Post-school education and skills reform legislation: consultation

Chapter 2: Simplifying responsibilities for apprenticeships and student support

In the 2024-25 Budget, the Scottish Government allocated over £2 billion to fund learning provision through Scotland’s post-school education, skills and research system. Scottish Government funding enables around 500,000 people in any given year to pursue opportunities to learn, develop their skills and fulfil their potential at our colleges and universities. It also enables around 40,000 modern and graduate apprentices in training who can earn as they learn.

There are three types of apprenticeship:

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.

In the 2024-25 Budget, the Scottish Government allocated just under £1.5 billion to fund higher education student support. Since 2012-13, free tuition has been provided to around 120,000 eligible students in full time higher education each year. Employers also make a significant contribution to training provision.

We need to make sure that:

• individuals receive the funding they need to access the education and training of their choosing (“student support funding”);
• universities, colleges and training providers receive the funding they need to provide high-quality education and training provision (“provision funding”); and
• employers get access to a workforce appropriately skilled to enable delivery of our national economic, and other, priorities.

The Minister for Higher and Further Education, in his statement to the Scottish Parliament in December 2023, reiterated his commitment to streamline funding for colleges, universities and apprenticeships. As a first step, this means bringing together funding for student support into one place and funding for apprenticeships into one place.

Current issues

The Withers Review and Purpose and Principles identified a range of issues with the current arrangements for funding post-school learning and skills training. They are complicated and it is not clear who is responsible for what. In developing the Purpose and Principles, we identified that:

“The current system lacks a coherent vision, shared values and a common purpose. It features complexity and confusion around overlapping roles, functions and funding models between and across government and agencies, alongside a lack of collaboration, trust and flexibility that would allow the system to deliver better outcomes. There is a lack of a comparable system-wide evidence base and regulatory framework which can describe the current successes and challenges, the desired outcomes and metrics and allow for accountability and assurance.”

Evidence Report on the Purpose and Principles for Post-School Education, Research and Skills (www.gov.scot), page 3.

Current funding arrangements

The roles of the three principal public bodies are summarised in Chapter 1.

Skills Development Scotland (SDS) delivers funding largely through public service contracts to independent training providers, colleges, employers and public sector organisations. This includes funding modern apprenticeships, providing around half the funding for foundation apprenticeships and some legacy graduate apprenticeships (as a result of historical funding arrangements). In addition to this, SDS has previously funded a range of other National Training Programmes (NTP), including Individual Training Accounts and is also responsible for skills planning, employer engagement and delivery of Scotland’s national Careers, Information, Advice and Guidance Service.

Scottish Funding Council (SFC) funds colleges and universities to cover core running costs and assigns funding for student teaching costs through its credit-based funding model. SFC funds graduate apprenticeships and provides the other half of the funding for foundation apprenticeships. SFC provides funding to colleges for student support, which each college administers separately. SFC also delivers Scottish Government core investment in university research and knowledge exchange.

Student Awards Agency Scotland (SAAS) provides funding for students in higher education at universities and colleges, including graduate apprenticeships. SAAS delivers the Scottish Government’s free tuition funding for students and provides this money directly to universities and colleges. SAAS provides bursaries and grants to eligible Scottish students. SAAS assesses eligibility and processes applications for living cost and tuition fee loans which are administered by the Student Loans Company.

(Note that the Student Loans Company is responsible for the administration and recovery of student loans.)

Business needs

The Purpose and Principles and Withers Review identified a range of issues with the current funding arrangements. The current arrangements are described in the Diversity of Provision Report, published alongside the Purpose and Principles.

We considered this evidence and outcomes from previous reviews and identified four business needs for improved funding arrangements. These are:

1. Vision. The need for a more coherent vision, shared values and common purpose to avoid confusion for learners and employers.

2. Clarity. The need to remove overlapping roles, functions and responsibilities, minimising duplication and maximising public value.

3. Data. The need to address the lack of comparable system-wide data and evidence leading to difficulty in understanding the social and economic value of investment and making it challenging to plan for the future needs of our economy and society.

4. Assurance. The need to address the lack of system-wide measures of success, supporting enhanced accountability and assurance.

