half (48%) of employers in Scotland disagreed with the statement that skills needed by the workforce have stayed pretty much the same for a good number of years (compared to 42% UK wide). In addition, 29% of employers in Scotland stated that they felt that they were being inhibited from moving into the production/delivery of more sophisticated products and services by the skills mix of their staff.

This may point to increasing pressures on the education system in Scotland in the future, which it will be important to address if Scotland is to improve its productivity performance.

2. The skills levels of those in low-skilled jobs

The Futureskills Scotland Employer Surveys also indicate fairly marked differences between occupations in terms of the extent of skill gaps that are reported by employers (skill gaps are defined as lack of proficiency within an employer's existing workforce).

The surveys show that the rate of skill gaps is highest among people doing jobs that require lower levels of skills and qualifications. For example, while 6% of professional employees are felt to have skill gaps, 12% of employers claim that workers in elementary jobs have skill gaps.

This indicates there is a need to pay particular attention to the education and training of those in low-skilled jobs in particular and to work with employers in those sectors most affected to stimulate their demand for skills.

3. The work readiness of school leavers

In the 2003 SESS, more than a third of employers in Scotland recruiting school leavers reported that they were not well prepared for work. The main problem seems to lie with core skills (with 43 per cent of employers stating that their recruits were poorly equipped with these).

In addition, three out of four employers disagreed with the statement that 'most school leavers understand the world of work'. This compares very poorly with employer views of the work-preparedness of college and university graduates (around four out of five employers report that their college and university recruits are well prepared for work).

Futureskills Scotland have undertaken further research onto this issue, using employer case studies. This work has also showed that where young people do not meet employers' expectations, the causes were most likely felt to lie in their attitudes and motivations.

4. Skill gaps in soft skills

The Futureskills Scotland's Employer Skills Surveys show that when skills gaps are identified by employers in Scotland, they are more likely to be related to weaknesses in 'soft' skills such as communication, customer service, team working and problem solving, than in technical skills. In the 2004 survey, looking at employer views of staff in sales and customer service occupations specifically (where soft skills are especially important), 11% of employees were deemed to be not fully proficient at their jobs (the joint second highest proportion in the survey behind elementary occupations).

Other research carried out in Scotland has also identified similar problems in terms of shortages and gaps in soft skills. The Scottish Centre for Employment Research based at Strathclyde University for example carried out research into employers' skill needs in the retail and hospitality industries of Glasgow. [2] This research showed that the key criteria employers want from front line staff in retail and hospitality are: pride in appearance and good attitude - in other words 'aesthetic' or self-presentation skills and social or interpersonal skills rather than technical skills. Employers reported that social and aesthetic skills were all lacking to some extent in job applicants.

The study concludes that Scottish policy makers need to think seriously about if and how these needs can be incorporated into education and training provision. Futureskills Scotland has also argued that improving customer service skills needs to be an area of public policy intervention. There would seem to be a strong case for employers working more closely with training providers in this area, for example by having more direct input into the design of pre-employment sector/occupation specific training programmes to ensure new recruits come to them with the sorts of soft skills they need.

This will be especially important for the future performance of Scotland's economy, given that the labour market projections produced by Futureskills Scotland show a continued transfer of jobs from manufacturing to services. The service sector will continue to be the biggest source of employment in Scotland, and the main driver of growth in the economy, with the biggest growth sectors in retail and distribution, banking and insurance, business services, and health and education.

5. Sector specific skills needs

There is substantial sector variation in skill levels, qualifications, occupational composition which can actually point to more pressing skills problems in particular sectors.

For instance the SESS 2004 highlights significant variation between sectors in terms of the proportion of the workforce that receive off-the-job training, which indicate that very different training practices/cultures exist within firms.

For instance, whilst overall 37% of employees have received off the job training in the last 12 months, in some sectors this is as low as one in ten. Such a position combined with growing skill demands and persistent deficiencies not being tracked can point to a more pressing skills priority.

Indeed, the SESS 2004 also highlights varying sectoral skills deficiencies. For example, recruitment problems in the form of skill shortage vacancies are particularly affecting the financial services and construction sectors in Scotland, where they account for more than one third of all vacancies, which is higher than the national average. Attracting appropriately skilled staff was the most cited challenge facing employers in the construction and engineering construction sectors in particular.

