Tertiary Education and Training (Funding and Governance) (Scotland) Bill - Business and Regulatory Impact Assessment (BRIA)

Section 1: Background, aims and options

Background to policy issue

Post-School Education and Skills Reform

16. Our education and skills system must work as a single system that is easy to navigate, where everyone takes responsibility to deliver excellence for all. This is the Scottish Government’s vision for a reformed education system from early learning, through school age learning and beyond as set out in the Cabinet Secretary for Education and Skills’ statement to the Scottish Parliament on 7 November 2023.

17. As part of this, the Scottish Government is implementing a programme of reform for post-school education and skills to improve outcomes and increase efficiency. By looking across the whole post-school education and skills system, the right connections can be made and reform implemented coherently. The Scottish Government wants to develop a world-class lifelong learning and skills system to help more people to fulfil their potential and be equipped to do the work they want to do. The Scottish Government wants to ensure a sustainable future for colleges, universities, students and learners and we want a system that supports sustainable economic growth, the move to net zero and a more equal Scotland.

18. Reform of the post-school system is just part of the picture. There is a complementary programme of work to reform our school system. Although they are progressing as two distinct programmes (not least because of the scale of the work), they are linked. Both programmes are working to ensure a seamless learner journey experience.

19. Changes are needed to what public bodies do in the post-school system in order to simplify responsibilities for apprenticeships and student support and they need legislation. These changes are just one part of the post-school education and skills reform programme. That programme also includes: leading the development of new national and regional skills planning processes; improving careers support; apprenticeship reform to reduce the complexity and improve the offer; and qualifications reform.

Simplification of the funding body landscape

20. The learner is at the centre of our reform programme. The Scottish Government is making changes to help to remove or reduce the barriers to entry into, and participation in, post-school education. The provision in the Bill affects the way things operate behind the scenes from a learner’s perspective, but this provision will enable changes which will improve their experience.

21. There are two cornerstones of this reform programme, both published in June 2023:

• the Purpose and Principles for Post-School Education, Research and Skills^[2] (“the Purpose and Principles”) which sets the vision and objectives for the wider post-school education and skills reform programme; and
• the Independent Review of the Skills Delivery Landscape^[3] by James Withers (“the Withers Review”) which makes 15 recommendations for change in skills delivery. This includes reform of the functions of two of the principal public bodies which help run our post-school education and skills system, SDS and the SFC.

22. Published alongside the Purpose and Principles were: a set of logic models^[4] showing the detailed outcomes to be achieved under each principle; an evidence report^[5] providing a high-level summary of the evidence then available against the long-term outcomes for each of the principles; and the Diversity of Provision Report^[6] which described the current funding system. An updated set of logic models^[7] was published on 22 January 2025.

23. There are three principal public bodies which help to run our post-school education and skills system:

• The Student Awards Agency Scotland (SAAS) is an executive agency of the Scottish Government. SAAS helps higher education students find the right information, support and funding. SAAS assesses applications for tuition fees, loans, grants and bursaries for eligible Scottish students studying a course of higher education in the UK.
• The Scottish Further and Higher Education Funding Council, commonly known as the Scottish Funding Council (SFC), is a non-departmental public body which provides funding to colleges and universities and other bodies, holds them to account and publishes official statistics about colleges. It also funds higher education research.
• Skills Development Scotland (SDS) is a non-departmental public body that supports individuals to build their career and skills, targeting help at those who need it most. SDS works closely with employers and businesses.

24. The Withers Review and the Purpose and Principles identified a range of issues with the current post-school funding body landscape. These included complexity of the landscape, funding streams and funding models, as well as lack of clarity on roles and responsibilities of each funding body. To address these issues, James Withers recommended “[establishing] a new single funding body, which brings together responsibility for all post-school learning and training funding functions from SFC, SDS and, potentially, the SAAS.”

25. The Scottish Government accepted the premise of this recommendation, and the Purpose and Principles Initial Priorities^[8], also published in June 2023, committed Scottish Ministers to “…investigate the options to deliver a single funding body, including tuition and living cost support, paying regard to issues such as the status and scope of the body’s responsibilities”.

