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

Section 3: Costs, impacts and benefits

Quantified costs to businesses

108. The transfer of responsibilities for NTPs, apprenticeship and work-based learning delivery from SDS to the SFC does not, of itself, impose any direct costs on business. There may be some costs (savings) from changes to arrangements for apprenticeship certificates, apprenticeship frameworks and the overall apprenticeship programme over time, as set out below. There may be other costs in future as the policy direction of these programmes evolves.

109. There are no quantified costs for business from other changes to the SFC’s functions or governance.

110. There are some quantified costs for private providers of higher education, set out below.

Apprenticeship certificates

111. At present, the Federation for Industry Sector Skills and Standards (FISSS) issue apprenticeship certificates for Scotland, England and Wales. The Bill provides a power for the SFC to issue apprenticeship certificates and a power to charge for doing so.

112. Should the SFC use this power, FISSS would no longer take forward this work, losing associated costs and revenues from Scotland. Income from Scotland has, in four years out of five, significantly exceeded expenditure on Scotland. The difference between revenue and expenditure is estimated to incur a net loss to FISSS of £20k per year from ceasing this work.

113. Assuming that the SFC charges independent training providers and employers for cost recovery, then there should be no additional cost to them; there may potentially be a saving.

114. For more information, see paragraphs 118 to 123 in the Financial Memorandum.

Scottish apprenticeship frameworks and requests

115. At present, SDS is responsible for preparing and publishing non-statutory apprenticeship frameworks. This responsibility will move to the SFC. But the costs are already accounted for in the operating costs of SDS, budget for which would be transferred to the SFC.

116. The Bill allows employers (and others) to request that the SFC prepare or amends an apprenticeship framework and gives the SFC the power to charge for doing so. SDS already engages extensively with employers to develop apprenticeship frameworks. In effect, requests for frameworks and their development are already included in the operating costs of SDS, which will be transferred to the SFC.

117. The additional costs to employers in making such requests is hard to estimate. The Financial Memorandum includes a total cost range of less than £10k per annum to over £80k per annum across all requestors, with an average cost of request ranging from just over £500 to just over £2,700.

118. For more information, see paragraphs 124 to 131 in the Financial Memorandum.

Apprenticeship programme expenditure savings

119. Bringing together apprenticeship provision at the SFC, combined with new approaches to delivery, a better understanding of funding flows and a tighter focus on outcomes could deliver savings starting in 2027-28. Indicative savings of 2% on the modern apprenticeship budget of c. £130 million per annum have been modelled in the Financial Memorandum. The extent to which this is deliverable will depend on what duplication can be eliminated through bringing provision together and on policy decisions by the next Scottish Administration.

120. Possible sources of savings include: ceasing funding for some apprenticeships which do not align well with the Scottish Ministers’ priorities; using the powers in the Bill for the SFC to create frameworks at the request of employers and charge them reasonable costs for doing so; and efficiencies from bringing together responsibility for securing modern apprenticeships and foundation apprenticeships. These savings would come from reduced expenditure from the modern apprenticeship budget on colleges, independent training providers and employers.

121. For more information, see paragraphs 132 to 138 in the Financial Memorandum.

Student support and private providers

122. The modelling in the Financial Memorandum assumes that the regulation-making powers created by the Bill would be used to require private providers of full-time HE courses to reapply for designation every two years. There would be no additional fee charged to these private providers, as they would be subject to an inspection regime under provision in the Education (Scotland) Bill.

123. Similarly, the modelling in the Financial Memorandum assumes that that private providers of part-time HE courses would also be required to reapply for designation every two years. However, they are not subject to separate inspection. The fee to be charged per private provider of part-time HE courses is estimated to be a single flat rate of between £180 and £460 every two years in the Financial Memorandum.

124. The final policy on the designation process, including frequency of renewal and application of fees, will be subject to appropriate consultation before implementation. The regulations governing the designation process and fees will themselves be subject to impact assessment.

125. For more information, see paragraphs 235 to 238 in the Financial Memorandum.

Other impacts

126. The Bill does not have any other impacts on businesses. There should not be any unintended consequences. The Bill should not result in any perceived unfairness, adverse impact on investment or affect businesses’ ability to meet other policy requirements.

Scottish firms’ international competitiveness

127. The Bill does not have any direct effect on Scottish businesses ability to compete internationally. The Bill does not have any direct effect on Scotland’s attractiveness as a destination for global capital investment, but see paragraph 136 below.

Benefits to business

128. Similarly to the consideration of costs above, the Bill itself does not generate significant quantifiable benefits to businesses. However, the Bill provision offers potential benefits through:

• allowing for flexibility and innovation in the evolution of Scottish apprenticeship policy and delivery, including a more efficient and streamlined set of processes;
• new provision for Scottish apprenticeship certificates; and
• a mechanism for businesses to request new or revised Scottish apprenticeship frameworks.

129. This enables changes which are expected to deliver significant benefits to businesses (and learners and others) in support of the Purpose and Principles:

• improving the offer and outcomes for learners, employers and wider society;
• simpler interactions for the learners and for employers with the public bodies, with streamlined processes and efficiency savings for employers;
• a system that is fit for future demands and educates and trains Scotland’s future workforce;
• easier for learners to find their learning pathway to the right career for them (and therefore providing employers with skilled and committed workers); and
• better system-wide data and evidence to inform decisions and deliver improvement.

Small business impacts

130. The Bill does not have a differential impact on small businesses. Small businesses affected by the provision in the Bill include: smaller employers, smaller training providers and private education providers. The Bill, of itself, does not affect the obligations on small employers or training providers involved in the employment or training of apprentices.