Those sectors most likely to report skills gaps in the existing workforce include tourism, the chemical, nuclear, oil and gas and petroleum polymers industries, the creative and cultural sector, the food and drink sector, and retail. In these sectors, the proportion of the workforce considered not fully proficient is at between 10 and 14 per cent.

Evidence on the FE sector in Scotland

FSS' Employer Skill Survey also reports that employers in Scotland are generally satisfied with the training provision they have accessed from colleges to train their workers.

In 2004, 82% of employers who had used colleges said that they were satisfied with them, with one in four saying that were very satisfied.

81 per cent of workplaces thought that FE college leavers were well prepared for work in terms of softer, core skills such as communication, team working or problem solving.

80 per cent thought they were well prepared in terms of technical skills.

Workplaces rated the preparedness of college leavers alongside that of university leavers.

There is a clear opportunity for colleges to build on this positive record…

However, Further Education colleges were cited as providers of training by only 23 per cent of employers surveyed. The most often cited providers of training were private training providers cited by 49 per cent of workplaces.

The most often cited reason for not using an FE college to provide training was that they could not 'offer appropriate training in terms of subject area'. The next most common reasons were that 'there was not enough time to train staff through an FE college' and that colleges 'do not offer suitable training in terms of mode of delivery' (13 per cent).

The evidence base clearly demonstrates that there is a key role for Scotland's Colleges to support skills needs in Scotland.

Possible key opportunities for colleges

• Enhancing employability: colleges, working closely with employers have a role in play in helping the long-term unemployed (including incapacity claimants, people with a disability) and young people get the skills they need in order to access paid employment. This would particularly be useful in terms of providing the sorts of 'soft skills' needed to secure employment and would support the NEET strategy and workforce plus.
• Responding to changing labour market needs: colleges need to be responsive to the changing labour market, meeting the requirements of new, growing, developing or diversifying industries, particularly in the service sector. Being responsive to economic priorities and the growing number of migrant workers.
• Responding to the globalisation of the Scottish Economy: Colleges have a role in supporting business to develop the skills to trade in a global economy.
• Responding to the specific needs of different sectors: colleges need to work more closely to ensure the specific skills needs of individual sectors are met - there is a clear role for SSCs in this regard and Sector Skills Agreements.
• Engaging with employers: colleges should continue to strengthen connections with the business community, making sure that the right courses are available at the right times and in the right places (including Modern Apprenticeships and other work based provision).
• Using labour market information: colleges should make more use of labour market information and research in order to ensure that they are fully informed of key trends in the Scottish economy.
• Promoting individuals' investment in training: colleges have a role to promote the uptake of ILAs and to support both employees and employers to contribute to the cost of training.
• Developing provision to meet the needs for higher level skills: colleges have a role to develop provision to support higher level skills acquisition at technician, advanced craft and associate professional level including management and leadership.
• Upskilling those in low-skilled occupations: colleges may want to work more closely with employers to target the skill needs of those in low-skilled work in particular.
• Encouraging participation from under-represented groups: colleges should encourage participation from under-represented members of the community, developing learning and support that give them the opportunity to progress.
• Addressing occupational segregation: colleges have a role to play addressing imbalances in terms of occupational segregation by gender and ethnicity by for example promoting non-traditional subjects to female (and male) students.
• Responding to the demographic changes in the population: Colleges have a role in developing provision for older learners, to re-skill/upskill to meet the changing labour market, the need to continue working in later years, and the need to change careers/jobs throughout life.
• Developing provision to support 3 - 18: colleges should continue to develop provision through Skills for Work courses and other provision to support the curriculum for excellence and school/college partnerships.
• Developing models to address supply and demand: Colleges need to work together to meet the needs of local communities, particularly rural and remote to ensure adequacy of provision.
• Developing qualification structures and delivery: Colleges need to continually review the range of qualifications and modes of delivery to ensure it delivers curriculum to meet sectoral skills priorities and to support the key economic priorities both locally and nationally.
• Developing alternative modes of delivery: Colleges need to continually review the modes of delivery to ensure that it is meeting the needs of employers and the economy. Future learners will require increased provision delivered through part-time, flexible, on-line, or through work based provision.
• Utilising the Scottish Credit and Qualifications Framework: Colleges need to utilise the SCQF to ensure that provision is credit and levelled to support progression and articulation.