We now look at each of these in turn.

Business need 1: vision

Three organisations, SFC, SDS and SAAS, are responsible for funding different parts of the post-school education system. The fact that several bodies are involved in administering funds makes the system complicated and confuses learners, employers and others. It also makes it difficult to know who is responsible for what, and creates the conditions for duplication and inefficiency.

One of the consequences of this fragmentation is that parts of the system that should be working together can see themselves in competition for funds, or indeed for learners. They also use the data that they gather to build and strengthen the case for “their part of the system” instead of working towards a shared vision and set of outcomes that serve the needs of Scotland’s economy and society as a whole.

It also means that, while all parts of the system would say that they take a user-centred approach, the user accessing the service is being served by different elements of a single system, each with different strategic and operational plan, which does not reflect a holistic or user centred approach. Both of these points were very well evidence in the Independent Review of the Skills Delivery Landscape (2023).

Several reviews have pointed to a lack of shared vision and values across the system, including the SFC’s review on the Coherence and Sustainability of the Tertiary System (2021).

Similarly, Audit Scotland (2022) highlighted a need for Scottish Government to be leading and setting expectations. It also emphasised the need to better define the roles and responsibilities of different agencies with a remit for administration of public funding – highlighting this as an area that had lacked focus.

The Scottish Government has taken action in response to these reviews and recommendations. Firstly, by establishing the Shared Outcomes Assurance Group (January 2022) and the Shared Outcomes Framework (July 2022) to support collaborative working across agency partners in response to the Audit Scotland findings and, secondly, by publishing the Purpose and Principles in June 2023.

Business need 2: clarity

The system, as described in a number of reviews, is complex with fragmentation of funding streams that flow to providers (colleges, universities, training providers, third sector) and learners. SFC and SDS provide funding to institutions and, in some cases, employers and other providers, whilst SFC and SAAS both deliver student support to learners, either directly or through institutions.

There can be unintended consequences as a result of public bodies with responsibility for different elements of funding not necessarily being fully cognisant of the impact of change in one part of the system manifesting elsewhere.

Examples of this were shared during engagement on the Purpose and Principles. Colleges spoke about the impact on their income from a reduction in higher education tuition fees received from SAAS due to an increase in the number of school leavers going directly to university. This, in turn, was a result of the SQA increase in grades during the COVID-19 pandemic. This was cited as something that had not been fully appreciated or understood across the wider public bodies landscape, or within government, and is reflective of the fragmentation that exists in the system.

A further opportunity that would be enabled by simplification of the funding body landscape is a clearer view and process through which contributions from other government portfolios flow to the post-school system. This would help support consideration of issues like financial sustainability and value for money and would further contribute to strengthening the evidence base on which decisions are made.

Further education (FE) is defined in the 2005 Act and includes vocational qualifications, preparation for higher education or English language training for non-native speakers, amongst other things. Further education is delivered by colleges.

Higher education (HE) is defined in the 2005 Act and includes first degrees, post-graduate studies and teacher training, amongst other things. Universities deliver higher education but some higher education is delivered by colleges.

There is an opportunity cost to maintaining separation of funding functions across a number of public bodies. It makes improvement and simplification of funding models more difficult to achieve.

For example, student support is currently split between SAAS and SFC and the funding is distributed in very different ways.

SAAS has responsibility for provision of all higher education (HE) student support across both colleges and universities. HE student support for students at university and college is both demand-led and means-tested and students interact directly with SAAS.

SFC provides funding for further education (FE) student support to colleges. FE student support is provided by each college to their students. College students do not interact with SFC or SAAS for FE student support.

This means that a college student in receipt of student support will have a different experience of accessing that support when they are studying for further education qualification^[1] and when they are studying for a higher education one^[2]. This is a challenge to ensuring equity in our approach to student support. It also means that there are two reporting mechanisms and systems of data capture associated with student support across two organisations that may not enable comparison on outcomes or value for money.

