The Scottish Funding Council has raised questions over the status of Scotland’s colleges.

The SFC’s report on the sustainability and coherence of the tertiary education sector highlights the lack of flexibility in colleges’ use of funding due to their status as public bodies, and says Scottish ministers should consider “whether they wish to explore the ONS classification of incorporated colleges, with a careful assessment of associated benefits and risks”.

It recommends that the Scottish government provides additional year-end flexibility to assist financial management in colleges and considers the benefits and risks of a different classification of colleges.

The review also says the SFC will work with colleges and universities to “intensify collaborative and integrated working, consolidation, and shared support services” - and recommends a move to multi-year funding settlements to help institutions plan.

Colleges in Scotland were reclassified as public sector bodies by the ONS in 2014. This means they do not have cash reserves, cannot incur external financial obligations apart from pension liabilities or borrowing without government consent, and have very limited obligations to external creditors in the main, “apart from PFI funded capital projects where support is provided directly by the Scottish government or SFC,” the review points out. 

It says: “They do not have reserves, and cannot build them up, to fund major strategic or large scale estates investments without government support.”

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And adds: “Many in the sector believe reclassification would provide greater flexibility, the opportunity to manage their finances differently, and would encourage a greater culture of entrepreneurial activity. However, the Educational Institute of Scotland’s response to our review makes clear their support for colleges remaining part of the public sector and democratically accountable through Scottish ministers and, ultimately, the Scottish parliament.”

However, the classification of incorporated colleges could not be altered without primary legislation. Scottish ministers would have to remove their powers of direction and consent as well as their role in the governance of individual colleges, and college requirements relating to the Scottish Public Finance Manual and national bargaining would need to change.

“We recommend Scottish ministers consider whether they wish to explore the ONS classification of incorporated colleges, with a careful assessment of associated benefits and risks, including lessons to be learned from the English college sector where colleges remain classified as private sector bodies, and consultation with all stakeholders,” says the SFC. 

Quality assurance and funding certainty

The SFC’s review today also recommends developing a single quality assurance and enhancement framework for tertiary education to uphold academic standards and enhance the learning experience of all students.

The Scottish government should explore with SFC and stakeholders “the consequences of the rising school leaver population and the need to provide greater opportunities to deliver learning throughout life, by reviewing the current approach to existing targets and our underpinning policy assumptions”, says the SFC, adding: “We recommend the introduction of a revised approach to strategic provision planning and skills alignment, which would include SFC convened Tertiary Provision Pathfinders to better explore strategic planning and partnership working at a regional level, assessing demand and future tertiary and skills provision that balances the needs of students, employers and broader economic and social drivers.”

Karen Watt: Pressures need collective leadership and creative solutions

SFC chief executive Karen Watt said: “We need a sustainable system of colleges, universities and specialists institutions.  While we start from a position of strength, together we face real pressures that will need collective leadership and creative solutions. 

“This means collaborating to design future provision and adapting business models to ensure they meet the needs of students and employers alike. It also means providing longer-term investment commitments and planning assumptions but equally a change in the way we hold institutions to account so that they demonstrate public value for public investment.”

Shona Struthers, chief executive of Colleges Scotland, said: “The review is welcome and we could see some real change delivered for colleges if its recommendations are taken forward. I was pleased to see the breadth and depth of the review which recognises the many ways in which colleges are an essential part of tertiary education in Scotland.

“The recommendation on moving colleges to a multi-year funding model is essential - the one-year funding model we have today should be consigned to the past, colleges need financial stability going forwards. Colleges want to plan and invest, work with local and regional partners, and most importantly provide a really great experience for our students which on one-year funding is becoming ever more challenging. Financial stability is critical to the success of colleges now and in the future.

“The review is right to consider the impact of the pandemic on the college sector and, again if its recommendations are enacted, there is a great opportunity for the delivery of new ways of learning such as micro-credentials and making the most of the digital learning and working environment that we’ve all had to pivot to.

“The review also notes how important collaboration is, and we would agree more collaboration is essential for colleges to truly thrive - colleges want to work with each other, with universities, with schools and with the businesses around them to deliver education, skills and training to people across their lives.” 

The report’s key recommendations:

• Develop a clear strategic, longer-term vision and intent for the future of tertiary education and research undertaken by colleges and universities in Scotland, that incorporates multi-year funding assumptions and commitments, and a new National Impact Framework.
• Protect excellent discovery research and develop mission-orientated research and knowledge exchange activities, in order to create knowledge of immense social, economic and cultural value; and to maintain Scotland’s associated international reputation. 
• Build capacity and a more systematic approach to the way we collectively plan coherent tertiary education and skills provision and investment, so that it responds better to current and future needs of pupils, students, employers and broader economic and social drivers.
• Find better ways to support learning throughout life, to enable people to reskill and upskill, as the labour market and the future world of work shifts, and to get credit for that learning, by reviewing existing targets, the assumptions that underpin existing funding models and student support, and qualification frameworks.
• Ensure the interests of current and future students are protected and promoted in the development of standards, outcomes, blended and digital learning opportunities, equality and inclusion actions, participation frameworks, investment and approaches to accountability.
• Recognise more fully the importance of international education connections and global research standing as an intrinsic part of Scotland’s social and economic prosperity, the student and staff experience, and the success and sustainability of the higher education sector.
• Galvanise current and future leaders across tertiary education, skills provision and research to work together to effect system change, building from our existing strengths, to tackle knotty long-term challenges and opportunities, and to develop the system for the future.