Next steps

• Identification of UK developments which impacts on Skills in Scotland.

Leitch review

the VQ reform Programme and the sub-strands on Qualification Reform, Rationalisation and Framework development

Joint Council for Qualifications, regulatory groups,14-19 Diploma Awarding Arrangements Steering Group, Federation of Awarding Bodies

Sector Qualification Strategies

• Identification of key economic priorities in Scotland. (Including supporting and enabling sectors and sectors that support rural and fragile economies.)
• An analysis of Sector Skills Agreements developed by Sector Skills Councils to provide information on skills needs on a sectoral and cross sectoral basis.
• Identification of the role the Skills for Business Network/ Scotland's Colleges Group can undertake to support this area of work

ANNEX C DRAFT 7 Sept 2006

PARTNERSHIP WORKING

This is not a statement of STUC policy, or indeed the policy of any organisation. It is aimed to be a starter paper for the Differences Colleges Make Working Group on the issue of partnership working.

Partnership working is a means by which a range of stakeholders agree to work together to move forward to reach common objectives. Partnership working is by no means an easy solution, but many argue it is a good way to work together on difficult issues, to reach common ground or solutions that are best for all of the stakeholders.

Social partnership can be defined as a tri or multi-partite arrangement involving employers, trade unions, public authorities (the state and/or local/regional authorities) and/or others (e.g. voluntary sector). Social partnership is usually concerned with areas of economic and social policy and might be based on a binding agreement or declaration of intent.

The STUC has experience of partnership working in a number of spheres, including:

· Memorandum of Understanding: STUC - Scottish Executive:

· Further Education Partnership Forum: STUC - West of Scotland Five Colleges

· STUC - Scottish Council for the Voluntary Sector Partnership Forum

· STUC - ASC Memorandum of Understanding.

More and more organisations are turning to partnership working as a way of moving forward in an industrial relations context. For example the whisky industry in Scotland has been a strong proponent of partnership working, and has used this as a means of addressing challenges facing the sector.

It should be noted that partnership is not intended as a replacement for agreed negotiating or bargaining procedures, unless, all parties decide that they want to incorporate negotiations into the partnership framework.

Principles for Partnership

The TUC suggest six principles for partnership:

· Shared commitment to the success of the enterprise

· Recognition of legitimate interests

· Commitment to employment security

· Focus on the quality of working life

· Openness

· Adding value

Partnership Outcomes

Research into partnership at work has revealed clear positive outcomes in a number of areas:

· High levels of trust, fairness and respect

· Greater employment security

· Improved understanding of business/organisation priorities, agenda and strategies

· Low levels of labour turnover and absenteeism - often exceptionally low

· Low levels of industrial conflict

· Increased ability to attract and retain key employees

[Guest and Peccei (2001), Knell (2000), NPCC (2002), EPOC (2001)]

The DTI (2002) summarises the benefits for companies in adopting a partnership approach as:

· Lower absenteeism

· Lower staff turnover and better retention of employees and their skills

· Senior managers who know what is actually going on at the 'shop floor' and what people think

· A higher rate of innovation

· Successful introduction of new forms of work organisation and managing resultant changes

· A better ability to react rapidly to threats and opportunities

· And ultimately enhanced productivity and competitiveness

Developing Partnership

In its partnership working initiatives the STUC has suggested the following values should underpin any partnership agreement:

· Mutual respect and trust

· Openness and transparency in communications

· Commitment to being positive and constructive

· Commitment to work with, listen to, and learn from others

· A continuing dialogue

· Ensuring high quality outcomes

· Promoting equal opportunities

· Making best use of resources

In addition, it is useful for all partners to set out at an early stage what they can commit to bring to the partnership. This helps to clarify roles, and to set realistic expectations for everyone. Partnerships are only really successful if all potential partners are committed to participating effectively. It is also helpful to set out working arrangements for the partnership, in terms of regularity of meetings, who is facilitating or acting as a secretariat, if necessary. It is worth noting that partnership working is very resource intensive, and it is necessary to account for this when establishing the partnership, including funding to facilitate the partnership working.