Similar issues are at play in the delivery of apprenticeships. Over time, as a result of the decline in the availability of European funding, responsibility for the funding of foundation and graduate apprenticeships has progressively shifted towards SFC, with funding from Scottish Government. SDS and SFC both fund new foundation apprenticeships. Only SFC funds new graduate apprenticeships, though SAAS provides the tuition fee funding to universities. Additional structures and governance arrangements have had to be developed and put in place to enable collaboration and information sharing on development and delivery of apprenticeships where SDS and SFC now have shared responsibilities. This has added to the complexity of the existing system.

Business need 3: data

A further consequence of the examples above on student support and apprenticeships is the lack of comparable data. This is a result of the fragmentation of responsibility across the system and the fact that data flows are often tied to funding, as opposed to being tied to the learner.

Audit Scotland’s Planning for Skills (2022) report highlights the current challenges for skills planning. It highlights a lack of consistency on the purpose for which data is captured and used by different organisations. This then makes it difficult to assess adequately value for money at a system level and creates challenges in being able to use that data to inform careers information and skills planning.

Attempts had been made to address this by the, now defunct, Enterprise and Skills Strategic Board. They commissioned the development of an Education and Skills Impact Framework (ESIF) to establish an evidence base that could help inform investment in post-school education and skills. The framework considered the return to public investment and the benefits to individual learners and employers.

This resulted in some work by London Economics, supported by three contextual summaries for modern apprenticeships, college provision (both HE and FE) and university provision. This work predominantly reported on the economic impacts but was hampered by the COVID-19 pandemic and the challenges of measuring social impact effectively.

The outcome of this work is helpful and the experience of bringing analysts across multiple public bodies together to work collaboratively has led to positive working relationships being established and continuing. However, it has not fundamentally improved the landscape for data collection or improved comparability of data that is being collected by different organisations for different purposes. As the data tends to follow the flow of funding, structural change and simplification of the funding body landscape is more likely to enable consistency.

As well as a lack of comparability, there are also inefficiencies in the current system. This is especially true for providers with colleges, in particular, having to comply with multiple data and reporting standards associated with the different funding streams they receive. This has an impact on front line services as it increases the cost to serve the system. During engagement in the development of the Purpose and Principles, we heard examples of additional finance managers being recruited just to manage the complexity of the funding environment. These are highly paid roles.

Business need 4: assurance

Linked to the points highlighted above, the fragmentation and overlap in responsibility for funding and for providing assurance that money has been spent effectively, means there are currently no system-wide measures of success. This is because each body with responsibility for funding has its own strategic and operational plan and different measures of success.

Building on the logic models underpinning the Purpose and Principles, the next step will be to develop a measurement and benefits framework that will enable system-wide measures to be developed.

Critical success factors

While the Withers Review recommended a single funding body, the remit was focussed on the skills delivery landscape and not the entirety of the post-school funding landscape. For this reason, it was important that further consideration was given to the practicalities of implementation and delivery of a single funding body. Therefore, the Scottish Government has considered options on simplifying the funding body landscape, up to and including a single funding body.

The Scottish Government have assessed a long-list of options against objectives and critical success factors based on HM Treasury Green Book guidance. The critical success factors used to assess the long-list of options were:

• Strategic fit, operational fit and meets business needs: How well the option meets the agreed spending objectives, related business needs and service requirements, how well the option provides holistic fit and synergy with other strategies.
• Potential value for money: How well the option optimises social value (social, economic and environmental), in terms of the potential costs, benefits and risks.
• Supplier capacity and capability: How well the option matches the ability of potential suppliers to deliver the required services and appeals to the supply side.
• Potential affordability: How well the option can be financed from available funds, how the balance of investment against the improved outcomes aligns with sourcing constraints.
• Potential achievability: How well the option is likely to be delivered given an organisation's ability to respond to the changes required, how well the option matches the level of available skills required for successful delivery.

The objectives (determined based on evidence reviews and a logic modelling exercise) were to:

• To simplify operational responsibility across the post-school funding landscape – ensuring fairness, transparency and maximising value for public investment.
• To reduce costs and increase efficiencies in the operation of the system – enabling more of the investment made by the Scottish Government to flow directly to learners and employers by reducing the costs of administering the system.
• To improve availability and quality of data collection to inform investment decisions, skills planning priorities and careers advice – ensuring the system is more responsive to the needs of learners, employers, the economy and society.
• To enable targeted and equitable distribution of funding to support the learner – ensuring that people, at every stage in life, have the opportunity and means to develop the skills, knowledge, values and attributes to fulfil their potential and to make a meaningful contribution to society.