Apprenticeship delivery

131. Training providers and employers, large and small, will be under a duty to provide information to the SFC on request and to have regard to any guidance issued by the SFC under new powers for the SFC in the Bill. It is expected that apprenticeship policy will evolve and that the Scottish Government and the SFC will, in due course, make improvements to the apprenticeship programme.

132. Initially, at least, the SFC is expected to ask for the same information from independent training providers and employers which they previously provided to SDS, generally through the terms and conditions of contract. As requirements for information change, or the guidance develops, the SFC would be expected to take a proportionate approach, cognisant of the size of the business.

133. Significant changes to the apprenticeship programme would be subject to a separate impact assessment.

Student support and private providers

134. Some private providers will be small businesses. All private providers will need to go through the designation process for which provision is made in the Bill; private providers need to do this at present, so the Bill does not introduce a new obligation. The power to charge a fee to private providers is new. The Financial Memorandum modelling assumes a single flat rate for part-time private providers of higher education, irrespective of the size of the private provider but the fee is modest (estimated to be between £180 and £460 every two years) so is considered to have a negligible differential impact.

135. To give these powers effect, the Scottish Ministers will need to make regulations. The development of these regulations will be subject to consultation and impact assessment.

Investment

136. The Bill has the potential to make Scotland a more attractive place for global investment by enabling improvements to apprenticeship delivery, helping to develop a better trained workforce. This is a benefit to companies considering building up their operations in Scotland.

137. The improvements made to the governance and functions of the SFC also supports a more transparent, resilient and trusted tertiary education sector, which should have a positive impact on confidence and investment in the sector.

138. The Bill aligns with the recommendations of the First Minister’s Investor Panel to make Scotland a globally competitive investment destination. It has neutral or positive implications for investors and investor sentiment.

Workforce and Fair Work

139. The primary workforce impact of the Bill is on SDS staff, some of whom are expected to transfer to the SFC. Details of who will transfer and the terms and conditions of transfer will be the subject of significant further work, including engagement with HR, recognised trade unions and affected staff. It is unlikely that the Bill will result in significant recruitment in the public bodies; between the SFC and SDS, there are sufficient numbers of people to undertake the new functions in the Bill.

140. The Bill will not affect businesses’ ability to meet the Fair Work First principles. There will not be any changes which reduce their ability to, or likelihood of, paying workers at least the real Living Wage.

141. The Bill indirectly promotes Fair Work First principles. New powers in the Bill for the SFC to issue statutory guidance to higher education institutions, colleges, independent training providers and employers in respect of activities for which the SFC provides funding, will enable the SFC to issue guidance on implementing Fair Work First principles. New powers in the Bill for the SFC to make recommendations to fundable bodies following an efficiency study would enable the SFC to make recommendations in respect of the implementation of fair work conditions, if this was appropriate.

Climate change and circular economy

142. The Bill has no direct impact on businesses’ ability to contribute to climate and circular economy targets (e.g. their own plans or Scottish Government’s wider climate objectives). However, it enables National Training Programmes and apprenticeships to be focused on the Scottish Government’s priorities, one of which is tackling the climate emergency. This means that a future Scottish Administration could require the SFC to operate one or more NTP and/or an apprenticeship programme focused on training for employment to meet net zero ambitions.

143. Similarly, the Bill has no direct impact on the reduction, reuse or recycling of resources by businesses. The Bill has no direct impact on volume of goods or services consumed in Scotland.

Competition assessment

144. The Bill has no direct effect on competition. Competition considerations are most relevant to the securing of training for apprentices by training providers. At present, training is secured through a mix of grant funding from the SFC and procurement by SDS. The Bill leaves it open to the SFC to continue with this mix, including procuring training provision in the same manner as SDS. However, it is anticipated that bringing provision together will make the process of securing training provision more streamlined, efficient and transparent. Any changes should help to create a more level playing field between all types of persons or bodies who are training providers under the legislation.

145. The five Competition and Markets Authority (CMA) competition assessment questions have been used to assess competition considerations:

• The Bill does not directly or indirectly limit the number or range of suppliers.
• The Bill does not limit the ability of suppliers to compete; if anything, the Bill facilitates greater consistency and transparency in the securing of training provision which will improve competition.
• The Bill does not limit suppliers’ incentives to compete. The Scottish Government will provide the SFC with the funds required to secure an apprenticeship programme of the scale required by the Scottish Ministers. The SFC is expected to secure provision by a competitive process (or other means of assuring best value) which encourages suppliers to compete and offer their best prices for high quality services.
• The Bill is expected to facilitate policy development which will improve consumers’ (apprentices and employers) ability to engage with the market (training for apprenticeships) and make choices that align with their preferences.
• The Bill is expected to facilitate policy development which increases suppliers’ ability and/or incentive to introduce new technologies, products or business models.

Consumer Duty

146. The Consumer Duty is a statutory duty introduced by the Consumer (Scotland) Act 2020^[17] (“the 2020 Act”) which came into force on 1 April 2024. It places a duty on relevant public authorities in Scotland, including the Scottish Government, to improve the extent to which consumers are considered in strategic decision-making. A key principle of the Duty is to ensure all public bodies are working towards improving outcomes for consumers as part of their strategic decision making process.

147. The 2020 Act defines a consumer as an individual or small business who buys, uses or receives goods or services in Scotland, or could potentially do so, supplied by a public authority or other public body.

148. The principal consumers of relevance to the Bill are students at higher education institutions or colleges and foundation, graduate or modern apprentices. Note that foundation apprentices are usually senior phase school pupils.

149. The Bill has no direct impact on these consumers. However, it should enable changes in policy and provision which benefit consumers through:

• putting learners at the centre of policy development and programme delivery;
• creating a more coherent and simpler system for learners to navigate, reducing confusion;
• reducing the barriers to entry into, and participation in, tertiary education and training; and
• ensuring that more public money is spent on activities of direct benefit to learners.