A review or monitoring process should be built in to any partnership working, after an established time period, so as all partners can take a step back and evaluate how the partnership is working, and what it is achieving, so as any changes can be made to ensure the partnership does achieve tangible goals.

The Way Forward for Colleges

How do we encourage a partnership approach at local college level?

· Political will - encouragement from the Scottish Funding Council and the Scottish Executive

· Agreement of college boards/ Principals

· Agreement of trade unions

· Resources and funding to support partnership working

· Facility time for management and staff/trade union reps involved.

What sort of partnership approach should be encouraged?

· Regional partnership?

· Partnerships between trade unions and management in individual colleges?

What support would partnership working require?

· Funding to facilitate time for managers/ trade union reps to participate in meetings etc.

· Meeting spaces and secretariat to facilitate working.

M Senior

STUC

7 September 2006

ANNEX D

TAILORING SUPPORT FOR LEARNERS IN SCOTLAND'S COLLEGES

This starter paper seeks to outline some of the pressures and opportunities in tailoring support for learners. It does not represent the views of any specific organisation and merely aims to provide a starting point for discussion.

The diversity of the learner population within Scottish colleges necessitates that arrangements for supporting the individual needs of learners are central to the thinking, planning and delivery of provision and services. Currently we use labels to describe groups of learners with specific types of 'additional' support needs such as disabled, ethnic minorities, socially excluded. However, as we move further towards realising equality and diversity, the focus changes towards meeting the needs of each individual learner. In the environment in which we operate these needs are often complex, difficult to categorise, resource intensive and yet are critical to successful participation, engagement and achievement. This paper therefore refers to 'learners' rather than specific groups or categories of people involved in learning.

Initial engagement

The arrangements for learners to access information on college provision in order to make informed choices require effective interface between teaching and support staff and staff in other organisations such as schools. Learners require access to a wide range of information on curricular options, opportunities for progression and support services such as finance, childcare and support for learning. All of these services may impact on a learner's ability to engage in learning, sustain their studies and achieve their individual goals.

Inadequate and/or inaccurate information at this stage can be financially damaging to the learner and the college and can impact on career and employment aspirations. This places considerable responsibility on colleges to provide information in formats which are appropriate to the needs of the individual learner, for example learners with additional support needs, on-line and distance learners and speakers of other languages.

Points for consideration

How can we support colleges in the development and delivery of services and resources which assist learners make informed decisions about their learning?

Preparation for learning

Learners embarking on college programmes have different levels of skills and experience. They therefore have different needs in terms of preparing for learning. Colleges require to ascertain what these preparatory needs are and develop and deliver appropriate provision to address these needs. This covers a wide range of needs including literacy, numeracy and ICT skills, learning and study skills, and specific vocational skills.

All colleges are different. Learners need to become familiar with their learning environment and their college's practices and procedures. It is therefore important that induction arrangements take good account of learner needs and are well-planned and appropriate in terms of access, pace and content. The format of induction varies according to different learner needs for example on-line learners, employees in the work place, asylum seekers.

Points for consideration

How can we support colleges in identifying and responding to the preparatory needs of learners?

How can we support colleges in preparing learners well for learning and the wider college environment?

Guidance and support services

Regular review and reflection on progress assists learners make informed decisions about their performance, further learning and employment. Structured meetings with staff enable learners to engage in discussing, monitoring and reflecting on their progress; develop independence and responsibility for their own learning, and set further goals. Access to advice and information on further learning, career and employment opportunities is important for learners who are considering and planning their transition to employment or further study.

The recording of achievement and distance travelled provides opportunity for learners to recognise, and gain recognition for, the development of wider skills and experiences. To facilitate this, colleges require to develop systems and procedures for capturing and recording these experiences and skills.

Points for consideration

How can we support colleges in enabling learners to review and reflect on their progress?

How can we support colleges in ensuring learners have access to appropriate advice and support when considering further learning, employment and career opportunities?

How can we support colleges in capturing and recording wider achievements and distance travelled?

Support for learning

Additional support for learning legislation places responsibility on colleges to make appropriate arrangements for learners with additional support needs. This necessitates effective liaison, recording and monitoring processes between and across college departments and with relevant external bodies including schools and support organisations. It also requires colleges to have effective, anticipatory and responsive arrangements in place to deliver these services and resources.