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

This means:

• moving National Training Programmes (including provision for apprenticeships) funding and functions from SDS to SFC; and
• moving college student support funding and functions from SFC to SAAS so that all student support funding is delivered through SAAS.

Proposal 2 would allow for all provision, including apprenticeships, to be funded by one body (i.e. SFC) and all student support to be funded by one body (i.e. SAAS).

NTP funding, any data and systems, and potentially some staff, needed to support delivery would be transferred from SDS to SFC. This would give SFC responsibility for all types of provision.

National Training Programmes (NTP).

SDS administer National Training Programmes, including apprenticeships, on behalf of the Scottish Government. This includes management of the funding of modern apprenticeships and some foundation apprenticeships through contract management, quality assurance, financial monitoring, compliance and audit processes. SDS also lead on the promotion and marketing of apprenticeships, particularly through apprenticeships.scot. They also lead on the development of apprenticeship frameworks and the underpinning standards in partnership with employers and other stakeholders.

In proposal 2, SFC would transfer responsibility and funding for administering FE student support funding to SAAS. It is not clear whether some members of SFC staff currently working on this support would transfer to SAAS to support this change. It is also important to note that each college will have staff involved in administering college student support. Details of funding, staffing and system changes would need to be worked through with technical groups that the Scottish Government are planning to convene.

Research would remain with SFC. This would enable the link between research and learning and teaching, highlighted as being of importance during development of the Purpose and Principles, to be maintained.

Proposal 3: Consolidate all provision funding and all student support funding within SFC

This means:

• moving National Training Programmes (including provision for apprenticeships) funding and functions from SDS to SFC; and
• moving SAAS student support funding and functions to SFC.

Proposal 3 would see all provision funding and all student support funding delivered by a single body (i.e. SFC).

As with proposal 2, National Training Programmes funding, systems, data and potentially some staff would be transferred from SDS to SFC. This would give SFC responsibility for all types of provision.

SFC would assume full responsibility for all FE and HE student support with funding and potentially some staff moving from SAAS to support this change. This would result in the dissolution of SAAS and student support being delivered via an NDPB as opposed to an executive agency; reducing the number of public bodies from three to two.

Research would remain with SFC. This would enable the link between research and learning and teaching, highlighted as being of importance during development of the Purpose and Principles, will be maintained.

Implications of proposals 2 and 3

Neither proposal 2 nor 3 affects SDS’s responsibilities for national careers information advice and guidance services, providing workforce development support to employers and PACE support for those at risk of, or experiencing, redundancy. The Scottish Government has already committed to taking responsibility for a national approach to skills planning and to strengthening regional approaches, what future role SDS might play in this space will be considered as part of that work.

Proposals 2 and 3 will require legislative changes and will primarily affect the public bodies and potentially their staff members. The Scottish Government recognises that significant change can have an impact on staff and will therefore ensure that they and their trade unions are involved throughout the process with clear communications and that the work proceeds in compliance with relevant employment law requirements.

While the changes proposed, in isolation, are unlikely to have much of a direct impact on learners, they do create the conditions for future changes to the way that the system is funded. Students in colleges and universities and apprenticeships will see little to no immediate change. Over time, some students may need to interact with a different organisation in relation to their student support. Any changes which directly impact the learner will be thoroughly tested and clearly communicated.

Similarly, the changes proposed, in isolation, are unlikely to have a significant impact on organisations such as universities, colleges or training providers. Apprenticeship training providers may have to deal with a different organisation and system than they do currently. Colleges may no longer provide direct student support for those studying further education, if this funding is moved from the SFC. As with learners, all changes would be thoroughly tested and clearly communicated with universities, colleges and training providers.

Scottish Government’s preferred option

The Scottish Government will determine which of the three proposals should be taken forward, informed both by the outcome of this consultation and the development of an outline business case. This will be developed using expertise from the three public bodies and practitioners from other organisations and institutions.