26. The Scottish Government considered a range of alternative options to achieve this commitment, including business as usual. A Strategic Outline Case (“SOC”) was developed to set out the strategic context and case for change for simplifying the post-school education and skills funding body landscape. The considerations underpinning the SOC were summarised in chapter 2 of the consultation paper.

27. Simplification of the funding body landscape requires primary legislation, i.e. a Bill. This provides the opportunity to make other changes to the SFC’s governance and functions. These were also explored in the consultation paper. The Bill also makes a technical change to powers around delivery of student support.

Current policies and legislation

28. The SFC (formally the Scottish Further and Higher Education Funding Council) is established by the Further and Higher Education (Scotland) Act 2005 (“the 2005 Act”). The SFC has statutory functions in respect of the securing and funding of further education (“FE”), higher education (“HE”) provision and research. The 2005 Act makes provision for the governance of the SFC and the functions of the SFC. The 2005 Act makes provision for appointing members to the Scottish Funding Council (“the Council”), but note that those members are commonly referred to as the SFC Board, including by the SFC. The SFC cannot act outside of its statutory functions.

29. The 2005 Act also places duties on the organisations funded by the SFC. These are higher education institutions (including universities), colleges and regional strategic bodies.

30. There are three current types of apprenticeship in Scotland:

• Foundation apprenticeships offer work-based learning for individuals in the senior phase of school. This learning is part of the curriculum and is unpaid.
• Modern apprenticeships provide new and existing employees with industry relevant qualifications and apprentices earn as they learn.
• Graduate apprenticeships provide new and existing employees with industry relevant degree qualifications (up to Master’s degree level) and apprentices earn as they learn.

31. At present, the SFC funds graduate apprenticeships and some foundation apprenticeships under its statutory powers for securing FE and HE provision. The modern apprenticeship programme, and half of the foundation apprenticeship programme, are secured and overseen by SDS on a non-statutory basis.

32. SDS and, in some cases the SFC, have delivered National Training Programmes (NTPs). To date, they have included the funding for, and oversight of, delivery of training to learners by a range of organisations. This could be through: securing training from the organisation; routing the funding via the learner; or supporting employers in delivering training. Again, the SFC can only deliver NTPs within its statutory powers; SDS secures and oversees NTPs on a non-statutory basis.

33. The Education (Scotland) Act 1980 (“the 1980 Act”) provides the legislative basis for the provision of student support funding. SAAS is responsible for the administration of student support for students studying at higher education institutions. Student support for those studying at further education institutions is currently administered via the SFC.

Related policy developments

34. The Scottish Government has separately consulted on a proposal to review and reform the role of Regional Strategic Bodies within the Glasgow and Lanarkshire college regions in summer 2024^[9]; any changes are being taken forward separately from the Bill.

35. There have been significant developments in England and Wales with regard to apprenticeship legislation and the development of the Bill has been informed by this.

36. The King’s Speech in July 2024 included the Skills England Bill^[10]. The UK Government has set out their intention that the Bill will transfer functions from the Institute for Apprenticeships and Technical Education (IfATE), to Skills England, a newly established body which is currently operating in shadow form within the Department for Education and is being developed in phases over the next year. The Bill, now named the Institute for Apprenticeships and Technical Education (Transfer of Functions etc) Bill^[11], was introduced in the UK Parliament on 9 October 2024.

37. The Welsh Government has recently put in place a new framework for apprenticeships under the Tertiary Education and Research (Wales) Act 2022^[12] overseen by the Medr (the Commission for Tertiary Education and Research).

Previous developments

38. The 2005 Act brought responsibility for FE and HE funding and provision together at the SFC; previously, they were the responsibility of two separate funding councils.

39. Skills Development Scotland (SDS) was created in April 2008 from a merger of Careers Scotland, the Scottish University for Industry and the skills and learning functions of Highlands and Islands Enterprise and Scottish Enterprise. One aim in creating this new organisation was to exploit synergies and to provide more streamlined services to individuals and employers.