Learners often require additional support with specific parts of their programme. This may be in a wide range of support including literacy, numeracy, ICT or language skills.

Points for consideration

How can we support colleges in meeting the legislative requirements?

How can we support colleges in clarifying the roles and responsibilities of themselves and partner agencies in meeting the support needs of learners and legislative requirements?

How can we support colleges in providing learners with access to more general forms of learning support, when and as required?

Promotion of equalities, diversity and inclusion agenda

Colleges are required to promote equality and appreciation of diversity. This requires colleges to put in place arrangements and processes which connect across college functions.

Points for consideration

How can we support colleges in driving this agenda forward?

Funding for learners

The complex and diverse range of the learner population, including, for example, learners with multiple social and economic needs, requires that funding mechanisms are clear, transparent and easily understood by staff, learners and other funding partners.

Points for consideration

How can we support colleges in arrangements for the disbursement of funds to ease access and participation?

ANNEX E

EUROPEAN FUNDING

Background

The current European structural funds programme ends in 2006 and detailed discussions are currently taking place on the shape of European regional policy after 2006. These discussions take place within the context of enlargement which increased the number of member states within the European Union in 2004.

College's income from European funds has come from two main sources under the structural funds, European Regional Development Fund (ERDF) which supports regional economic conversion and development and European Social Fund (ESF) which supports training and employment.

The European Commission's proposals envisage that, following 2006, resources for structural funds in Scotland will be very much reduced from historical and current levels. The amount of funding available will vary by region dependent upon eligibility for potential programmes. Highlands and Islands is likely to receive funding at around 60% of current levels but at this stage it is anticipated that Lowlands and Upland Scotland will probably receive no more than 45% of current allocations. However, funding levels have not been finalised and will need to be approved by the European Parliament with a decision on the details of the future delivery of structural funds expected later in 2006.

Evidence

The Scottish Funding Council conducted a survey of European funded activities at colleges with a view to establishing a baseline position across the sector. The questionnaire sought further detail on the nature of European activities being funded, the impact of a reduction in funding and compensatory strategies in the event of such a scenario

In 2004 across the sector European funding (excluding ERDF) represented about 3% of college income but this varied significantly between colleges (from 0.5% to 15.4%). Also this figure only included funding where a college had received European funding directly or as a partner in a European funded project. It did not include funding from a third party who may have been securing college services with income they received via European funds.

For the majority of colleges, ESF income has to date been used to support social inclusion, widening access and targeted skills training for small businesses. It has also enabled colleges to invest in course design and development, including e-learning and staff development, thereby adding value to activities in vocational education and training. ERDF grant has been used to support substantial estates and infrastructure investment.

Impact

Several colleges have indicated that a decrease in funding may result in a reduction in ESF funded activities, in particular for activity taking place for students from socially deprived areas. This in turn may impact on the achievement of student activity (WSUMs) targets, fee waiver grant claims and formula social inclusion funding. A significant number of colleges have put in place arrangements to shift their balance of activity away from European funding supported social deprivation to other less expensive activity and/or generate alternative income streams.

A small number of colleges also stated that income may be indirectly affected through the impact of client organisations facing a reduction in ESF grant. Colleges are involved in various partnerships with the voluntary sector, local councils, local enterprise companies and other agencies. A small number of colleges made reference to the need to implement staff restructuring in the event of a decrease in European income.

Most colleges reflected decreasing levels of European income in their 2005 financial forecast returns which cover the period to 2007-08. Overall sector European income is projected to reduce from £20 million in 2004-05 to £10.6 million in 2007-08.

The majority of colleges have indicated that they will seek to develop alternative income streams including commercial income, trust income and other grants. This trend is reflected in colleges' 2005 financial forecasts returns which show increases in income from fees and contracts and other income generating activities over the period to 2007-08. However, these are unlikely to generate the same level of income as European funding, particularly in the short to medium term.

The Council has published the results of its European funding survey in Circular letter SFC/50/2006 which also request more up to date information from colleges.

Presentation in spending review advice

Without significant additional resources the Council cannot replicate the type of bid based funding that is reducing from Europe. Therefore any funding to fill the gap would be different. We would also need to ensure that any additional funding provided to the Council to take account of the reduction in European funding can be used as flexibly as possible.