Potential benefits: delivery of apprenticeships

The Scottish Government invests a total of c £170 million across SDS and SFC to support apprenticeships each year. Apprenticeships are a key part of the post school education and skills system, providing learners with employment whilst being able to learn and develop skills. They enable employers to invest in their workforce, providing the skills the economy needs both now, and in the future. They provide people of all ages with a great opportunity to upskill and reskill and help them to progress within their chosen career path.

SDS delivers funding for apprenticeships largely through public service contracts to independent training providers, colleges, employers and public sector organisations. This includes funding for 25,000 modern apprenticeship starts and up to 2,500 foundation apprenticeship starts each year; and graduate apprenticeships for those who started training prior to 2021-22.

SFC provides funding to colleges and universities and assigns funding to different institutions for student teaching costs through its credit-based funding model. This includes funding for up to 2,500 foundation apprenticeship starts each year in addition to those funded by SDS, and around 1,200 graduate apprenticeship starts each year for those starting training from 2021-22.

Whilst funding for modern apprenticeships is primarily routed through SDS, colleges can also access SFC funding though its credit-based model to supplement SDS funding. This tends to happen in subjects like engineering and construction where there is a large element of college-based teaching, particularly where apprentices are required to complete an HNC/D alongside their work-based qualification. This is not transparent and SFC funding for modern apprenticeships is not widely known.

Recent reviews, including the Withers Review, the OECD report on Strengthening Apprenticeships in Scotland and the Audit Scotland report on Modern Apprenticeships, have set out improvements that could be made to apprenticeships in Scotland. Evidence from the Withers Review suggests that the administration and funding of apprenticeships is complicated, not always transparent, and sometimes slow to respond to demand. There is also evidence of a perception of apprenticeships as being detached from the rest of university and college learning.

Bringing provision funding into one place would allow for greater flexibility, not only within the apprenticeship family, but across all provision. If one organisation was responsible for all provision funding, this would allow changes to be more easily and regularly made to the benefit of learners, institutions and employers.

Potential benefits: delivery of student support

As noted earlier (see Business need 2: clarity), SAAS has responsibility for provision of all higher education (HE) student support across both colleges and universities and students interact directly with SAAS. But SFC provides funding for further education (FE) student support to colleges. FE student support is provided by each college to their students.

The funding available for students in HE and FE is different. HE students are eligible for means-tested bursaries and loans (up to £11,400 per year). FE students are eligible for bursary support only (up to £125.55 per week) that is paid on a discretionary basis. FE students do not have access to a student loan. However, they are eligible to claim welfare benefits and those under 18 are eligible to receive the Education Maintenance Allowance (EMA).

The disparity in support on offer to students in FE and HE was highlighted in the recent NUS Scotland Report: Broke Students, Broken System. The report detailed that there is no national and consistent means-testing process for FE students to determine their eligibility for bursaries. This means that students studying for the same qualification, with the same socioeconomic background, can receive varying levels of financial support based on when and where they made their applications, rather than on their need.

The Independent Review of Student Support (2017) set out recommendations for improving the higher and further education student support system. The recommendations centred around four key themes (Fair Funding, Parity, Clarity and Costs to Implement) and specifically recommended a common funding system across further and higher education, with local face-to-face support.

Bringing all student support into one place would allow for a more standardised approach to the distribution of student support funding across FE and HE. It would give the opportunity to introduce parity across the support packages and enhance the learner experience for those progressing from FE into HE.

Tell us what you think

Q1. Which of the three proposals do you prefer?

Q2. What do you think are the main advantages of your preferred proposal?

Q3. What do you think could be the biggest challenges with your preferred proposal?

Q4. Are there any other factors you think we should consider in making a decision?

You might want to consider whether you think any of these proposals make it easier or more difficult to:

• put the learner at the centre and overcome barriers to participation
• take forward other post-school reform actions set out in chapter 1
• boost the economy
• reduce child poverty
• tackle climate change.

You might also want to consider the impact on:

• equality and diversity of learners
• equity of different ways of learning
• data collection and reporting
• learning outcomes.