40. Responsibility for graduate apprenticeship delivery transferred from SDS to the SFC in 2021-22.

41. There is a wealth of previous research, evidence and reviews (for more information, see page 7 and Annex B of the consultation paper) which has led to the development of the Bill.

Purpose and desired effect

42. The primary policy objective of the Bill is to enable tertiary education provision funding to be more responsive to the needs of learners and the economy. The Bill does this by consolidating responsibility for securing and funding all forms of tertiary education provision, including NTPs, apprenticeships and work-based learning in a single public body, the SFC. This will simplify the tertiary education funding landscape by reducing the number of funding bodies.

43. The Bill is an essential enabling step in reforming the post-school education and skills public body landscape. By bringing responsibility for securing and funding all forms of tertiary education and training provision together at the SFC, the Bill aims to:

• deliver better services for learners and employers;
• simplify the operating environment for colleges, universities and training providers; and
• ensure best value from our public funds.

44. The policy provision in the Bill is in three parts.

45. Part 1 of the Bill expands the functions of the SFC by conferring powers and duties on it in respect of funding and securing the delivery of NTPs, Scottish apprenticeships and work-based learning. Part 1 does this by amending the 2005 Act, which established the SFC and set out its functions.

46. Part 1 of the Bill also makes some improvements to the SFC’s existing functions , whilst also integrating the new functions created by Part 1. Part 1 of the Bill makes provision to: ensure a greater focus on protecting and promoting the interests of current and prospective learners; improve the timeliness and efficiency with which financial and other information is provided to the SFC; give the SFC the power to issue guidance to any organisation to which it provides funding and to make recommendations to a fundable body^[13] following an efficiency study into its performance; and recognise SFC’s role in promoting knowledge exchange and innovation from the research of, and among, the post-16 education bodies^[14].

47. Part 2 of the Bill makes changes to some of the governance arrangements of the SFC. Part 2 modifies provision at paragraphs 2 and 3 of schedule 1 of the 2005 Act to improve the arrangements for reappointing members of the Council (commonly referred to as the SFC Board) and to adjust the matters to which the Scottish Ministers are to have regard when appointing members to the Council. Part 2 also gives the SFC powers to co-opt additional members to the Council on a limited-term basis. Finally, Part 2 of the Bill requires the SFC establish a new apprenticeship committee to assist with the administration of the new functions conferred by Part 1.

48. Part 3 of the Bill aims to ensure that Scottish-domiciled students undertaking courses of education with approved private providers based in Scotland, or elsewhere in the UK, can receive student support. These are technical changes to clarify provision in the 1980 Act.

49. In broad terms, the Bill is part of the first phase of reform: delivering new capabilities. It will enable a second phase where the changes to structures and funding flows are implemented. This in turn enables the third phase which is to maximise the outcomes. As the changes take effect, they will support a reformed post-school education and skills system which will:

• support people to take the right path at the right time and fulfil their potential;
• be more responsive to our economic and social needs and ambitions; and
• deliver better value for money across the system.

50. Delivering structural change to the post-school funding body landscape creates the opportunity to make different policy and operational delivery choices across the entirety of the system to ensure that it is best equipped to contribute to all four of the Scottish Government’s priorities: child poverty – enabling changes that will help those most vulnerable and furthest from the labour market to increase their earning potential; boosting the economy – these reforms will better equip the post-school system to address the upskilling and reskilling requirements of our workforce; tackling climate change – enabling the system to better address reskilling requirements that will help to deliver the workforce to support a just transition to net zero; and high quality public services – removing duplication of functions and delivering enhanced efficiency, allowing more of the total investment to be directed towards institutions, research, learners and employers.