Additionally, we will have to deal with the question of whether this should be highlighted as a potential downward pressure on the total available provision in spending review submissions or simply be noted as something that colleges have to deal with in an evolving environment. One of the key issues that would add to the argument that this is a spending review issue is the potential impact on colleges' ability to engage with students from socially deprived areas. Tackling the problems of social deprivation is high on the Government's agenda and this is supported by the recent publication of the NEET (not in education employment or training) strategy. As mentioned above a reduction in European funding will probably result in a reduction in the volume of students from socially deprived areas going to college.

ANNEX F

NEW DEMANDS / GROWING EXPECTATIONS ON COLLEGES

Background

The "Unlocking Opportunity" report (near final draft of 9 June 2006) clearly outlined the contribution currently made by Scotland's Colleges to economic prosperity, transforming individual lives and opening up opportunities.

Even on the most conservative of assumptions, each £1m of public funds invested in the Sector is turned into an economic benefit of £3.2m (An excellent return on investment).

This overall contribution to the development of both Scotland's economy and society is evidence of a positive and flexible approach to service delivery.

It is also a fact that not all eligible activities are currently fully funded, since there is a general gap of circa 4% between the contracted level of activity in Colleges (SFC Targets for WSUMs) and the actual level of student activity (Actual Level of WSUMs). (NB - SFC to check this for accuracy in 2004/2005 and 2005/2006.)

The "Unlocking Opportunity" report concentrated on the factual base of the Colleges' contribution in the period 1993 to 2006.

This second phase of the Working Group is now attempting to answer the question "What differences could Colleges make?" (Assuming additional real funding in the period 2006+).

New Demands/Growing Expectations

(NB - I have not attempted to quantify actual demand or costs of delivery at this stage - merely to list new areas of demand and growing expectations on the College sector.)

· Globalisation - selling Scotland's Colleges expertise abroad (Products/Services/Intellectual Property/Consultancy); link to Fresh Talent Initiative; link to formation of Scotland's Colleges International; link to 'Engagement with China' strategy.

· Migrant Workers/EU Enlargement - demands from individuals/companies; ESOL growth; encouraging migrants to integrate and start businesses. (Link also to National ESOL Strategy.)

· Reducing NEET - size of problem; reflect on current role of Colleges; staff support intensive initiatives; effect on ELS likely.

· Demographic Challenges - update current skills of existing workforce; link to migrants; upskilling and retraining older workers; reducing Incapacity Benefit numbers.

· Growing Volunteering in Scotland - link to separate paper; developing employability/citizenship skills of students; embedding into courses.

· Economic Development of Scotland - encouraging labour force participation; developing higher level skills; growth in Modern Apprenticeships; changing nature of Skillseekers.

· Growth of College/University articulation - efficiency/effectiveness of HNC/D to 3rd year degree route, reduces student debts; embedding of SCQF and its effect on articulation.

· Additional School/College links - meeting demands for 'Curriculum for Excellence'; assisting with vocational delivery in schools; pressure on staffing and specialist facilities; assisting Careers Scotland.

· Adult Literacy/Numeracy Initiative - continuing to support local initiatives.

· Growing demands of partnership working - especially community planning.

· Increase in Work Based Learning.

· Involvement in Knowledge Transfer initiatives.

· Involvement in Improving Scotland's Health - alcohol/drugs/diet/mental health issues.

· National Health Service Labour Needs - assisting the NHS to overcome the impending crisis in the coming reduction (retiral) of 50% of NHS staff in next 10 years.

· Social Care Needs - compulsory qualifications of workforce; impending shortages of trained staff.

· Investment in Facilities - growing expectations of students and communities.

· Modernisation of Delivery - new methodologies, new technologies/blended learning/ individualised packages.

· Maintenance of financial security.

[1] Skills for Business 2004: Survey of Employers, SSDA Research Series Report 11, September 2005 ( http://www.ssda.org.uk/ssda/default.aspx?page=41)

[2] See 'Aesthetic Labour and the Policy Making Agenda: Time for a Reappraisal of Skills', Dennis Nickson et al, SKOPE Research Paper no. 48 ( http://www.skope.ox.ac.uk/WorkingPapers/SKOPEWP48.pdf)