51. Outcomes will be monitored and evaluated using the published Purpose and Principles logic models as a framework.

Options considered

52. Options considered are summarised below. For more information, see the Policy Memorandum.

National Training Programmes and apprenticeships

53. With regard to the simplification of the funding body landscape, the Scottish Government assessed a long list of options against objectives and critical success factors based on HMT Green Book guidance. The process followed supported the development of the SOC and is summarised in chapter 2 of the consultation paper. This led to three short-listed options which were set out as proposals in the consultation paper:

• Proposal 1: Business as usual. Post-school education and skills funding would continue to be delivered as now through the three public bodies (i.e. SFC, SAAS and SDS)
• Proposal 2: Consolidate all provision funding within SFC and all student support funding within SAAS.
• Proposal 3: Consolidate all provision funding and all student support funding within SFC.

54. The Scottish Government decided to proceed with proposal 2, based on both an analysis of the consultation responses and the findings of the Outline Business Case (OBC). This decision was announced on 22 January 2025, accompanied by the supporting evidence: publication of the OBC, consultation report and consultation responses.

55. The legislation needed to support both proposals for change (proposals 2 and 3) is the same. In both cases, the SFC needs new statutory functions in respect of NTP, apprenticeship and work-based learning provision. The difference between the proposals is in which public body takes responsibility for administering student support; this change can be delivered administratively using existing powers in the 1980 Act. Importantly, this allowed development of the legislation to proceed, based on consultation findings, pending a decision on which proposal to take forward. It also means that the changes to responsibilities for delivery of student support are outside the scope of this BRIA.

56. Funding Body Simplification

Now

The SFC is responsible for securing FE and HE provision, including funding places at FE and HE institutions, and research.

Options considered

The SFC will continue to do this.  The SOC ruled out any other options.

Now

The SFC funds graduate apprenticeships and some foundation apprenticeships under its statutory powers for securing FE and HE provision.
SDS delivers modern apprenticeships and some foundation apprenticeships on a non-statutory basis.
Foundation apprenticeships are unpaid and therefore not really true apprenticeships.

Options considered

Proposal 1 was business as usual.

Both proposals 2 and 3 give the SFC responsibility for securing the delivery of all apprenticeship provision.

The Bill establishes, for the first time, a statutory footing for apprenticeships in Scotland and confers responsibility for securing provision on the SFC.

Foundation apprenticeships will sit under statutory functions for the SFC to fund and secure the delivery of work-based learning.

Open options: the mechanisms for securing apprenticeship and work-based learning provision and the future direction of the policies and programmes: decisions for the Scottish Ministers and the SFC.

Now

SDS and, in some cases the SFC, have delivered National Training Programmes (NTPs), such as the Flexible Workforce Development Fund which provided training to employers to upskill / re-skill their existing workforce.

Options considered

Proposal 1 was business as usual.

Both proposals 2 and 3 give the SFC responsibility for securing the delivery of all NTP provision.

Open options: the mechanisms for securing NTP provision and what programmes are taken forward: decisions for the Scottish Ministers and the SFC.

Now

The SFC funds FE student support.

Options considered

The SFC’s future role in delivery of student support is not determined by the Bill.  Proposal 2 means that responsibility moves from the SFC to SAAS.

Now

SAAS administers HE student support.

Options considered SAAS’s future role in delivery of student support is not determined by the Bill.   Proposal 3 would have meant that responsibility moved from SAAS to the SFC.

57. Other functions of the SFC

Now

Fundable bodies (broadly speaking colleges, regional strategic bodies, and higher education institutions - HEIs) are under a duty to provide the SFC with such information as it may reasonably require for the purposes of or in connection with the exercise of its functions.

Options considered

The Bill extends this duty to those receiving SFC funding to deliver NTPs, apprenticeships and work-based learning.

The alternative option was not to do so.

Now

The SFC may not always be adequately notified of high risk situations by fundable bodies.  This may risk potentially serious jeopardy to other fundable bodies or to the SFC’s ability to perform its functions.

Options considered

The Bill places a duty on post-16 education bodies (colleges and HEIs) to notify the SFC of certain matters set out by Ministers in subordinate legislation.  E.g. a major data breach through a cyberattack or a certain level of financial difficulty.

The alternative option was not to do so.

Now

The SFC must have regard to a range of matters in carrying out its functions, including, for example: skills needs in Scotland; issues affecting the economy of Scotland; and social and cultural issues in Scotland.

Options considered

The Bill expands these matters to include: protecting and promoting the interests of current and prospective learners; and promoting knowledge exchange and innovation from the research of, and among, colleges and universities.

The alternative options were not to do so or to place the SFC under a duty to consider different matters.

Now

At present, the SFC issues guidance to the fundable bodies but it is purely administrative (i.e. it has no statutory basis).

Options considered

The Bill will give the SFC a statutory power to issue guidance to the persons and bodies to whom it provides funding.  Relevant persons must have regard to the guidance.

Alternative options included:

• no statutory guidance;
• an express duty to comply with statutory guidance; or
• a power for the SFC to issue codes of conduct.

Now

The SFC has the power to secure “efficiency studies” and this provides a gateway for the SFC to monitor performance of the fundable bodies in respect of improving “their economy, efficiency and effectiveness” in operational matters.

Options considered

The Bill expands the scope of efficiency studies to encompass the needs and interests of learners, and creates a power for the SFC to issue recommendations to a fundable body following a study into its performance.  The Bill also expands the SFC’s responsibilities to include monitoring financial sustainability.

Alternative options included:

• giving the SFC more powers to conduct audits and investigations;
• giving the SFC stronger enforcement and intervention powers; or
• placing fundable bodies under a duty to seek the consent of the SFC before doing certain things.

59. Governance of the SFC

Now

Ministers can appoint Council members for an initial appointment period of up to four years.  But reappointments are limited to one single further period not exceeding four years.

Options considered

The Bill gives Ministers the flexibility to reappoint a Council member several times for shorter periods, should that be appropriate.  Duration will continue to be limited to eight years total by the Ethical Standards Commissioner’s Code on Ministerial Appointments to Public Bodies.

Alternative options were considered, and consulted upon, including removing the restrictions in either length of appointment or reappointment, or on both.

Now

The Scottish Ministers must have regard to the desirability of appointing Council members who have experience of, and shown capacity in, a range of matters, including the provision of further and higher education.

Options considered

The Bill expands the range of potentially relevant skills and experience of Council members to cover apprenticeships and work-based learning.

Alternative options were suggested in consultation responses and considered.

Open options: the Bill leaves the Scottish Ministers with wide discretion as to whom to appoint to the Council, including taking account of other matters not set out in the legislation.

Now

A significant number of Council members are actively employed or engaged in the college or university sectors, potentially creating conflicts of interest.

Options considered

The Bill facilitates a shift away from appointing Council members who are actively employed or engaged in the college or university sectors, whilst retaining flexibility to ensure relevant expertise.

Open options: the Bill leaves the Scottish Ministers with wide discretion as to whom to appoint to the Council.

Now

The SFC cannot co-opt Council members which may help them respond quickly to particular pressures or temporary challenges.

Options considered

The Bill gives the SFC the power to co-opt Council members (subject to Ministerial approval) in order to access particular expertise.

Alternative options considered included making no change and relying on existing powers to set up new committees.

Now

SDS, the Scottish Apprenticeship Advisory Board, the Standards and Frameworks Group and the Apprenticeships Approvals Group lead on apprenticeship definition, standards and delivery.

Options considered

The Bill requires the SFC to put in place a new apprenticeships committee.  One option considered was to leave it the discretion of the SFC to establish such a committee.

Open options: the detailed responsibilities and operation of this committee.  It is likely to absorb at least some of the functions and responsibilities of various of the bodies and groups in the current apprenticeships landscape.

Student support and private providers

60. A number of students undertake further and higher education courses run by private providers based in Scotland or in rUK; these are education providers that are not post-16 education bodies in terms of the 2005 Act. The fundable bodies in the 2005 Act receive teaching grant (or provision funding) from the SFC; private providers do not. However, eligible students can receive student support whilst studying a course of education at a private provider if that provider has been designated (approved) for this purpose.

61. Part 3 of the Bill provides greater clarity to the process of designation of private providers for the purposes of student support. This is to enable greater transparency in the process which until now has been largely administrative. The Bill allows the Scottish Ministers to make regulations that will set out the process for applying for designation, as well as the process the Scottish Ministers are to follow when making a designation.

62. These Bill provisions are technical and clarificatory provisions to the enabling powers in the 1980 Act which allow for regulations to be made relating to student support. These provisions are considered to be necessary to provide clarity to the existing practice. No other options were considered. They were not the subject of public consultation. The Scottish Government engaged extensively with SAAS in the development of these provisions.

63. The procedure and fees for designation would be set out in regulations and these would be the subject of consultation and impact assessment.

Scope of this impact assessment

64. This BRIA only encompasses the parts of the reform programme for which provision is made in the Bill:

• provision for the SFC to take full responsibility for the delivery of NTPs and apprenticeships;
• changes to the governance and some functions of SFC, which may affect the institutions and other organisations to which the SFC will provide funding; and
• technical provision in relation to student support funding for students at private HE and FE providers.

65. Any movement of student support functions between the SFC and SAAS will be executed administratively. The movement of student support functions is therefore outside the scope of this impact assessment.

The Bill and apprenticeship policy

66. The Bill will deliver changes to the configuration of functions in public bodies (axis C in the diagram below), enabling the transfer of responsibility for NTP and apprenticeship provision from SDS to the SFC.

67. The diagram below shows how the three phases of reform connect with the provision in the Bill. The diagram represents these as moves along three independent axes in a 3-D space. The Bill has the effect of changing the configuration of functions in public bodies (phase 1, done first) to deliver new capabilities. This enables a second phase where the changes to structures and funding flows are implemented. This has the potential both to unlock efficiency savings (phase 2A) and policy development and innovation (phase 2B). In turn, these enable the third phase which is to maximise the outcomes. The blue arrows denote movement in each of these directions. For example, it is theoretically possible to transfer responsibilities but not make any further changes (i.e. no efficiency savings or policy development).

 

68. The Bill will enable re-brigaded functions to be exercised more efficiently (axis E in the diagram) and facilitate new policy approaches (axis P in the diagram). The Bill does not directly deliver the efficiencies or new policy approaches.

Out of scope

69. The following are out of scope of this BRIA:

• the movement of FE student support functions from the SFC to SAAS (under proposal 2), as noted previously;
• evolution of policy enabled by the Bill, primarily changes to the apprenticeship programme;
• subordinate legislation and implementation decisions made by the Scottish Ministers, or the SFC, as they give effect to their new functions and responsibilities.

Sectors and groups affected

70. The provision in the Bill primarily affects the SFC and, indirectly, SDS. This includes their functions, staffing and resourcing. In addition, there are four other groups of stakeholders affected:

• higher education institutions (including universities) and colleges;
• independent training providers (of apprentices and work-based learning);
• employers (of apprentices), noting that these may be public or private sector organisations; and
• private providers of further and higher education (in relation to the designation process set out at Part 3 of the Bill).

71. A wide range of employers and businesses use apprenticeships, covering many sectors of the economy, including public and private. Funding was provided in 2024-25 for around 25,500 modern apprenticeship starts, 5,000 foundation apprenticeship starts and 1,400 graduate apprenticeship starts. Apprentices work in central and local government, police and fire services, social care, childcare, creative industries, digital and cyber skills, tourism, manufacturing and aerospace, timber, green jobs and retrofit, to name but a few. Businesses range from multinationals through UK-based and Scottish to small local employers.

72. Higher education institutions, colleges and independent training providers provide education and training to these apprentices across a similarly diverse set of disciplines.

73. The Bill provision would allow for the current policy and delivery model to be replicated by the Scottish Government and the SFC, but leaves open the possibility for change and innovation by future Scottish Administrations.

74. The Bill does not have any direct impact on learners (students and apprentices).